As filed with the Securities and Exchange Commission on September 1, 2005.

Registration No. 333-              

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Ituran Location and Control Ltd.

(Exact name of Registrant as specified in its charter)


State of Israel 5065 Not Applicable
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No. )
     
  3 Hashikma Street  
  Azour 58001, Israel  
  (011) 972-3-557-1333  

(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)


  Ituran U.S.A. Inc.  
  3330 N.W. 53rd Street, Suite 302
Fort Lauderdale, Florida 33355 		 
  (954) 484-3806  

(Address, including zip code, and telephone number, including area code, of agent for service)

Copies of communications to:


Yoram L. Cohen, Adv. Paul I. Rachlin, Esq. Joshua G. Kiernan, Esq. Ehud Sol, Adv.
Zvi Fisher, Adv. Yuval Tal, Esq. White & Case LLP Chaim Friedland, Adv.
Yoram L. Cohen, Ashlagi, Fisher Proskauer Rose LLP 1155 Avenue of the Americas Herzog, Fox & Neeman
Gibor Sport Building 1585 Broadway New York, New York 10036 4 Weizman Street
7 Begin Street, 25 Floor New York, New York 10036 Telephone: (212) 819-8200 Tel Aviv 64239, Israel
Ramat Gan 52521, Israel Telephone: (212) 969-3000 Fax: (212) 354-8113 Telephone: (972-3) 692-2020
Telephone: (972-3) 611-0611 Fax: (212) 969-2900   Fax: (972-3) 696-6464
Fax: (972-3) 611-0600      

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If the only securities being registered on this Form are being offered pursuant to dividend or interest or interest investment plans, please check the following box.   [ ]

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, other than securities offered only in connection with dividend or interest reinvestment plans, 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 delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.   [ ]

CALCULATION OF REGISTRATION FEE


Title of Each Class of
Securities to be Registered 		Proposed Maximum
Aggregate Offering Price (1)(2) 		Amount of Registration Fee
Ordinary shares, nominal value NIS 0.33 1/3 per share $ 86,250,000   $ 10,151.63  
(1)  Includes ordinary shares that may be issued upon exercise of the underwriters' over-allotment option.
(2)  Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.



 

The information in this preliminary 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 preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. 

PRELIMINARY PROSPECTUS   Subject to Completion   September 1, 2005 

 

4,800,000  Shares 

Ordinary Shares 

 

This is an initial public offering of our ordinary shares in the United States. We are offering 3,840,000 ordinary shares and our shareholders are offering 960,000 ordinary shares to be sold in this offering. We currently expect that the initial public offering price of our ordinary shares will be between $       and $       per share. 

Our ordinary shares are traded on the Tel Aviv Stock Exchange under the symbol "ITRN." The last reported sale price of our ordinary shares on the Tel Aviv Stock Exchange on August 31, 2005 was NIS 56.33, or $12.43, per share. After the pricing of this offering, we expect that our ordinary shares will be quoted on the Nasdaq National Market under the symbol "ITRN." 

Investing in our ordinary shares involves a high degree of risk. Before buying any ordinary shares, you should read the discussion of material risks of investing in our ordinary shares in "Risk factors" beginning on page 7 of this prospectus. 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. 

Per Share Total
Public offering price $ $
Underwriting discounts and commissions $ $
Proceeds, before expenses, to us $ $
Proceeds, before expenses, to the selling shareholders $ $

The underwriters may also purchase up to an additional 720,000 ordinary shares from us and the selling shareholders at the public offering price, less underwriting discounts and commissions payable by us and the selling shareholders to cover over-allotments, if any, within 30 days from the date of this prospectus. If the underwriters exercise the option in full, the total underwriting discounts and commissions will be $          , and the total proceeds, before expenses, to us will be $         and the total proceeds, before expenses, to the selling shareholders will be $        . 

The underwriters are offering the ordinary shares as set forth under "Underwriting." Delivery of the ordinary shares will be made on or about September         , 2005. 

UBS Investment Bank 

JP Morgan 

William Blair & Company 

C.E. Unterberg, Towbin 

The date of this prospectus is         , 2005 

 

 
 

i

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with information different from that contained in this prospectus. We are not, and the underwriters are not, making an offer to sell or seeking offers to buy these securities in any jurisdiction where the offer or sale is not 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.

We obtained statistical data, market data and other industry data and forecasts used throughout this prospectus from publicly available information. We have not sought the consent of the sources to refer to their reports in this prospectus.

TABLE OF CONTENTS


Prospectus summary   1  
Risk factors   7  
Special note regarding forward-looking statements   20  
Price range of our ordinary shares   21  
Use of proceeds   22  
Dividend policy   23  
Capitalization   24  
Dilution   25  
Selected consolidated financial and other data   26  
Management's discussion and analysis of financial condition and results of operations   29  
Business   50  
Material agreements   74  
Management   78  
Transactions with related parties   88  
Principal and selling shareholders   90  
Description of ordinary shares   94  
Shares eligible for future sale   99  
United States tax considerations   100  
Israeli taxation   105  
Underwriting   109  
Legal matters   112  
Experts   112  
Enforceability of civil liabilities   113  
Where you can find more information   114  
Index to financial statements   F-1  

Through and including                                 , 2005 (the 25th day after the date of this prospectus) federal securities law may require all dealers that effect transactions in these securities, whether or not participating in this offering, to deliver a prospectus. This requirement is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

ii



 

Prospectus summary 

This summary highlights information contained in other parts of this prospectus. Before you decide to invest in our ordinary shares, you should read the entire prospectus carefully, including, among other matters, the issues we discuss in "Risk factors." 

OUR BUSINESS 

We believe we are a leading provider of location-based services, consisting predominantly of stolen vehicle recovery and tracking services. We also provide wireless communications products used in connection with our location-based services and various other applications, including automatic meter reading and radio frequency identification. We currently provide our services and sell our products in Israel, Brazil, Argentina and the United States. In addition, we have recently commenced installing automatic vehicle location infrastructures in and are currently generating revenues from China and South Korea, where, following the completion thereof, our automatic vehicle location products will be sold by third-party operators in such countries. 

Our automatic vehicle location products and services enable us to locate and track stolen vehicles in real time. Unlike other products and services providing stolen vehicle recovery, ours provide reliable coverage in dense urban areas and are relatively unaffected by buildings or other potential obstructions, do not require line-of-sight for accurate tracking, are not dependent on the availability of satellites and are less susceptible to jamming. In addition, as our control centers are connected to the vehicle's anti-theft device, we are able to detect and report unauthorized entry into our subscribers' vehicles, and the effectiveness of our services does not depend on the subscriber reporting the vehicle as stolen. Over the last three years, we achieved an average stolen vehicle recovery time of approximately 20 minutes from the time an unauthorized entry is confirmed or reported to the time the vehicle is recovered, and an average recovery rate of approximately 85%, based on the total number of our subscribers' vehicles that were stolen and recovered in the markets in which we operate. We estimate that our market share of stolen vehicle recovery services in Israel is approximately 75%, based on the aggregate number of installed stolen vehicle recovery systems. As of June 30, 2005, we provided our location-based services to approximately 298,000 subscribers worldwide and have achieved 14 consecutive quarters of growth in our subscriber base. Over the last two calendar years, our average quarterly subscriber growth rate in Brazil and Argentina was 14.6% and 28.4%, respectively. 

Our wireless communications products address three principal markets: automatic vehicle location, automatic meter reading and radio frequency identification. Our automatic vehicle location products are an integral part of our location-based services and are installed in each subscriber's vehicle. Our automatic meter reading products enable utilities to read water meters remotely, thus reducing the time and labor associated with manual data collection. Our water meter reading products are sold primarily in the United States. Our radio frequency identification products enable high-speed communication between mobile transponders and roadside readers and are used for electronic toll collection, electronic security seals and electronic weigh stations. We currently sell our electronic toll collection devices to the sole toll road operator in Israel and to the transit authority of the State of Minnesota. 

We generate our revenues primarily from subscription fees for our location-based services and from the sale of our wireless communications products. In every quarter since 1998, we have achieved sequential growth in revenues from subscription fees. Our revenues and net income have increased from $49.7 million and $0.9 million for the year ended December 31, 2002, to $77.9 million and $11.2 million for the year ended December 31, 2004, representing annualized growth rates of 25.2% and 252.0%, respectively. We believe the increase in our revenues and net income over the last three years was primarily due to our expansion into Brazil and Argentina and the increase in sales of our wireless communications products for applications such as automatic meter reading. Our recent contracts with third-party service providers for the deployment of our automatic vehicle location infrastructure and the subsequent sale of our automatic vehicle location products in China and South Korea represent important growth opportunities for the sale of these products. 

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OUR INDUSTRY 

Our products and services primarily address the following markets: 

 

Location-based services and automatic vehicle location products.     The market for vehicle security services and products is driven by vehicle theft rates and the increasing demand by insurance companies for solutions that limit their payout for losses. According to a March 2005 report by the Insurance Information Institute, in the United States alone, vehicle thefts accounted for 2% of the premiums paid for private passenger car insurance in 2003, or approximately $3 billion. In order to mitigate these losses, insurance companies in the markets in which we operate often either require their customers to install a security system or offer their customers financial incentives through insurance premium discounts. We currently provide stolen vehicle recovery services throughout Israel, in São Paulo, Brazil and its immediate vicinity, in Buenos Aires, Argentina and its immediate vicinity and in Miami, Florida in the United States. 

 

Automatic meter reading.     Demand for automatic meter reading systems in the United States is driven by the replacement cycle for existing water meters, an increase in the number of consumers as a result of increased levels of housing starts since 2001 and the need for utilities to improve billing accuracy, reduce costs and increase reliability. We sell our automatic meter reading products exclusively to Arad Technologies, Ltd. that incorporates our products into a water meter that it markets and distributes to utilities in the United States through its wholly-owned subsidiary, Master Meter, Inc. 

 

Radio frequency identification.     Our radio frequency identification systems are primarily focused on electronic toll collection applications in an effort to reduce waiting time and related labor costs at toll plazas by enabling payment transactions to be performed at near-highway cruising speeds. Approximately 25 states in the United States have passed legislation allowing for some form of private toll roads, which we believe will increase demand for our radio frequency identification products. In addition, recent efforts to enhance national security and border control in the United States have increased the demand for security systems incorporating radio frequency identification products from federal and state governmental agencies, such as the United States Department of Homeland Security and the United States Customs and Border Protection Agency. We currently sell our radio frequency identification devices in Israel and the United States. Specifically, we currently sell our electronic toll collection devices to Derech Eretz Highways (1997) Ltd., the sole toll road operator in Israel, and to the transit authority of the State of Minnesota, and we sell our electronic weigh station devices to ACS- SLS, Inc., a subsidiary of Affiliated Computer Services, Inc., and to Norpass, Inc., a provider of mainline screening systems at weigh stations. 

OUR COMPETITIVE STRENGTHS 

We believe our competitive strengths include: 

 

Superior technology.     Our automatic vehicle location products, stolen vehicle services and value-added services are based on terrestrial network triangulation, which enables accurate tracking even in dense urban areas and underground locations. Our automatic meter reading devices are integrated directly into the water meter and enable the remote reading of water meters from a range of up to 1,000 feet. Our radio frequency identification products, specifically our electronic toll collection devices, enable the reading device to process signals even when the vehicle is traveling at speeds of 120 miles per hour. 

 

Comprehensive solution.     We offer a comprehensive turn-key location-based solution consisting of our automatic vehicle location infrastructure and automatic vehicle location products. 

 

Strong relationships with insurance companies.     We have established relationships with both global and local insurance companies, including AIG, Generali, HSBC, Mapfre, Porto Seguro and La Caja, that drive demand for our stolen vehicle recovery services and our automatic vehicle location products and allow us to operate with lower sales and marketing expenses than we would otherwise incur. 

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Established subscriber base with generally predictable subscriber fees.     We have an established and growing global customer base of approximately 298,000 subscribers as of June 30, 2005, and in 2004 and the first six months of 2005, approximately 46.9% and 47.1%, respectively, of our revenues were attributable to recurring subscription fees. 

 

Leverageable subscription model.     Our location-based services business model generally allows us, once we incur the initial cost involved in deploying the infrastructure in a region, to increase the number of our subscribers without a commensurate increase in additional direct costs. 

 

Proven track record.     We have over 10 years of experience in providing stolen vehicle recovery services and over the last three years our stolen vehicle recovery rates have averaged approximately 85% and our average vehicle recovery time, from the time an unauthorized entry is confirmed or reported, has averaged approximately 20 minutes. 

OUR STRATEGY 

In order to enhance our position as a leading provider of location-based services and wireless communications products, we intend to continue to: 

 

increase penetration of our location-based services in our existing geographical markets and expand into additional regions in Latin America; 

 

provide our turn-key location-based solution consisting of our automatic vehicle location infrastructure and automatic vehicle location products to third-party service providers in Asia; 

 

expand our penetration of the market for electronic toll collection, electronic security seals and electronic weigh stations into North America; 

 

expand the applications of our automatic meter reading products to include electricity and gas utilities; 

 

provide new value-added services for our subscribers; and 

 

acquire complementary businesses and technologies. 

OUR CORPORATE INFORMATION 

Our legal commercial name is Ituran Location and Control Ltd. We were established in Israel in February 1994 by Tadiran Ltd., an Israeli-based designer and manufacturer of telecommunications equipment, software and defense electronic systems. In July 1995, we were sold by Tadiran to Moked Ituran Ltd. In May 1998, we completed the initial public offering of our ordinary shares in Israel and our ordinary shares began trading on the Tel Aviv Stock Exchange. 

Our principal executive offices are located at 3 Hashikma Street, Azour, Israel 58001 and our telephone number is (011) 972-3-557-1333. Our website is www.ituran.com. The information contained in our website and the website of our subsidiaries, www.ituranusa.com, www.ituran.com.br, www.ituran.com.ar and www.telematics-wireless.com, and any information that can be accessed through such websites is not a part of this prospectus and is not incorporated herein by reference. 

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The Offering 

Ordinary shares we are offering 

3,840,000 shares 

Ordinary shares offered by the selling shareholders 

960,000 shares 

Ordinary shares to be outstanding after this offering 

22,642,050 shares 

Use of proceeds 

We intend to use the net proceeds of this offering for working capital to support the growth of our business in existing and new markets and for the funding of potential acquisitions and investments in complementary businesses, technologies or products (although we do not currently have agreements or undertakings regarding any acquisition or investment). 

  

We will not receive any proceeds from the sale of ordinary shares by the selling shareholders. 

Risk factors 

See "Risk factors" beginning on page 7 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares. 

Tel Aviv Stock Exchange symbol and proposed Nasdaq National Market symbol 

ITRN 

The number of ordinary shares outstanding after this offering is based on 18,802,050 ordinary shares outstanding as of the date of this prospectus. This number of 18,802,050 ordinary shares excludes 384,048 ordinary shares reserved for issuance upon the exercise of options, 33,333 ordinary shares reserved for issuance upon exercise of a warrant, 8,406 ordinary shares reserved for issuance upon conversion of an outstanding capital note, and includes 20,736 ordinary shares held by our subsidiary, Telematics Wireless Ltd. 

Unless otherwise indicated, all information in this prospectus assumes: 

 

an offering price of $         per ordinary share, the mid point of the range on the cover of this prospectus; 

 

that the underwriters' option to purchase up to an additional 720,000 ordinary shares from us and from the selling shareholders is not exercised; 

 

with respect to all amounts represented in dollars that were incurred in NIS (other than those included in the financial statements), that the exchange rate is $1.00 = NIS 4.574, the exchange rate on June 30, 2005; 

 

an increase of the authorized share capital of our company that will be effected immediately prior to the consummation of this offering; and 

 

a three-for-one share split of our ordinary shares that will be effected immediately prior to the consummation of this offering. 

All references to "dollars" or "$" in this prospectus refer to US dollars and all references to "NIS" refer to New Israel Shekels. 

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Summary Consolidated Financial and Other Data 

The following table is a summary of our historical consolidated financial and other data. The following summary historical consolidated financial data is derived from our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read it in conjunction with our historical financial information and other information provided in this prospectus including, "Selected consolidated financial and other data", "Management's discussion and analysis of financial condition and results of operations" and our consolidated financial statements and related notes appearing elsewhere in this prospectus. 

Year ended December 31, Six months ended
June 30,
Consolidated statements of operations data: 2002 2003 2004 2004 2005
(Unaudited)
(In thousands, except earnings per share data)
Revenues:
Location-based services $ 24,053 $ 32,088 $ 36,549 $ 17,857 $ 20,565
Wireless communications products 17,782 23,527 33,461 14,432 20,958
Other 7,856 8,456 7,916 3,790 2,162
Total revenues 49,691 64,071 77,926 36,079 43,685
Cost of revenues:
Location-based services 12,159 12,258 12,944 6,366 7,620
Wireless communications products 12,928 19,071 23,224 9,596 14,459
Other 5,746 6,119 5,720 2,663 1,573
Total cost of revenues 30,833 37,448 41,888 18,625 23,652
Gross profit 18,858 26,623 36,038 17,454 20,033
Operating expenses:
Research and development expenses 1,717 1,692 2,020 979 1,600
Selling and marketing expenses 2,365 2,888 4,074 2,128 2,206
General and administrative expenses 9,757 11,443 11,693 5,488 6,823
Other expenses (income), net 740 314 (12 ) (11 ) (5 )
Total operating expenses 14,579 16,337 17,775 8,584 10,624
Operating income 4,279 10,286 18,263 8,870 9,409
Financing expenses, net 6,039 616 2,059 1,391 41
Other non-operating expenses, net 528 — — — —
Income (loss) before taxes on income (2,288 ) 9,670 16,204 7,479 9,368
Taxes on income 2,955 (3,417 ) (4,423 ) (2,420 ) (2,133 )
Income after taxes on income 667 6,253 11,781 5,059 7,235
Share in losses of affiliated companies, net (529 ) (235 ) (324 ) (167 ) (88 )
Minority interests in (income) loss of subsidiaries 731 (173 ) (238 ) (15 ) (62 )
Net income for the period $ 869 $ 5,845 $ 11,219 $ 4,877 $ 7,085
Earning per share (1) :
Basic $ 0.05 $ 0.32 $ 0.60 $ 0.26 $ 0.38
Diluted $ 0.05 $ 0.31 $ 0.58 $ 0.25 $ 0.36
Weighted average number of shares outstanding (1) :
Basic 17,634 18,273 18,585 18,577 18,614
Diluted 18,264 19,086 19,192 19,188 19,140

 

(1) 

Earnings per share and weighted average number of shares outstanding were adjusted to reflect the three-for-one share split of our ordinary shares to be effected immediately prior to the consummation of this offering.  

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The as adjusted information in the following balance sheet data table gives effect to the sale of 3,840,000 ordinary shares in this offering at an assumed offering price of $         per share (which is equal to NIS           ) and the receipt by us of $                      million in estimated net proceeds from the offering, after deducting the underwriting discounts and commissions and estimated offering expenses. 

As of June 30, 2005
Consolidated balance sheet data: Actual As adjusted
(Unaudited)
(In thousands)
Cash and cash equivalents $ 4,815
Working capital 3,373
Total assets 63,051
Total liabilities 43,910
Accumulated deficit (3,243 )
Shareholders' equity 19,141

As of December 31, As of June 30,
Other data: 2002 2003 2004 2005
(Unaudited)
Subscribers of our location-based services (1) 178,000 210,000 262,000 298,000
Average monthly churn rate 1.0% 1.4% 1.5% 1.6%

 

(1) 

Number of subscribers is approximate.  

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Risk factors 

You should carefully consider the risks described below, in addition to the other information set forth elsewhere in this prospectus, before deciding to invest in our ordinary shares. Such material risks could adversely impact our results of operations, possibly causing the trading price of our ordinary shares to decline, and you could lose all or part of your investment. The risks described below are not the only risks we face. Our business, results of operations and financial condition could also be adversely affected by additional risks and uncertainties that are not presently known to us or that we currently consider immaterial. 

RISKS RELATED TO OUR BUSINESS 

Failure to maintain our existing relationships or establish new relationships with insurance
companies could adversely affect our revenues and growth potential. 

Revenues from our stolen vehicle recovery services, which we refer to as SVR services, and automatic vehicle location products, which we refer to as AVL products, are primarily dependent on our relationships with insurance companies. In Israel, insurance companies drive demand for our SVR services and AVL products by encouraging and, in some cases, requiring customers to subscribe to vehicle location services and purchase vehicle location products such as ours. In Brazil and Argentina, insurance companies, such as Porto Seguro in Brazil and La Caja in Argentina, enter into written agreements to subscribe to our services and purchase or lease our products directly. For example, we provide our SVR services to vehicles insured by Porto Seguro pursuant to an agreement that requires Porto Seguro to pay us an annual service fee and a fee for each vehicle we recover. We do not have similar agreements with insurance companies in Israel and instead we rely on informal arrangements with these insurance companies to drive demand for our products and services. Our inability to maintain our existing relationships or establish new relationships with insurance companies could adversely affect our revenues and growth potential. 

Changes in practices of insurance companies in the markets in which we provide our SVR services and sell our AVL products could adversely affect our revenues and growth potential. 

We depend on the practices of insurance companies in the markets in which we provide our SVR services and sell our AVL products. In Israel, insurance companies either mandate the use of SVR services and AVL products, or their equivalent, as a prerequisite for providing insurance coverage to owners of certain medium- and high-end vehicles, or provide insurance premium discounts to encourage vehicle owners to subscribe to services and purchase products such as ours. In Brazil and Argentina, insurance companies purchase or lease our AVL products directly and subsequently require their customers to subscribe to our SVR services. 

Therefore, we rely on insurance companies' continued practice of: 

 

accepting vehicle location and recovery technology as a preferred security product; 

 

requiring or providing a premium discount for using location and recovery services and products; 

 

mandating or encouraging use of our SVR services and AVL products, or similar services and products, for vehicles with the same or similar threshold values and for the same or similar required duration of use; and 

 

with respect to insurance companies in Brazil and Argentina, deciding to purchase or lease SVR services and AVL products from us directly. 

If any of these policies or practices change, revenues from sales of our SVR services and AVL products could decline, which could adversely affect our revenues and growth potential. 

A reduction in vehicle theft rates may adversely impact demand for our SVR services and AVL products. 

Demand for our SVR services and AVL products depends primarily on prevailing or expected vehicle theft rates. Vehicle theft rates may decline as a result of various reasons, such as the availability of improved security systems, implementation of improved or more effective law enforcement measures, or improved economic or  

 

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Risk factors 

political conditions in markets that have high theft rates. If vehicle theft rates in any or all of our existing markets decline or stabilize, or if insurance companies or our other customers believe that vehicle theft rates have declined or stabilized or are expected to decline or stabilize, demand for our SVR services and AVL products may decline. 

A decline in sales of new medium- and high-end cars and commercial vehicles in the markets in which we operate could result in reduced demand for our SVR services and AVL products. 

Our SVR services and AVL products are primarily used to protect medium- and high-end cars and commercial vehicles and are often installed before or immediately after their initial sale. Consequently, a reduction in sales of new medium- and high-end vehicles could reduce our addressable market for SVR services and AVL products. New vehicle sales may decline for various reasons, including an increase in new vehicle tariffs, taxes or gas prices. A decline in vehicle production levels or labor disputes affecting the automobile industry in the markets where we operate may also impact the volume of new vehicle sales. According to a survey conducted by the United Nations, total recorded vehicle theft declined by 1% to approximately 3.1 million vehicles between 2001 and 2002 amongst the 50 nations that participated in the survey. According to Ward's Communications, total sales of passenger vehicles in North and South America declined by 5.6% to 10.3 million between 2002 and 2003. A decline in sales of new medium- and high-end vehicles in the markets in which we provide our SVR services or sell our AVL products could result in reduced demand for such services and products. 

In the event that we are not successful in penetrating the Chinese and South Korean markets, as a result of contractual or governmental constraints, or if our relevant counterparties are not able or willing to effectively market SVR services in China or South Korea, we will not be able to implement a substantial portion of our current growth strategy. 

We recently entered into material agreements for the sale of our AVL infrastructure and AVL products in China and South Korea. See "Material agreements." Our current growth strategy depends, in large part, on our ability to maximize our opportunities pursuant to such agreements. Performance under such agreements is subject to various contractual and governmental constraints, including the receipt of various licenses and permits required for the establishment of our AVL infrastructure and specialized approvals, such as the Telecommunication Equipment Network Access Type Approval in China and the Business License and Spectrum License in South Korea, some of which are difficult to obtain or require a substantial time investment. In addition, our ability to sell our products in the relevant markets is dependent upon the local operators' ability to effectively provide SVR services based on our AVL infrastructure or market our AVL end-units in China and South Korea. Their failure to provide any such services or market our products effectively, or such operators' failure to obtain any necessary governmental licenses, would preclude us from being able to optimize our growth in China and South Korea. 

There is significant competition in the markets in which we offer our services and products and our results of operations could be adversely affected if we fail to compete successfully. 

The markets for our services and products are highly competitive. We compete primarily on the basis of the technological innovation, quality and price of our services and products. Our most competitive market is the location-based services market and the related AVL products market, due to the existence of a wide variety of competing services and products and alternative technologies that offer various levels of protection and tracking capabilities, including global positioning systems, or GPS, satellite- or network-based cellular systems and direction-finding homing technologies. Some of these competing services and products, such as certain GPS-based products, are installed in new cars by vehicle manufacturers prior to their initial sale, which effectively precludes us from competing for such subscribers. Furthermore, providers of competing services or products may extend their offerings to the locations in which we operate or new competitors may enter the location-based services market. Our AVL products also compete with less sophisticated theft protection devices such as standard car alarms, immobilizers, steering wheel locks and homing devices, some of which may be significantly cheaper. Some of these competing products have greater brand recognition than our AVL products, including LoJack Corporation in the United States. 

 

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Risk factors 

Over 90% of the automatic meter reading market, which we refer to as the AMR market, exists in the United States, where we compete with a number of established companies with greater financial resources. The radio frequency identification market, which we refer to as the RFID market, in the United States is characterized by a small number of established and accepted providers, including Mark IV, the provider of the E-ZPass solution, many of which have greater experience and name recognition in this market than we do. Many of our current and potential competitors in all of the markets in which we operate have significantly greater name recognition, larger customer base and greater financial, technical, manufacturing, marketing and other resources than we do. If our competitors succeed in marketing products more effectively than we do, our results of operations could be adversely affected. 

The development of new or improved competitive products, systems or technologies that
compete with our wireless communications products may render our products less competitive or obsolete, which could cause a decline in our revenues and profitability. 

We are engaged in businesses characterized by rapid technological change and frequent new product developments and enhancements. The number of companies developing and marketing new wireless communications products has expanded considerably in recent years. The development of new or improved products, systems or technologies that compete with our wireless communications products may render our products less competitive and we may not be able to enhance our technology in a timely manner. For example, in the AVL industry, new location technologies are being developed for cellular networks, both handset-based and network-based, that may prove to be a competitive alternative to our services and products due to improvements in the reliability and breadth of cellular networks. In the RFID industry, we expect new products to be developed if certain new roadside-to-vehicle standards are adopted in the United States, such as ASTM-DSRC, and new short-range communications technologies utilizing Ultra-Wideband. In addition to the competition resulting from new products, systems or technologies, our future product enhancements may not adequately meet the requirements of the marketplace and may not achieve the broad market acceptance necessary to generate significant revenues. Any of the foregoing could cause a decline in our revenues and profitability. 

The inability of local law enforcement agencies to timely and effectively recover the stolen
vehicles we locate could negatively impact customers' perception of the usefulness of our SVR services and AVL products, adversely affecting our revenues. 

Our AVL products identify the location of vehicles in which our products are installed. Following a notification of an unauthorized entry, or if we receive notification of the vehicle's theft from a subscriber, we notify the relevant law enforcement agency of the location of the subscriber's vehicle and generally rely on local law enforcement or governmental agencies to recover the stolen vehicle. We cannot control nor predict the response time of the relevant local law enforcement or other governmental agencies responsible for recovering stolen vehicles, nor that the stolen vehicles, once located, will be recovered at all. Over the past three years, an annual average of approximately 15% of stolen vehicles in which our AVL products were installed were not recovered and the average stolen vehicle recovery time in the markets in which we operate was 20 minutes from the time an unauthorized entry is confirmed or reported to the time the vehicle is recovered. Over the past three years, the average response time of the relevant law enforcement agencies in the markets in which we provide SVR services was approximately 20 minutes. To the extent that the relevant agencies do not effectively and timely respond to our calls and recover stolen vehicles, our recovery rates would likely diminish, which may, in turn, negatively impact customers' perception of the usefulness of our SVR services and AVL products, adversely affecting our revenues. 

The ability to detect, deactivate, disable or otherwise inhibit the effectiveness of our AVL
products could adversely affect demand for such products and our revenues. 

The effectiveness of our AVL products is dependent, in part, on the inability of unauthorized persons to deactivate or otherwise alter the functioning of our AVL products or the vehicle anti-theft devices that work in conjunction with our AVL products. As sales of our AVL products increase, criminals in the markets in which we operate may become increasingly aware of our AVL products and may develop methods or technologies to detect, deactivate or disable our tracking devices or the vehicle anti-theft devices that work in conjunction with  

 

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Risk factors 

our AVL products. Over the past three years, an annual average of approximately 15% of stolen vehicles in which our AVL products were installed were not recovered and some of these vehicles were likely not recovered due to the deactivation or other disablement of our AVL end-unit. We believe that, as is the case with any product intended to prevent vehicle theft, over time, there may be an increased ability of unauthorized persons to detect, deactivate, disable or otherwise inhibit the effectiveness of our AVL products, although it is difficult to verify this fact. An increase in the ability of unauthorized persons to detect, deactivate, disable or otherwise inhibit the effectiveness of our AVL products could adversely affect demand for our products and our revenues. 

We rely on some intellectual property that we license from a third party, the loss of which could preclude us from providing our SVR services or market and sell some of our AVL products, which would adversely affect our revenues. 

We license from Teletrac, Inc. some of the technology that we need in order to provide our SVR services and market and sell some of our AVL products. In the event that such licenses were to be terminated, or if such licenses were rendered unenforceable or invalid, we would not be able to license similar technology from other parties, which would require us, at a minimum, to obtain rights to a different technology and reconfigure our AVL products accordingly. Our license agreements with Teletrac are perpetual in term unless terminated by mutual agreement or for breach, including bankruptcy, dissolution or insolvency. As a result, our failure to maintain our intellectual property licenses from Teletrac could preclude us from providing our SVR services or market and sell some of our AVL products, which would adversely affect our revenues. 

We depend on proprietary technology and our failure to protect and enforce our intellectual property rights or our need to defend against infringement claims could result in a significant
increase in costs and decline in revenues. 

Our business is dependent on the uninterrupted use of proprietary technology, both owned and licensed, from third parties. If we fail to protect, enforce and maintain our intellectual property rights, we may not be able to compete and our business and operating results could be negatively impacted. We seek to protect our intellectual property rights through a combination of patents, trademarks, copyrights, trade secret laws, know-how, confidentiality procedures and licensing arrangements. Even with the intellectual property protection currently in place, we may not be able to protect our technology from misappropriation or infringement and we may lose, or the relevant owners may restrict or lose, our current rights of use of the technology that we license from such owners. Any of our existing intellectual property rights may be invalidated, circumvented, challenged or rendered unenforceable. In addition, the laws of some countries in which we operate or plan to operate, such as China, for example, may not protect intellectual property rights to the same extent as the laws of Israel or the United States, increasing the possibility of piracy of our technology and products. It may be necessary for us to litigate in order to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others, which litigation can be time consuming, distracting to management, expensive and difficult to predict. 

It is possible that we have or will inadvertently violate the intellectual property rights of other parties and those other parties may choose to assert infringement claims against us. If a court were to determine that our technology infringes on third parties' intellectual property, in addition to exposure to substantial damages, we could be required to expend considerable resources to modify our products, to develop non-infringing technology or to obtain licenses to permit our continued use of the technology that is the subject matter of the litigation. 

Our failure to protect and enforce our intellectual property rights, or our need to defend against claims of infringement of intellectual property rights of others or the loss of any such claims, could result in a significant increase in costs and decline in revenues. 

 

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Risk factors 

Our ability to sell our services and products depends upon the prior receipt and maintenance of various governmental licenses and approvals and our failure to obtain or maintain such licenses and approvals, or third-party use of the same licenses and frequencies, could result in a disruption or curtailment of our operations, a significant increase in costs and a decline in revenues. 

We are required to obtain specific licenses and approvals from various governmental authorities in order to conduct our operations. For example, our AVL products use radio frequencies that are licensed and renewed periodically from the Ministry of Communications in Israel and similar agencies worldwide. As we continue to expand into additional markets, we will be required to obtain new permits and approvals from relevant governmental authorities. Furthermore, once our AVL infrastructure is deployed and our AVL products are sold to subscribers, a change in radio frequencies would require us to recalibrate all of our antennas and replace or modify all units held by subscribers, which would be costly and may result in delays in the provision of our SVR services. In addition, some of the governmental licenses for radio frequencies that we currently use may be preempted by third parties. In Israel, our license is designated as a "joint" license, allowing the government to grant third parties a license to use the same frequencies, and in Brazil our license is designated as a "secondary" license, which allows the government to grant a third party a primary license to use such frequencies, which third-party use could adversely affect, disrupt or curtail our operations. Our inability to maintain necessary governmental licenses and approvals, or third-party use of the same licenses or frequencies, could result in a significant increase in costs and decline in revenues. 

Our SVR services business model is based on the existence of certain conditions, the loss or lack of which in existing or potential markets could adversely affect our revenues generated in existing markets or our growth potential. 

Our SVR services business model and, consequently, our ability to provide our SVR services and sell our AVL products, relies on our ability to successfully identify markets in which: 

 

the rate of car theft or consumer concern over vehicle safety is high; 

 

satisfactory radio frequencies are available to us that allow us to operate our business in an uninterrupted manner; and 

 

insurance companies or owners of cars believe that the value of cars justifies incurring the expense associated with the deployment of SVR services. 

The absence of such conditions, our inability to locate markets in which such conditions exist or the loss of any one of the above conditions in markets we currently serve could adversely affect our revenues generated in existing markets or our growth potential. 

Some of our agreements restrict our ability to expand into new markets for our SVR services and our AMR products, which could adversely affect our growth potential. 

We have entered into the following agreements that include restrictions on our ability to sell certain of our services and products: 

 

We have granted Korean Location Information and Communications Company Ltd., a South Korean company, a right of first refusal to provide SVR services, based on an AVL infrastructure and AVL end-units supplied by us, in the far east and south-east Asia, including Japan, but excluding China, Hong Kong, Macao and Taiwan. 

 

We have granted Golden Net Communication Technology Ltd., a Chinese company, the exclusive rights to provide SVR services, based on an AVL infrastructure and AVL end-units supplied by us, in China, Hong Kong, Macao and Taiwan. In addition, once we receive $150 million in revenues from sales of our AVL products to Golden Net, we are obligated to transfer title and ownership to all of our intellectual property rights, including know-how, patents and source code, relating to our AVL system to Golden Net for its use in China, Hong Kong, Macao and Taiwan. 

 

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Risk factors 

 

We have granted Arad Technologies the exclusive right (subject to certain limited exceptions) to purchase our AMR products. As a result, we are not permitted to independently market our AMR products to any entity other than Arad Technologies. Furthermore, Arad Technologies currently uses our AMR products only with respect to water meter products and applications and not in the gas and electricity meter markets, which we believe to be potential new markets for our AMR products. 

These agreements restrict our ability to expand our business and operations in certain markets, which could adversely affect our growth potential. 

We rely on a single customer for the sale of our AMR products and the loss of such customer or such customer's failure to effectively market and sell our AMR products could have an adverse effect on our revenues and growth potential. 

Currently, we sell our AMR products exclusively to Arad Technologies Ltd. who incorporates our AMR products into a water meter product that it markets and distributes to utilities in the United States through its wholly-owned subsidiary Master Meter, Inc. Therefore, the volume of our existing AMR products sales is wholly dependent upon Arad Technologies' demand for our products, which demand may not match or exceed historical levels. Any factors that adversely impact the operations of Arad Technologies, or result in our loss of its business, could adversely impact our AMR business. For example, Arad Technologies exclusively sells our AMR products to customers in the utility industry where sales cycles are often long and unpredictable. Furthermore, because we sell our AMR products exclusively to Arad Technologies, we rely on Arad Technologies for the effective marketing and sale of our AMR products to end-users. The failure of Arad Technologies to maintain or increase current demand for its products that incorporate our AMR products could have an adverse effect on our revenues and growth potential. 

The loss of key personnel could adversely affect our business and prospects for growth. 

Our success depends upon the efforts and abilities of key management personnel, including our Chairman of the Board of Directors, our Co-Chief Executive Officers and the President and Chief Executive Officer of our subsidiary, Telematics Wireless Ltd. Loss of the services of one or more of such key personnel could adversely affect our ability to execute our business plan. In addition, we believe that our future success depends in part upon our ability to attract, retain and motivate qualified personnel necessary for the development of our business. If one or more members of our management team or other key technical personnel become unable or unwilling to continue in their present positions, and if additional key personnel cannot be hired and retained as needed, our business and prospects for growth could be adversely affected. 

We rely on third parties to manufacture our wireless communications products, which could affect our ability to provide such products in a timely and cost-effective manner, adversely impacting our revenues and profit margins. 

We outsource the manufacturing of most of our wireless communications products to third parties. Furthermore, we use one manufacturer for production of a significant portion of our wireless communications products and we do not maintain significant levels of inventories to support us in the event of an unexpected interruption in its manufacturing process. If our principal manufacturer or any of our other manufacturers is unable to or fails to manufacture our products in a timely manner, we may not be able to secure alternative manufacturing facilities without experiencing an interruption in the supply of our products or an increase in production costs. Any such interruption or increase in production costs could affect our ability to provide our wireless communications products in a timely and cost-effective manner, adversely impacting our revenues and profit margins. 

We depend on the use of specialized quality assurance testing equipment for the production of our wireless communications products, the loss or unavailability of which could adversely affect our results of operations. 

We and our third-party manufacturers use specialized quality assurance testing equipment in the production of our products. The replacement of any such equipment as a result of its failure or loss could result in a disruption of our production process or an increase in costs, which could adversely affect our results of operations. 

 

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Risk factors 

The adoption of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and could harm our results of operations. 

There are no established industry standards in all of the businesses in which we sell our wireless communications products. For example, vehicle location devices may operate by employing various technologies, including network triangulation, GPS, satellite-based or network-based cellular or direction-finding homing systems. The development of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and we may not be able to develop new services and products that are in compliance with such new industry standards on a cost-effective basis. If industry standards develop and such standards do not incorporate our wireless communications products and we are unable to effectively adapt to such new standards, such development could harm our results of operations. 

Expansion of our operations to new markets involves risks and our failure to manage such risks may delay or preclude our ability to generate anticipated revenues and may impede our overall growth strategy. 

Our recently-signed contracts with third-party providers for the establishment of a AVL system in China and South Korea represent important growth opportunities for the sale of our AVL infrastructure and AVL end-units. The expansion into these new markets involves challenges and risks, including tariffs, trade restrictions and foreign import export regulations as well as weak intellectual property law protection in China, and restrictive regulatory schemes or local customs in South Korea. We are also subject to fluctuations in exchange rates in both of these markets. 

In addition, although we do not have current plans to expand our operations to new countries, we anticipate future growth to be attributable to our business activities in new markets, particularly in developing countries, where we may encounter additional risks and challenges, such as longer payment cycles, potentially adverse tax consequences, potential difficulties in collecting receivables and potential difficulties in enforcing agreements or other rights in foreign legal systems. The challenges and risks of entering a new market, and in particular the risks associated with us commencing operations in China and South Korea, may delay or preclude our ability to generate anticipated revenues and may impede our overall growth strategy. 

Part of our fleet management business relies on GPS-based technology owned and controlled by  others, the loss, impairment or increased expense of which could negatively impact our immediate and future revenues from, or growth of, our fleet management services and adversely affect our results of operations. 

Part of our fleet management business relies on signals from GPS satellites built and maintained by third parties. If GPS satellites become unavailable to us, or if the costs associated with using GPS technology increase such that it is no longer feasible or cost-effective for us to use such technology, we will not be able to adequately provide our fleet management services. In addition, if one or more GPS satellites malfunction, there could be a substantial delay before such satellites are repaired or replaced, if at all. The occurrence of any of the foregoing events could negatively impact our immediate and future revenues from, or growth of, our fleet management services and adversely affect our results of operations. 

Due to the already high penetration of SVR services and AVL products in Israel and moderate overall growth of the addressable market in Israel, our prospects for growth in such market may be limited. 

Our AVL products are primarily installed in medium- and high-end cars and commercial vehicles. Therefore, our ability to increase demand for our SVR services and revenues from sales of our AVL products is limited by the number of potential vehicles in which our products can be installed in each relevant market. We currently estimate that our AVL products are installed in a significant portion of the medium- and high-end cars and commercial vehicles in Israel. We anticipate that revenues from sales of our SVR services and AVL products in  

 

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Risk factors 

Israel will not increase significantly due to the already high penetration of SVR services and AVL products in Israel and moderate overall growth of the addressable market in Israel, which could adversely affect our prospects for growth in such markets. 

We may not be able to offset the loss of revenues from the decline in our cellular services, which would adversely affect our results of operations when compared to results of operations of prior periods. 

We derived 15.8%, 13.2%, 10.2%, 10.5% and 4.9% of our total revenues in 2002, 2003, 2004 and the first six months of 2004 and 2005, respectively, from the provision of our cellular services. Our revenues from such services have declined significantly due to the expiration and non-renewal of our agreement with Partner Communications Co., Ltd. as of March 31, 2005, which agreement was the source of a significant portion of our revenues for this business. If we are unable to substitute these revenues, in whole or in part, with increasing revenues from our existing business segments, our results of operations will decline when compared to our results of operations for prior periods. 

Some of our employees are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could delay or preclude altogether our ability to generate revenues in the markets where such employees are located. 

Some of our employees are members of labor unions. If a labor dispute were to develop between us and our unionized employees, such employees could go on strike and we could suffer work stoppage for a significant period of time. For example, in June 2000, we experienced a labor dispute in Israel that resulted in work stoppage lasting one month. A labor dispute can be difficult to resolve and may require us to seek arbitration for resolution, which arbitration can be time consuming, distracting to management, expensive and difficult to predict. The occurrence of a labor dispute with our unionized employees could delay or preclude altogether our ability to generate revenues in the markets where such employees are located. 

We are subject to litigation that could result in significant costs to us, a reduction in the price of our ordinary shares or dilution of our shareholders' ownership percentage. 

We are a party to a litigation between us and Leonardo L.P. (and certain of its related parties) arising from a financial transaction concluded in February 2000. Pursuant to such transaction, Leonardo invested $12 million in our company in return for notes that were convertible into our ordinary shares. We believe that the terms of the transaction dictated that the notes could be converted into a maximum of 2,250,000 of our ordinary shares and that upon conversion of the notes, the notes would be fully discharged and we would have no further obligation to the holders of the notes. Through the maturity date of the notes, March 3, 2003, Leonardo exercised its right to convert the notes into 2,241,594 of our ordinary shares. Immediately following the maturity date of the notes, however, Leonardo sent us a demand to repay in cash the balance of the notes plus accrued interest which had not been previously converted into our ordinary shares, which, according to Leonardo, was approximately $6.2 million. We subsequently commenced this litigation to obtain a judicial determination of the proper disposition of the Leonardo notes and to obtain a declaration that our sole remaining obligation under the notes was to issue 8,406 of our ordinary shares. After engaging in the early stages of pleading the case before a district court in Israel and the process of undertaking discovery, the parties have entered into, at the court's suggestion, a non-binding mediation process. In its pleadings, Leonardo is seeking alternative remedies and relief, including, among others, (a)  the repayment in cash of the balance of the notes in the amount of approximately $6.2 million plus interest and expenses, (b) the delivery to Leonardo of the maximum number of our ordinary shares into which the notes could have been converted on the maturity date without regard to the 2,250,000 share limitation, or 3,516,462 ordinary shares, plus additional monetary damages, or (c) the payment of a cash amount equal to the amount obtained by multiplying the 3,516,462 shares mentioned in the preceding clause by the highest trading price of our ordinary shares between the maturity date and the date of the court's decision, plus interest or expenses. Although there can be no assurances as to the final outcome of this litigation or the mediation process, we believe that the maximum liability that we could have in this matter, assuming that a court rejects our interpretation of the agreements or determines that we have otherwise defaulted on the notes, is approximately $5.9 million plus interest and expenses. While we cannot predict the outcome of this litigation or the mediation process at this time, if Leonardo prevails, the  

 

14

 

Risk factors 

award to Leonardo of damages, either in cash or by delivery of our ordinary shares, could result in significant costs to us, adversely affecting our results of operations. In addition, the issuance of our ordinary shares to Leonardo may impact the share price of our ordinary shares and would dilute our shareholders' ownership percentage. See also "Business—Legal proceedings." 

Consistent with the presentation throughout this prospectus, all share numbers reported in this discussion were adjusted to reflect the three-for-one share split of our ordinary shares to be effected immediately prior to the consummation of this offering. 

We have not obtained nor applied for several of the permits required for the operation of some of our base sites. To the extent enforcement is sought, the breadth, quality and capacity of our network coverage could be materially affected. 

The provision of our SVR services depends upon adequate network coverage for accurate tracking information. In Israel, we have installed 96 base sites that provide complete communications coverage in Israel. Similarly, we have established complete communications coverage in São Paulo, Brazil, Buenos Aires, Argentina and Miami, Florida. The installation and operation of most of our base sites require building permits from local or regional zoning authorities as well as a number of additional permits from governmental and regulatory authorities. For example, in Israel, the erection of our base sites requires installation and operating permits from the Ministry of the Environment, certain permits from the Civil Aviation Authority, permits from the Israeli Defense Forces and approval from Israel's Land Administration. 

Currently most of our base sites in Israel and Brazil operate without local building permits or the equivalent. Although relevant authorities in Israel and Brazil have not historically enforced penalties for non-compliance with certain permit regulations, following ongoing press coverage and actions by various public interest groups, relevant Israeli authorities have recently begun seeking enforcement of permit regulations, especially with respect to antennas constructed for cellular phone operators. Some possible enforcement measures include the closure or demolition of existing base sites. Should these enforcement measures be imposed upon us in Israel or should the relevant authorities in Brazil similarly begin enforcing permit requirements, or impose penalties on us for non-compliance with such permit requirements, the extent, quality and capacity of our network coverage and, as a result, our ability to provide SVR services, may be adversely affected. 

Currency fluctuations may result in valuation adjustments in our assets and liabilities and could cause our results of operations to decline. 

The valuation of our assets and liabilities and our revenues received and the related expenses incurred are not always denominated in the same currency. This lack of correlation between revenues and expenses exposes us to risks resulting from currency fluctuations. These currency fluctuations could have an adverse effect on our results of operations. In addition, fluctuations in currencies may result in valuation adjustments in our assets and liabilities which could cause our results of operations to decline. 

RISKS RELATED TO OUR OPERATIONS IN ISRAEL 

We are headquartered in Israel and therefore our results of operations may be adversely affected by political, economic and military instability in Israel. 

Our headquarters and sole research and development facilities are located in Israel and our key employees, officers and directors are residents of Israel. Accordingly, security, political and economic conditions in Israel directly affect our business. Over the past several decades, a number of armed conflicts have taken place between Israel and its Arab neighbors. Since 2000, hostilities have increased in intensity and regional political uncertainty has also increased. Continued or increased hostilities, future armed conflicts, political developments in other states in the region or continued or increased terrorism could make it more difficult for us to conduct our operations in Israel, which could increase our costs and adversely affect our financial results. For example, due to the obligation of every male Israeli citizen to serve in the military up to 30 days per year, which extends until middle age, any major escalation in hostilities in the region could result in a portion of our employees being called up to perform military duty for an extended period of time. 

 

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Risk factors 

Israel has experienced in recent years, unionized general strikes in connection with the legislation of new economic reforms. A prolonged general strike in Israel would affect our ability provide our wireless communications products that are manufactured in Israel and would negatively impact our operations. Furthermore, there are a number of countries, primarily in the Middle East, as well as Malaysia and Indonesia, that restrict business with Israel or Israeli companies and as a result our company is precluded from marketing its products in these countries. Restrictive laws or policies directed toward Israel or Israeli businesses could have an adverse affect on our ability to grow our business and our results of operations. 

We receive tax benefits that may be reduced or eliminated in the future, which reduction or elimination could result in us paying increased taxes thereby adversely affecting our results of operations. 

Some of our operations in Israel have been granted "approved enterprise" status by the Investment Center in the Israeli Ministry of Industry and Trade that resulted in us being eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959. The availability of these tax benefits is subject to certain requirements, including, among other things, making specified investments in fixed assets and equipment, financing a percentage of those investments with our capital contributions, compliance with our marketing program which was submitted to the Investment Center, filing of certain reports with the Investment Center and compliance with Israeli intellectual property laws. If we do not meet these requirements in the future, these tax benefits may be cancelled and we could be required to refund any tax benefits that we have already received plus interest and penalties thereon. The tax benefits that our current "approved enterprise" program receives may not be continued in the future at their current levels or at all. If these tax benefits were reduced or eliminated, the amount of taxes that we pay would likely increase, which could adversely affect our results of operations. See "Israeli taxation." 

Under Israeli law, we are considered a "monopoly" and therefore subject to certain restrictions that may negatively impact our ability to grow our business in Israel. 

We have been declared a monopoly under the Israeli Restrictive Trade Practices Law, 1988, in the market for the provision of systems for the location of vehicles. Under Israeli law, a monopoly is prohibited from taking certain actions, such as predatory pricing and the provision of loyalty discounts, which prohibitions do not apply to other companies. The Israeli antitrust authority may further declare that we have abused our position in the market. Any such declaration in any suit in which it is claimed that we engage in anti-competitive conduct would serve as prima facie evidence that we are a monopoly or that we have engaged in anti-competitive behavior. Furthermore, we may be ordered to take or refrain from taking certain actions, such as set maximum prices, in order to protect against unfair competition. Restraints on our operations as a result of being considered a "monopoly" in Israel could adversely affect our ability to grow our business in Israel. 

It may be difficult and costly to enforce a judgment issued against us in the United States, our executive officers and directors, the selling shareholders and the Israeli experts named in this prospectus, or to assert United States securities laws claims in Israel or serve process on our officers and directors and these experts. 

Our company is incorporated and headquartered in Israel. As a result, our executive officers and directors, the selling shareholders and the Israeli experts named in this prospectus are non-residents of the United States and a substantial portion of our assets and the assets of these persons are located outside of the United States. Therefore, service of process upon any of these officers, directors, shareholders or experts may be difficult to effect in the United States. Furthermore, it may be difficult to enforce a judgment issued against us in the United States against us or any of such persons in both United States courts and other courts abroad. 

Additionally, there is doubt as to the enforceability of civil liabilities under United States federal securities laws in actions originally instituted in Israel or in actions for the enforcement of a judgment obtained in the United States on the basis of civil liabilities in Israel. See "Enforceability of civil liabilities" for additional information about the difficulty in enforcing a judgment under United States securities laws in Israel. 

 

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Risk factors 

Provisions of Israeli corporate and tax law may delay, prevent or otherwise encumber a merger with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such transaction are favorable to us and our shareholders. 

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. In addition, our articles of association contain provisions that may make it more difficult to acquire our company, such as classified board provisions. Furthermore, Israeli tax considerations may make potential transaction structures involving the acquisition of our company unappealing to us or to some of our shareholders. See "Management—Approval of related party transactions under Israeli law" and "Israeli taxation" for additional discussion about some anti-takeover effects of Israeli law. These provisions of Israeli law and our articles of association may delay, prevent or otherwise encumber a merger with, or an acquisition of, our company or any of our assets, which could have the effect of delaying or preventing a change in control of our company, even when the terms of such a transaction could be favorable to our shareholders. 

Your rights and responsibilities as a shareholder will be governed by Israeli law and may differ in some respects from the rights and responsibilities of shareholders under United States law. 

We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our memorandum of association, articles of association and by Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical US-based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith toward the company and other shareholders and to refrain from abusing his, her or its power in the company, including, among other things, in voting at the general meeting of shareholders on matters such as amendments to a company's articles of association, increases in a company's authorized share capital, mergers and interested transactions requiring shareholder approval. In addition, a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness (which is not defined under Israeli law) toward the company. Israeli corporate law has undergone extensive revisions in the recent years and, as a result, there is little case law available to assist in understanding the implications of these provisions that govern shareholders' actions, which may be interpreted to impose additional obligations on holders of our ordinary shares that are typically not imposed on shareholders of US-based corporations. 

RISKS RELATED TO THIS OFFERING 

We will have broad discretion in how to use the proceeds from this offering and we may apply the proceeds for uses with which you do not agree. 

We intend to use the net proceeds from the offering for general corporate purposes, including for working capital to support the growth of our business in existing and new markets, and for funding of potential acquisitions and investments in complementary business, technologies or products (although we do not currently have agreements or undertakings regarding any acquisition or investment). As a result, there is no specific allocation for the use of the net proceeds of the offering and our management retains the right to use the proceeds as it determines appropriate. Our ability to use broad discretion with the proceeds from this offering may result in our shareholders disagreeing with our business practices and being generally dissatisfied with their investment. 

Future sales of our ordinary shares could reduce the market price of our ordinary shares. 

If we or our shareholders sell substantial amounts of our ordinary shares, either on the Tel Aviv Stock Exchange or the Nasdaq National Market, the market price of our ordinary shares may decline. We and the beneficial owners of 9,247,643 of our ordinary shares (such shares representing holdings immediately prior to the consummation of this offering) have agreed with the underwriters of this offering not to sell any ordinary shares, other than the shares offered by this prospectus, for a period of at least 180 days following the date of this prospectus. The ordinary shares we and the selling shareholders are offering for sale in this offering will be  

 

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Risk factors 

freely tradable immediately following this offering. Sales by us or our shareholders of substantial amounts of our ordinary shares, or the perception that these sales may occur in the future, could reduce the market price of our ordinary shares. 

The market price of our ordinary shares is subject to fluctuation, which could result in substantial losses for our investors. 

The stock market in general, and the market price of our ordinary shares in particular, are subject to fluctuation, and changes in our share price may be unrelated to our operating performance. The market price of our ordinary shares has fluctuated in the past, and we expect it will continue to do so, as a result of a number of factors, including: 

 

the gain or loss of significant orders or customers; 

 

recruitment or departure of key personnel; 

 

the announcement of new products or service enhancements by us or our competitors; 

 

quarterly variations in our or our competitors' results of operations; 

 

announcements related to litigation; 

 

changes in earnings estimates, investors' perceptions, recommendations by securities analysts or our failure to achieve analysts' earning estimates; 

 

developments in our industry; and 

 

general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors. 

These factors and price fluctuations may materially and adversely affect the market price of our ordinary shares and result in substantial losses to our investors. 

A significant portion of our ordinary shares are held by a small number of existing shareholders and you may not agree with some or all of the decisions taken by such shareholders. 

Our directors and officers, some of whom are also selling shareholders in this offering, in the aggregate, currently beneficially own or control approximately 48.2% of our outstanding ordinary shares and will continue to beneficially own or control approximately 36.7% of our outstanding ordinary shares following the completion of this offering, or 35.2% if the underwriters exercise their over-allotment option in full. Other than pursuant to lock-up agreements executed in connection with this transaction and applicable regulatory requirements under applicable law, these shareholders are not prohibited from selling a controlling interest in our company to a third party. These shareholders, acting together, could exercise significant influence over our operations and business strategy and may use their voting power to influence all matters requiring approval by our shareholders, including the ability to elect or remove directors, to approve or reject mergers or other business combination transactions, the decision to raise additional capital and the amendment of our articles of association that govern the rights attached to our ordinary shares. You may not agree with some or all of the decisions taken by such shareholders. In addition, this concentration of ownership may delay, prevent or deter a change in control, or deprive you of a possible premium for your ordinary shares as part of a sale of our company. 

US investors in our company could suffer adverse tax consequences if we are characterized as a passive foreign investment company. 

If, for any taxable year, our passive income or our assets that produce passive income exceed levels provided by law, we may be characterized as a passive foreign investment company, which we refer to as PFIC, for US federal income tax purposes. This characterization could result in adverse US tax consequences to our shareholders who are US Holders. See "United States tax considerations" for more information about which shareholders may qualify as US Holders. If we were classified as a PFIC, a US Holder could be subject to increased tax liability upon the sale or other disposition of our ordinary shares or upon the receipt of amounts treated as "excess  

 

18

 

Risk factors 

distributions." Under such rules, the excess distribution and any gain would be allocated ratably over the US Holder's holding period for the ordinary shares and the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a PFIC would be taxed as ordinary income. The amount allocated to each of the other taxable years would be subject to tax at the highest marginal rate in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed on the resulting tax allocated to such other taxable years. In addition, holders of shares in a PFIC may not receive a "step-up" in basis on shares acquired from a decedent. US shareholders should consult with their own US tax advisors with respect to the United States tax consequences of investing in our ordinary shares as well as the specific application of the "excess distribution" and other rules discussed in this paragraph. For a discussion of how we might be characterized as a PFIC and related tax consequences, please see "United States tax considerations—Passive foreign investment company considerations." 

Our ordinary shares will be traded on more than one market and this may result in price variations. 

We intend to trade our ordinary shares on the Nasdaq National Market upon completion of this offering and our shares are currently traded on the Tel Aviv Stock Exchange. Trading in our ordinary shares on these markets will take place in different currencies (dollars on the Nasdaq National Market and NIS on the Tel Aviv Stock Exchange), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Israel). The trading prices of our ordinary shares on these two markets may differ due to these and other factors. Any decrease in the trading price of our ordinary shares on one of these markets could cause a decrease in the trading price of our ordinary shares on the other market. 

Securities we issue to fund our operations or in connection with acquisitions could dilute your ownership or impact the value of your ordinary shares. 

We may decide to raise additional funds through a public or private debt or equity financing to fund our operations or finance acquisitions. If we issue additional equity securities, the percentage of ownership of our shareholders will be reduced and the new equity securities may have rights superior to those of our ordinary shares, which may, in turn, adversely affect the value of our ordinary shares. 

 

19

 

Special note regarding forward-looking statements 

This prospectus contains forward-looking statements that involve substantial risks and uncertainties regarding future events or our future performance. We have based these forward-looking statements on our current expectations and projections about future events. These statements include but are not limited to: 

 

expectations as to the development of our products and technology and the timing of enhancements to our products; 

 

statements as to expected increases in sales, results of operations and certain expenses, including selling and marketing expenses; 

 

expectations as to the market opportunities for our products as well as our ability to take advantage of those opportunities; 

 

statements as to the expected use of proceeds from this offering; 

 

expectations as to growth of our location-based services and wireless communications products segments; 

 

expectations as to the development of our marketing and sales relationships and, in particular, our relationships with insurance companies; 

 

expectations as to the revenues that will be derived from our agreements with regard to the development and construction of AVL systems in China and South Korea; 

 

statements as to the expected outcome of legal proceedings in which we are involved, such as the Leonardo litigation; 

 

estimates of the impact of changes in currency exchange rates on our results of operations; and 

 

statements as to our expected treatment under Israeli and United States federal tax legislation and the impact that Israeli tax and corporate legislation may have on our operations. 

In addition, statements that use the terms "believe", "expect", "plan", "intend", "estimate", "anticipate" and similar expressions are intended to identify forward-looking statements. All forward-looking statements in this prospectus reflect our current views about future events and are based on assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from future results expressed or implied by the forward-looking statements. Many of these factors are beyond our ability to control or predict. You should not put undue reliance on any forward-looking statements. Unless we are required to do so under United States federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements. 

 

20

 

Price range of our ordinary shares 

Our ordinary shares have been trading on the Tel Aviv Stock Exchange under the symbol "ITRN" since May 1998. No trading market currently exists for our ordinary shares in the United States. However, we have applied for the listing of our ordinary shares on the Nasdaq National Market under the symbol "ITRN." 

The following table sets forth for the periods indicated the reported high and low sales prices of our ordinary shares on the Tel Aviv Stock Exchange. Dollar per ordinary share amounts are calculated using the applicable rate of exchange on the date to which the high or low market price is applicable. 

Price per
ordinary share (NIS) 		Price per
ordinary share ($)
High Low High Low
Annual:
2005 (through August 31, 2005) 56.33 40.97 12.43 9.32
2004 41.57 25.42 9.78 5.60
2003 26.37 8.23 6.07 1.69
2002 13.90 7.50 3.10 1.54
2001 19.67 7.53 4.78 1.78
2000 76.00 16.80 18.83 4.16
Quarterly:
Third Quarter 2005 (through August 31, 2005) 56.33 43.07 12.43 9.66
Second Quarter 2005 52.30 43.07 11.96 9.66
First Quarter 2005 52.47 40.97 12.14 9.32
Fourth Quarter 2004 41.30 29.77 9.47 6.67
Third Quarter 2004 31.72 25.42 7.10 5.60
Second Quarter 2004 32.10 28.13 7.09 6.12
First Quarter 2004 31.20 25.70 6.97 5.76
Fourth Quarter 2003 26.37 18.67 6.07 4.21
Third Quarter 2003 19.20 14.79 4.40 3.34
Second Quarter 2003 19.07 10.94 4.38 2.33
First Quarter 2003 11.01 8.23 2.35 1.69
Most recent six months:
August 2005 (through August 31, 2005) 56.33 46.57 12.43 10.44
July 2005 50.63 46.20 11.17 10.07
June 2005 50.43 43.07 11.55 9.66
May 2005 51.17 46.67 11.73 10.68
April 2005 52.30 46.30 11.96 10.64
March 2005 52.47 46.97 12.14 10.76
February 2005 49.27 44.60 11.31 10.20
January 2005 45.17 40.97 10.34 9.32
December 2004 41.57 38.43 9.78 8.88

On August 31, 2005, the last reported sale price of our ordinary shares on the Tel Aviv Stock Exchange was NIS 56.33, or $12.43, per share. As of August 31 , 2005, there were 9 shareholders of record of our ordinary shares. The number of record holders is not representative of the number of beneficial holders of our ordinary shares. 

 

21

 

Use of proceeds 

We estimate that we will receive net proceeds, after deducting the underwriters' discounts and commissions and the estimated offering expenses, of approximately $         million from the sale by us of 3,840,000 ordinary shares in this offering. If the underwriters exercise their over-allotment option, we will receive additional proceeds from the sale of up to 576,000 additional ordinary shares. For the purpose of estimating net proceeds, we are assuming a public offering price of $         per ordinary share and that the estimated offering expenses will equal $         . We will not receive any proceeds from the sale of our ordinary shares by the selling shareholders. 

We intend to use the net proceeds of this offering for working capital to support the growth of our business in existing and new markets, for the funding of potential acquisitions and investments in complementary businesses and for technologies or products (although we do not currently have agreements or undertakings regarding any particular acquisition or investment). 

 

22

 

Dividend policy 

On January 29, 2004, we adopted a dividend policy providing for an annual dividend distribution in an amount equal to 25% of our net profits, calculated based on the financial statements for the period ending on December 31 of the fiscal year with respect to which the relevant dividend is paid. 

According to our current dividend policy and Israeli law, an annual dividend will only be declared and paid if, in the discretion of the Board of Directors, there is no reasonable foreseeable concern that the distribution will prevent us from being able to meet the terms of our existing and contingent liabilities, as and when due. Dividends must be approved by the shareholders, although interim dividends may be declared and paid by the Board of Directors without shareholder approval. The distribution of dividends is further limited by Israeli law to the greater of retained earnings and earnings generated over the two most recent years. See "Description of ordinary shares—Dividend and liquidation rights." Our dividend policy may change from time to time at the discretion of our Board of Directors. Due to the foregoing restrictions on our dividend policy, and given our current financial condition and our current cash flows from operations, we do not believe that our dividend policy restricts our growth. 

Dividends declared on our ordinary shares will be paid in NIS. Dividends paid to shareholders outside of Israel will be converted into dollars on the basis of the exchange rate prevailing on the date of the declaration of the relevant dividend and paid in dollars. The payment of dividends may be subject to Israeli withholding taxes. See "Israeli taxation—withholding on dividends paid to non-residents of Israel." 

On January 29, 2004, upon adopting our current dividend policy, we declared a dividend in an amount equal to NIS 6.0 million, or $1.3 million. Such dividend was paid on April 1, 2004. On March 23, 2005, we declared a dividend in an amount equal to NIS 11.8 million, or $2.7 million. Such dividend was paid on April 28, 2005. We did not declare or pay any cash dividends to shareholders during the five-year period prior to January 29, 2004. 

 

23

 

Capitalization 

The following table sets forth our capitalization as of June 30, 2005: 

 

on an actual basis; and 

 

as adjusted to reflect the sale of 3,840,000 ordinary shares at an assumed public offering price of $     per share and the receipt by us of estimated net proceeds equal to $       million after deducting the underwriters' discounts and commissions and estimated offering expenses. 

This table should be read in conjunction with "Management's discussion and analysis of financial condition and results of operations" and our consolidated financial statements and related notes included elsewhere in this prospectus. 

As of June 30, 2005
Actual As adjusted
(Unaudited)
(In thousands)
Short-term debt $ 5,975 $
Long-term debt 664
Capital note 5,894
Shareholders' equity:
Ordinary shares, nominal value NIS 0.33⅓ per share; authorized 22,575,000 shares, actual; 18,776,652 shares outstanding, actual;
22,616,652 shares outstanding, as adjusted 		1,640
Additional paid-in capital 23,876
Retained earnings (accumulated deficit) (3,243 )
Accumulated other comprehensive loss (2,748 )
Cost of purchase of company's shares by subsidiaries (384 )
Deferred compensation —
Total shareholders' equity 19,141             
Total capitalization $ 31,674 $

The discussion and table above do not include an aggregate of 540,105 ordinary shares issuable upon the exercise of outstanding options, 33,333 ordinary shares issuable upon the exercise of an outstanding warrant and 8,406 ordinary shares issuable upon the conversion of an outstanding capital note. 

We are the beneficiaries of loans and a line of credit from Bank Hapoalim Ltd. and Bank Leumi, Ltd. pursuant to which we had an aggregate amount of $6.6 million outstanding as of June 30, 2005. The loans from Bank Hapoalim are secured by liens on all our assets and properties in Israel. 

 

24

 

Dilution 

Our net tangible book value on June 30, 2005 was approximately $19,141 million, equivalent to $1.00 per share. We have calculated our net tangible book value per share by: 

 

subtracting our liabilities and intangible assets from our total assets; and 

 

dividing the difference by the number of ordinary shares outstanding. 

After giving effect to adjustments relating to the offering, our pro forma net tangible book value on June 30, 2005 would have been approximately $         million, equivalent to $         per share. The adjustments made to determine pro forma net tangible book value per share are as follows: 

 

an increase in total assets to reflect the net proceeds of the offering received by us as described under "Use of proceeds"; and 

 

the addition of the 3,840,000 ordinary shares offered in this prospectus to the number of ordinary shares outstanding. 

The following table illustrates the immediate increase in pro forma net tangible book value of $         per share and the immediate pro forma dilution to new investors: 

Assumed public offering price per share
                     $
Net tangible book value per share as of June 30, 2005 $
Increase in net tangible book value per share attributable to the offering
Pro forma net tangible book value per share as of June 30, 2005 after giving
effect to the offering 		            
Dilution per share to new investors in the offering $

The table below summarizes, as of June 30, 2005, the differences for our existing shareholders and new shareholders in this offering, with respect to the number of ordinary shares purchased from us, the total consideration paid and the average price per share paid before deducting fees and expenses. 

Shares issued Total consideration
Number Percentage Amount Percentage Average
price per share
(In thousands, except share data)
Our existing shareholders          % $ % $
New shareholders in this offering                                   
Total 100.0 % $ 100.0 % $

The discussion and table above do not include an aggregate of 540,105 ordinary shares issuable upon the exercise of outstanding options, 33,333 ordinary shares issuable upon the exercise of an outstanding warrant and 8,406 ordinary shares reserved for issuance upon conversion of an outstanding capital note. 

We are the beneficiaries of loans and a line of credit from Bank Hapoalim and Bank Leumi, pursuant to which an aggregate amount of $6.6 million was outstanding as of June 30, 2005. The loans from Bank Hapoalim are secured by liens on all our assets and properties in Israel. 

 

25

 

Selected consolidated financial and other data 

The following table sets forth our selected consolidated financial and other data for the periods ended and as of the dates indicated. The following selected historical consolidated financial data for our company should be read in conjunction with the historical financial information and other information provided in this prospectus, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes appearing elsewhere in this prospectus. The selected consolidated financial data in this section is not intended to replace the consolidated financial statements and is qualified in its entirety thereby. 

We derived the selected consolidated financial statements as of and for the periods ended December 31, 2002, 2003 and 2004 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the selected consolidated financial statements as of and for the periods ended December 31, 2000 and 2001 from our audited consolidated financial statements not included in this prospectus. We derived the selected consolidated financial and other data as of and for the six months ended June 30, 2004 and June 30, 2005 from our unaudited consolidated financial statements included elsewhere in this prospectus. In the opinion of our management, our unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows. The results of operations for the six months ended June 30, 2004 and June 30, 2005 are not necessarily indicative of the operating results to be expected for the full fiscal years encompassing such periods. 

Our consolidated financial statements included in this prospectus were prepared in dollars in accordance with generally accepted accounting principles in the United States. In addition, all of our financial data relating to prior periods that is provided in this prospectus is also derived from financial statements prepared in accordance with generally accepted accounting principles in the United States. Our functional currency is NIS. In accordance with the rules of the Israeli Securities Authority and the Tel Aviv Stock Exchange, prior to this offering, we reported our consolidated financial statements in NIS prepared in accordance with generally accepted accounting principles in Israel. Our consolidated financial statements were translated into dollars in accordance with the principles set forth in Statement of Financial Accounting Standards, which we refer to as FAS No. 52, of the United States Financial Accounting Standards Board, which we refer to as FASB. Accordingly, assets and liabilities were translated from the relevant local currencies to dollars using year-end exchange rates, and income and expense items were translated at average exchange rates during the year. Gains or losses resulting from translation adjustments (which result from translating an entity's financial statements into dollars if its functional currency is different than the dollar) are reflected in shareholders' equity, under "accumulated other comprehensive income (loss)." 

After the offering, we will report our consolidated financial statements in dollars prepared in accordance with generally accepted accounting principles in the United States. 

 

26

 

Selected consolidated financial and other data 

Year ended December 31, Six months ended June 30,
Consolidated statements of operations data: 2000 2001 2002 2003 2004 20042005
(Unaudited)
(In thousands, except earnings per share data)
Revenues:
Location-based services $ 13,896 $ 19,757 $ 24,053 $ 32,088 $ 36,549 $ 17,857 $ 20,565
Wireless communications products 18,421 19,516 17,782 23,527 33,461 14,432 20,958
Other 8,045 8,689 7,856 8,456 7,916 3,790 2,162
Total revenues 40,362 47,962 49,691 64,071 77,926 36,079 43,685
Cost of revenue:
Location-based services 12,401 14,042 12,159 12,258 12,944 6,366 7,620
Wireless communications products 13,591 17,081 12,928 19,071 23,224 9,596 14,459
Other 6,563 6,922 5,746 6,119 5,720 2,663 1,573
Total cost of revenues 32,555 38,045 30,833 37,448 41,888 18,625 23,652
Gross profit 7,807 9,917 18,858 26,623 36,038 17,454 20,033
Operating expenses:
Research and development expenses 6,324 1,362 1,717 1,692 2,020 979 1,600
Selling and marketing expenses 2,907 3,241 2,365 2,888 4,074 2,128 2,206
General and administrative expenses 11,894 11,551 9,757 11,443 11,693 5,488 6,823
Other expenses (income), net — — 740 314 (12 ) (11 ) (5 )
Total operating expenses 21,125 16,154 14,579 16,337 17,775 8,584 10,624
Operating income (13,318 ) (6,237 ) 4,279 10,286 18,263 8,870 9,409
Financing expenses, net 3,362 5,369 6,039 616 2,059 1,391 41
Other non-operating expenses, net 1,010 753 528 — — — —
Income (loss) before taxes on income (17,690 ) (12,359 ) (2,288 ) 9,670 16,204 7,479 9,368
Taxes on income 2,612 198 2,955 (3,417 ) (4,423 ) (2,420 ) (2,133 )
Income after taxes on income (15,078 ) (12,161 ) 667 6,253 11,781 5,059 7,235
Share in losses of affiliated
companies, net 		(258 ) (955 ) (529 ) (235 ) (324 ) (167 ) (88 )
Minority interests in (income) loss of subsidiaries 768 174 731 (173 ) (238 ) (15 ) (62 )
Net income for the period $ (14,568 ) $ (12,942 ) $ 869 $ 5,845 $ 11,219 $ 4,877 $ 7,085
Earning per share (1) :
Basic $ 1.02 $ 0.86 $ 0.05 $ 0.32 $ 0.60 $ 0.26 $ 0.38
Diluted $ 1.02 $ 0.86 $ 0.05 $ 0.31 $ 0.58 $ 0.25 $ 0.36
Weighted average number of shares outstanding:
Basic 14,295 15,135 17,634 18,273 18,585 18,577 18,614
Diluted 14,295 15,135 18,264 19,086 19,192 19,188 19,140

 

(1)  

Earnings per share and weighted average number of shares outstanding were adjusted to reflect the three-for-one share split of our ordinary shares to be effected immediately prior to the consummation of this offering.  

 

27

 

Selected consolidated financial and other data 

As of December 31, As of June 30,
Consolidated balance sheet data: 2000 2001 2002 2003 2004 2005
(Unaudited)
(In thousands)
Cash and cash equivalents $ 2,906 $ 1,014 $ 1,327 $ 3,918 $ 4,604 $ 4,815
Working capital (3,700 ) (15,825 ) (11,650 ) (3,624 ) 2,508 3,373
Total assets 61,151 57,926 54,412 54,731 59,023 63,051
Total liabilities 62,107 65,768 57,333 50,942 44,022 43,910
Retained earnings (accumulated deficit) 11,304 24,236 23,367 (17,522 ) (7,630 ) (3,243 )
Shareholders' equity 956 7,842 2,921 3,789 15,001 19,141

As of December 31, As of June 30,
Other data: 2000 2001 2002 2003 2004 2005
(Unaudited)
Subscribers of our location-based services (1) 116,000 150,000 178,000 210,000 262,000 298,000
Average monthly churn rate 0.7% 1.0% 1.0% 1.4% 1.5% 1.6%

 

(1)  

Number of subscribers is approximate.  

 

28

 

Management's discussion and analysis of financial condition and results of operations 

The following discussion of our financial condition, results of operations and liquidity should be read in conjunction with "Selected consolidated financial and other data" and our consolidated financial statements and the related notes to those statements included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategies for our business, statements regarding the industry outlook, our expectations regarding the future performance of our business and the non-historical statements contained herein are forward-looking statements. See "Special note regarding forward-looking statements." Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth in the following discussion and in "Risk factors", "Business" and elsewhere in this prospectus. 

OVERVIEW 

We believe we are a leading provider of location-based services, consisting predominantly of stolen vehicle recovery, which we refer to as SVR, and tracking services. We also provide wireless communications products used in connection with our SVR services and for various other applications, including automatic meter reading, which we refer to as AMR, and radio frequency identification, which we refer to as RFID. We currently provide our services and sell our products in Israel, Brazil, Argentina and the United States. In addition, we have recently entered into contracts to deploy our automatic vehicle location, which we refer to as AVL, infrastructure and sell our AVL end-units in China and South Korea, and commenced deploying such infrastructure in China in 2004 and in South Korea in 2005. 

Our operations consist of two segments: 

 

location-based services; and 

 

wireless communications products. 

Our location-based services segment consists of our SVR, fleet management and value-added services. We currently operate stolen vehicle recovery services throughout Israel, in São Paulo, Brazil, in Buenos Aires, Argentina and in Miami, Florida in the United States. 

Our wireless communications products segment consists of our short- and medium-range two-way wireless communications products that are used for various applications, including AVL, AMR, and RFID. We sell our AVL products to customers that subscribe to our SVR services, as well as to third-party operators of SVR services in China and in South Korea. We sell our AMR products exclusively to Arad Technologies Ltd. that incorporates our AMR products into a water meter product that it markets and distributes to utilities in the United States through its wholly-owned subsidiary Master Meter, Inc. We sell our RFID products to toll road and weigh station operators in the United States and Israel. 

Outlook 

We have historically experienced significant growth in the markets in which we provide our location-based services. Going forward, the Brazilian and Argentine markets continue to represent significant growth potential for our location-based services. These markets are characterized by high car theft rates and insurance companies that are seeking solutions to limit their actual losses resulting from car theft. The growth in subscribers within our location-based services segment also has a direct impact on the sale of our AVL products, as they are an integral component of our location-based services and are installed in each subscriber's vehicle. In addition, our recent contracts with third-party service providers for the deployment of our AVL infrastructure and the subsequent sale of our AVL end-units in China and South Korea represent important growth opportunities for the sale of these products. 

 

29

 

Management's discussion and analysis of financial condition and results of operations 

As of June 30, 2005, we had approximately 137,000 subscribers in Brazil and Argentina. We estimate that the total addressable market in our current coverage areas of São Paulo and Buenos Aires is several million vehicles, and therefore we have a significant opportunity to grow our subscriber base and increase sales of our AVL products. 

We expect growth over the next 12 months in our location-based services segment to be driven by increased demand from existing insurance company customers in Brazil and Argentina, as a result of our strong operating results and their increased familiarity with and confidence in our services, as well as additional insurance companies who could seek to establish relationships with us, as well as increased direct sales of SVR services to individual subscribers in Brazil who, due to prevailing high insurance costs, are self-insured and represent an additional market opportunity for our SVR services and AVL products. In connection with such potential markets and additional growth opportunities, we are looking to enhance our brand recognition through additional advertising efforts that we started in 2004. We expect our growing representation in the SVR market in Brazil and Argentina to result in additional revenues from sales of our AVL products. We also intend to commence providing SVR and fleet management services in Rio de Janeiro and expect to generate additional revenues from such operations in future periods. 

We intend to develop our location-based services and products businesses in new geographic markets either by selling our AVL infrastructure and end-units to third party providers of SVR services, as is the case currently in China and South Korea, or by providing our SVR services and selling our AVL products directly, as is the case currently in Israel, São Paulo, Buenos Aires and Miami. Selling our AVL infrastructure and end-units to third party providers of SVR services will result in increased short-term revenues from the sale of our AVL infrastructure and some long-term revenues from the sale of wireless communications products without any material increase in corresponding costs. Expanding to new markets to provide our SVR services and AVL products directly will increase our short-term costs associated with obtaining licenses, permits and establishing an infrastructure and operating system and result in increased long-term revenues from subscription fees from our SVR services and sales of our AVL products. The prevalence of one business approach over the other is dependent upon the particular opportunities that may arise from time to time and the prevailing circumstances in the different geographic markets into which we expand. 

The AMR market also has significant growth potential. Demand for AMR systems in the United States, the principal AMR market, is driven by the approximate five- to seven-year replacement cycle for existing water meters, the trend towards automatic meter readers versus legacy meters and the increase in number of consumers as a result of increased levels of housing starts since 2001. Products integrating our AMR technology provide an attractive solution for utilities looking to upgrade their technology and address their need to improve billing accuracy, reduce costs and increase reliability. Since we started selling AMR products at the end of 2001, we have experienced increased demand from Arad Technologies. Through December 31, 2004, we had sold approximately 550,000 AMR end-units. In December 2004, we received an additional order for approximately 488,000 end-units. As of June 30, 2005, we had supplied 129,330 of these end-units. These numbers represent a significant increase in sales of our AMR products. We believe that such increased demand has resulted from increased market awareness in the United States for the integrated meter product marketed by Master Meter and its technological advantages and benefits. We expect this trend to continue in the future. 

The market for our RFID products principally addresses three main areas: electronic toll collection, electronic security seals and electronic weigh stations. Recent legislative changes in the United States regarding the promotion of private toll road operations represent significant growth potential for the sale of our RFID products. Increased demand for security products in the United States by federal and state governmental agencies, including the United States Department of Homeland Security, also represents a potential market opportunity for our RFID products. We sell our electronic toll collection devices to Derech Eretz Highways (1997) Ltd., the sole toll road operator in Israel, and to the transit authority of the State of Minnesota. We sell our electronic weigh station devices to ACS-SLS, Inc., a subsidiary of Affiliated Computer Services, Inc., and to Norpass, Inc., a provider of mainline screening systems at weigh stations. We expect these orders, our first outside of Israel for our RFID products, to result in additional revenues over the next 12 months. In addition, we are currently engaged as the sole technology provider in several pilot programs for our RFID products with various federal and state governmental agencies, such as the United States Department of Homeland Security  

 

30

 

Management's discussion and analysis of financial condition and results of operations 

and the United States Customs and Border Protection Agency. Although these pilot programs do not currently represent a material portion of our business or revenues and we do not know if they may lead to revenue-generating contracts in the future, we believe our selection for these pilot programs represents a first step in our attempt to penetrate the RFID market in the United States. 

Historically, we derived a significant portion of our revenues from the provision of cellular services. Commencing in the second quarter of 2005, our revenues from these services declined significantly as a result of the expiration and non-renewal of our exclusive agreement with Partner Communications Co., Ltd. as of March 31, 2005. Our operations pursuant to such agreement represented a non-core, low margin business for us. We are seeking and will continue to seek to offset any recurring or fixed expenses, primarily salaries, through new business initiatives, or we will take actions to eliminate any such fixed or recurring expenses. We do not currently anticipate taking any charge or write-down associated with the decline or potential cessation of our cellular services. See Note 19 to our consolidated financial statements appearing elsewhere in this prospectus. 

Geographical breakdown 

Location-based services subscriber base 

The following table sets forth the geographic breakdown of subscribers to our location-based services as of the dates indicated: 

As of December 31, As of June 30,
2002 2003 2004 2005
Israel 144,000 142,000 146,000 152,000
Brazil 25,000 42,000 75,000 90,000
Argentina 5,000 22,000 36,000 47,000
United States 4,000 4,000 5,000 9,000
Total (1) 178,000 210,000 262,000 298,000

 

(1) 

All numbers provided are rounded down, and therefore totals may be slightly different than the results obtained by adding the numbers provided.  

Revenues 

The following table sets forth the geographic breakdown of our revenues for each of our business segments for the relevant periods indicated. 

Year ended December 31, Six months
ended June 30,
2002 2003 2004 2004 2005
Location-
based
services 		Wireless
communi-
cations
products 		Location-
based
services 		Wireless
communi-
cations
products 		Location-
based
services 		Wireless
communi-
cations
products 		Location-
based
services 		Wireless
communi-
cations
products 		Location-
based
services 		Wireless
communi-
cations
products
     (Unaudited)
(in millions)
Israel $ 19.6 $ 10.8 $ 22.7 $ 12.5 $ 23.2 $ 16.6 $ 12.1 $ 6.8 $ 10.9 $ 8.1
Brazil 3.0 4.6 5.1 2.6 8.2 4.8 3.4 1.8 6.4 3.1
Argentina 0.3 0.1 2.6 2.2 3.8 1.6 1.7 0.4 2.5 1.8
United States 1.2 2.3 1.6 6.1 1.4 9.8 0.7 5.4 0.8 5.3
China (1) — — — — — 0.7 — — — 2.1
South Korea (1) — — — — 0.5
Total (2) $ 24.1 $ 17.8 $ 32.1 $ 23.5 $ 36.5 $ 33.5 17.9 14.4 20.6 21.0

 

(1) 

Currently only includes sales of AVL infrastructure.  

(2) 

All numbers provided are rounded down, and therefore totals may be slightly different than the results obtained by adding the numbers provided.  

The above table does not include revenues from our cellular services, which no longer constitute a reportable segment. See Note 19 to our consolidated financial statements appearing elsewhere in this prospectus. 

 

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Management's discussion and analysis of financial condition and results of operations 

We attribute revenues to countries based on the location of the customer. Revenues from sales to Arad Technologies are included in US sales. 

Revenues 

Location-based services segment 

We generate revenues from sales of our SVR, fleet management and value-added services. A majority of our revenues represent subscription fees paid to us by our customers, predominately subscribers in Israel and the United States, and insurance companies in Brazil and Argentina. We recognize revenues from subscription fees on a monthly basis. Our customers are free to terminate their subscription at any time. In the absence of such termination, the subscription term continues automatically. We also generate subscription fees from our fleet management services. Assuming no additional growth in our subscriber base and based on our historical churn rates of under 2% per month in this segment, we can anticipate that at least 90% of our subscription fees generated in a prior quarter will recur in the following quarter. 

Wireless communications products segment 

We generate revenues from the sale of our AVL, AMR and RFID products to customers in Israel, Brazil, Argentina, the United States, China and South Korea. We currently sell our AVL products in each of the regions in which we provide SVR services. Growth in our subscriber base is the principal driver for the sale of our AVL products. In addition, we recently entered into contracts for the sale of our AVL infrastructure and end-units in China and South Korea to third-party operators that would likely result in growth of our AVL product sales that will not be related to any increase in our subscriber base. We commenced sales to China and South Korea during the fourth quarter of 2004 and the second quarter of 2005, respectively, for deployment of our AVL infrastructure in connection with the initial set-up and deployment of the terrestrial network and base stations throughout the coverage region. We sell our AMR products exclusively to Arad Technologies that incorporates our AMR product into a water meter product that it markets and distributes to utilities in the United States through its wholly-owned subsidiary Master Meter. We sell our RFID products to the sole toll road operator in Israel, the transit authority of the State of Minnesota, ACS-SLS, a subsidiary of ACS, and Norpass. We recognize revenues from sales of our wireless communications products upon delivery. 

Other 

We also generated revenues from the provision of our cellular services, consisting predominately of installation and repair fees for mobile phone hands-free car kit devices manufactured by third parties. Revenues are recognized upon installation of the device or sale of phone cards. Revenues from our cellular services have declined significantly as a result of the expiration and non-renewal of our agreement with Partner Communications as of March 31, 2005. 

Cost of revenues 

Location-based services segment 

The cost of revenues in our location-based services segment consists primarily of staffing, maintenance and operation of our control centers and base stations, costs associated with our staff and costs incurred for private enforcement, licenses, permits and royalties. Cost of revenues for sales of our fleet management services also includes payments to a third party who markets our services. 

Wireless communications products segment 

The cost of revenues in our wireless communications products segment consists primarily of production costs of our third-party manufacturers and costs associated with royalties. 

Other 

The cost of revenues for our cellular services consists primarily of installation costs. 

 

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Management's discussion and analysis of financial condition and results of operations 

Operating expenses 

Research and development 

Our research and development expenses consist of salaries, costs of materials and other overhead expenses, primarily in connection with the design and development of our wireless communications products. We expense all of our research and development costs as incurred. As we expand into new markets and introduce new products and services, we expect that our research and development costs will increase, although we do not expect them to increase significantly as a percentage of total revenues. 

Selling and marketing 

Our selling and marketing expenses have historically consisted primarily of advertising, salaries, commissions and other employee expenses related to our selling and marketing team and promotional and public relations expenses. We anticipate an increase in such costs, specifically in advertising costs related to our efforts to increase our subscriber base and enhance our brand recognition in Brazil and Argentina and to maintain our market leading position in Israel with respect to our location-based services, but we do not expect them to increase as a percentage of total revenues. 

General and administrative 

Our general and administrative expenses consist primarily of salaries, bonuses, accounting and other general corporate expenses. We expect our general and administrative expenses to increase in future periods, both in absolute terms and as a percentage of our total revenues, due to the expansion of our business as well as anticipated increased compliance costs as a result of becoming a publicly traded company in the United States. 

Operating Income 

Location-based services segment 

Operating income in our location-based services segment is primarily affected by increases in our subscriber base and our ability to increase the resulting revenues without a commensurate increase in our corresponding costs. We expect this trend to continue in the foreseeable future. 

Wirless communications products segment 

Operating income in our wireless communications products segment is primarily affected by our ability to increase sales of our higher margin AMR products as well as sales of AVL products in connection with turn-key solutions such as China and South Korea. While we expect the market for AMR products to grow in the foreseeable future, we expect sales of AVL infrastructure products in connection with our existing projects to end some time in 2006. 

Other 

Operating income for our cellular services is primarily affected by the margins of the different products that we sell. 

Financing expenses, net 

Financing expenses, net, include short- and long-term interest expenses and gains and losses from currency fluctuations from dollar-denominated loans and the conversion of monetary balance sheet items denominated in currencies other than the dollar. Financing expenses, net, also include gains or losses from currency swaps and other derivatives that do not qualify for hedge accounting under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities , as amended, or which have not been designated as hedging instruments. 

 

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Management's discussion and analysis of financial condition and results of operations 

Taxes on income 

Income earned from our services and product sales is subject to tax in the country in which we provide our services or from which we sell our products. In Israel, the current corporate tax rate is 34%, however, this tax rate is expected to be reduced in the coming years. In addition, some of the operations of our subsidiary Telematics Wireless Ltd. have been exempt or subject to reduced tax rates and we expect to maintain such benefits for some period of time, see "—Corporate tax." 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES 

Our critical accounting policies are more fully described in Note 1 to our consolidated financial statements appearing elsewhere in this prospectus. However, certain of our accounting policies require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates on a periodic basis. We base our estimates on historical experience, industry trends, authoritative pronouncements and various other assumptions that we believe to be reasonable under the circumstances. Such assumptions and estimates are subject to an inherent degree of uncertainty. 

The following are our critical accounting policies and the significant judgments and estimates affecting the application of those policies in our consolidated financial statements. See Note 1 to our consolidated financial statements. 

Revenue recognition 

We recognize revenues in accordance with Staff Accounting Bulletin No. 104 Revenue Recognition . For each of our segments we recognize revenues as follows: 

 

from sales to subscribers of our location-based services, on a monthly basis; 

 

from sales of our wireless communications products, when title and risk of loss of the applicable product pass to the relevant customer, which occurs upon delivery; and 

 

from sales of our cellular services, when the installation of the relevant unit is completed. 

We recognize revenues from certain long-term contracts in accordance with Statement of Position, which we refer to as SOP, 81-1, Accounting for Performance of Construction-Type and Certain Production Type Contracts . Pursuant to SOP 81-1, revenue is recognized pursuant to the percentage of completion method. We measure the percentage of completion based on output criteria in contracts that require network construction before end-units are sold, such as the number of end-units delivered or the progress of the work, based on input from engineers or other related professionals. Provisions for estimated losses on incomplete contracts are made during the period in which such losses are first identified, in the amount of the estimated loss on the entire contract. 

We recognize revenues as gross or net in accordance with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent . In most of our business arrangements, we contract directly with our end-users, we are the primary obligor and we carry all risk of collections. Revenues under these arrangements are recorded on a gross basis. In some cases, we are not considered as the primary obligor according to the criteria established in EITF 99-19, and serve only as a distributor of products or services of other parties to end-users. In those instances, in accordance with EITF 99-19, we report the revenues on a net basis. 

Accounting for income taxes 

As part of the process of preparing our consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process requires us to estimate our actual current tax exposure and make an assessment of temporary differences resulting from differing treatment of items, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must  

 

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Management's discussion and analysis of financial condition and results of operations 

include an expense within the tax provision in the consolidated statement of income. Significant management judgment is required in determining our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We have recorded a valuation allowance of $1.8 million as of December 31, 2004, which indicates that our management cannot determine that it is more likely than not that we will be able to realize this tax asset in the future. In the event that we generate taxable income in the jurisdictions in which we operate and in which we have net operating loss carry-forwards, we may be required to adjust our valuation allowance. 

Derivative instruments 

We maintain a risk management strategy that incorporates the use of currency hedges to minimize significant fluctuations in cash flows and/or earnings that are caused by exchange rate volatility. As a result, we engage in transactions involving foreign exchange derivative financial instruments, principally forward exchange contracts, which are designed to hedge our expected cash flows from revenues resulting from subscription fees denominated in currencies other than NIS. Such transactions are designed to qualify as cash flow hedges under FAS No. 133. FAS No. 133 establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). Changes in fair value of instruments that qualify for hedging accounting under FAS No. 133 are reported as "other comprehensive income" under "gains in respect of derivative instruments designated for cash flow hedge, net of related taxes", and are recognized in the statements of income when the hedged transaction affects earnings. Derivatives which do not qualify for hedge accounting under FAS No. 133, or which have not been designated as hedging instruments, are recognized in the balance sheet at their fair value, with changes in the fair value carried to the statements of income and included in "financing expenses, net." 

Allowance for doubtful accounts 

We are required to perform ongoing credit evaluations of our trade receivables and maintain an allowance for doubtful accounts, based upon our judgment as to our ability to collect outstanding receivables. In determining the relevant allowance amounts, we analyze our historical collection experience, current economic trends and the financial position of our customers. Our allowance policy is to define a flat percentage of our accounts receivable as the ongoing reserve and to reserve a higher amount for certain customers that we believe have a higher risk of default. As of December 31, 2004 and June 30, 2005, our allowance for doubtful accounts was $195,000 and $405,000 and our trade receivables (net of allowance for doubtful accounts) were $20.0 million and $22.2 million, respectively. To date, based on our past experience, our allowances for doubtful accounts have been sufficient. 

Goodwill and other intangible assets 

Under FAS No. 142, Goodwill and Other Intangible Assets , goodwill acquired in a business combination that closes on or after July 1, 2001 is deemed to have indefinite life and will not be amortized. FAS No. 142 requires goodwill to be tested for impairment on adoption and at least annually thereafter or between annual tests in certain circumstances, and written down when impaired, rather than being amortized as previous accounting standards required. Goodwill is tested for impairment by comparing the fair value of the reporting unit with its carrying value. Fair value is determined using the income approach. Significant estimates used in the methodologies included estimates of future cash flows and estimates of discount rates. We have performed impairment tests on our goodwill and as of December 31, 2004 and June 30, 2005, no impairment losses have been identified. As of December 31, 2004 and June 30, 2005, we had total goodwill of $2.9 million and $2.9 million, respectively, on our balance sheet. In assessing the recoverability of our goodwill and other intangible assets, we must make assumptions regarding the estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets. 

 

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Management's discussion and analysis of financial condition and results of operations 

RESULTS OF OPERATIONS 

The following table shows selected items from our consolidated statements of operations data as a percentage of our total revenues: 

Year ended December 31, Six months ended June 30,
Consolidated statements of operations data: 2002 2003 2004 2004 2005
(Unaudited)
Revenues:
Location-based services 48.4 % 50.1 % 46.9 % 49.5 % 47.1 %
Wireless communications products 35.8 36.7 42.9 40.0 48.0
Other 15.8 13.2 10.2 10.5 4.9
Total revenues 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Location-based services 24.5 19.1 16.6 17.6 17.4
Wireless communications products 26.0 29.8 29.8 26.6 33.1
Other 11.5 9.5 7.4 7.4 3.6
Total cost of revenues 62.0 58.4 53.8 51.6 54.1
Gross profit 38.0 41.6 46.2 48.4 45.9
Operating expenses:
Research and development expenses 3.5 2.6 2.6 2.7 3.7
Selling and marketing expenses 4.8 4.5 5.2 5.9 5.0
General and administrative expenses
(and other expenses (income), net) 		21.1 18.4 15.0 15.2 15.7
Total operating expenses 29.4 25.5 22.8 23.8 24.4
Operating income 8.6 16.1 23.4 24.6 21.5
Financing expenses, net 12.1 1.0 2.6 3.9 0.1
Other expenses, net 1.1 — — — —
Income (loss) before taxes on income (4.6 ) 15.1 20.8 20.7 21.4
Taxes (benefit) on income 5.9 (5.3 ) (5.7 ) (6.7 ) (4.9 )
Share in losses of affiliated companies, net (1.1 ) (0.4 ) (0.4 ) (0.5 ) (0.2 )
Minority interest in (income) loss of subsidiaries 1.5 (0.3 ) (0.3 ) — (0.1 )
Net income (loss) 1.7 % 9.1 % 14.4 % 13.5 % 16.2 %

Six months ended June 30, 2005 compared to six months ended June 30, 2004 

Revenues 

Total revenues increased from $36.1 million in the six months ended June 30, 2004 to $43.7 million in the six months ended June 30, 2005, or 21.1%. This increase consisted of $2.7 million from subscription fees from our location-based services and $6.5 million from sales of our wireless communications products. This increase was partially offset by a decline of $1.6 million from sales of our cellular services. 

Location-based services segment 

Revenues in our location-based services segment increased from $17.9 million in the six months ended June 30, 2004 to $20.6 million in the six months ended June 30, 2005, or 15.2%. This increase was primarily due to an increase in the number of our Brazilian and Argentine subscribers, from approximately 78,000 at June 30, 2004 to approximately 137,000 at June 30, 2005, as well as an increased average rate for our subscription fees in those counties due to the expansion of our customer base, including the increase of direct sales to individual subscribers. 

 

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Management's discussion and analysis of financial condition and results of operations 

Wireless communications products segment 

Revenues in our wireless communications products segment increased from $14.4 million in the six months ended June 30, 2004 to $21.0 million in the six months ended June 30, 2005, or 45.2%. This increase was primarily due to our growing subscriber base, the corresponding increase in sales of our AVL products in Brazil and Argentina and to the commencement of sales of our AVL infrastructure to third party operators in China and South Korea. This increase was partially offset by a decline in sales of our AMR products due to a delay in the launch of a new product by Arad Technologies. 

Other 

Revenues from our cellular services decreased from $3.8 million in the six months ended June 30, 2004 to $2.2 million in the six months ended June 30, 2005, or 43.0%. This decrease was due to decreased sales resulting from the expiration and non-renewal of our agreement with Partner Communications as of March 31, 2005. 

Cost of revenues 

Total cost of revenues increased from $18.6 million in the six months ended June 30, 2004 to $23.7 million in the six months ended June 30, 2005, or 27.0%. This increase of cost of revenues consisted of an increase of $1.3 million in our location-based services segment and $4.9 million in our wireless communications products segment. This increase was partially offset by a decline of $1.1 million in sales of our cellular services. As a percentage of total revenues, cost of revenues increased from 51.6% in the six months ended June 30, 2004 to 54.1% in the six months ended June 30, 2005. 

Location-based services segment 

Cost of revenues for our location-based services segment increased from $6.4 million in the six months ended June 30, 2004 to $7.6 million in the six months ended June 30, 2005, or 19.7%. This increase was primarily due to the increase in our subscriber base. As a percentage of total revenues for this segment, cost of revenues increased from 35.7% in the six months ended June 30, 2004 to 37.1% in the six months ended June 30, 2005, despite our ability to increase our subscribers without a significant increase in related costs, due to the effects of currency exchange rates of the dollar vis-a-vis the NIS and related foreign currency forward transactions that qualify as hedging transactions under FAS. 133 in the six months ended June 30, 2004. 

Wireless communications products segment 

Cost of revenues for our wireless communications products segment increased from $9.6 million in the six months ended June 30, 2004 to $14.5 million in the six months ended June 30, 2005, or 50.7%. This increase was primarily due to increased sales of our AVL products, as well as increased sales of our RFID products in the US market. As a percentage of total revenues for this segment, cost of revenues increased from 66.5% in the six months ended June 30, 2004 to 69.0% in the six months ended June 30, 2005. This increase was due to a one time write-off of inventory in the amount of $0.15 million and a decrease in the proportion of sales that our higher-margin AMR products constitute out of our total products sold. 

Other 

Cost of revenues from our cellular services decreased from $2.7 million in the six months ended June 30, 2004 to $1.6 million in the six months ended June 30, 2005, or 40.9%. This decrease was due to the decline in sales of our cellular services. As a percentage of total revenues from our cellular services, cost of revenues increased from $70.3% in the six months ended June 30, 2004 to 72.8% in the six months ended June 30, 2005. 

Operating expenses 

Research and development 

Research and development expenses increased from $1.0 million in the six months ended June 30, 2004 to $1.6 million in the six months ended June 30, 2005, or 63.4%. This increase was due to the hiring of additional personnel at Telematics Wireless in 2005. As a percentage of total revenues, research and development expenses increased from 2.7% in the six months ended June 30, 2004 to 3.7% in the six months ended June 30, 2005. 

 

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Management's discussion and analysis of financial condition and results of operations 

Selling and marketing 

Selling and marketing expenses slightly increased from $2.1 million in the six months ended June 30, 2004 to $2.2 million in the six months ended June 30, 2005, or 3.7%. This increase was due to additional advertising expenses in Brazil to increase our brand recognition in this market. As a percentage of total revenues, selling and marketing expenses decreased from 5.9% in the six months ended June 30, 2004 to 5.0% in the six months ended June 30, 2005. 

General and administrative 

General and administrative expenses increased from $5.5 million in the six months ended June 30, 2004 to $6.8 million in the six months ended June 30, 2005, or 24.3%. This increase was due to an additional $0.7 million paid as compensation to our employees, a one time expenditure for our ten-year anniversary event with respect to which approximately $0.3 million were charged to general and administrative costs and $0.2 million for an increase in our provision for doubtful accounts. As a percentage of total revenues for this segment, general and administrative expenses increased from 15.2% in the six months ended June 30, 2004 to 15.7% in the six months ended June 30, 2005. 

Operating income 

Total operating income increased from $8.9 million in the six months ended June 30, 2004 to $9.4 million in the six months ended June 30, 2005, or 6.1%. This increase consisted of $0.4 increase in our location-based services segment and a $0.4 increase in our wireless communications products segment. This increase was partially offset by a $0.3 decrease in our celluar services. 

Location-based services segment 

Operating income in our location-based services segment increased from $5.6 million in the six months ended June 30, 2004 to $6.1 million in the six months ended June 30, 2005, or 7.6%. This increase was due to an increase in our revenues from $17.9 million in the six months ended June 30, 2004 to $20.6 million in the six months ended June 30, 2005, and was partially offset by an increase in cost of revenues as a percentage of revenues for this segment from 35.7% in the six months ended June 30, 2004 to 37.1% in the six months ended June 30, 2005 and $0.4 million expenditure related to our ten-year anniversary event. 

Wireless communications products segment 

Operating income in our wireless communications products segment increased from $2.6 million in the six months ended June 30, 2004 to $3.0 million in the six months ended June 30, 2005, or 16.0%. This increase was primarily due to an increase in our revenues from $14.4 million in the six months ended June 30, 2004 to $21.0 million in the six months ended June 30, 2005, and was partially offset by an increase in cost of revenues as a percentage of revenues for this segment from 66.5% in the six months ended June 30, 2004 to 69.0% in the six months ended June 30, 2005, an increase of $0.6 million in our research and development costs, and a $0.2 million write-off of inventory. 

Other 

Operating income from our celluar services decreased from $0.6 million in the six months ended June 30, 2004 to $0.3 million in the six months ended June 30, 2005, or 48.5%. This decrease was due to a decline in our revenues. 

Financing expenses, net 

Financing expenses, net, decreased from $1.4 million in the six months ended June 30, 2004 to almost $0.0 million in the six months ended June 30, 2005. This decrease was primarily due to the repayment of most of our long-term bank loans and to a $0.1 million gain in exchange differences on outstanding amounts of our dollar-denominated loans in the six months period ended June 30, 2005 compared to a $0.9 million loss in the six months ended June 30, 2004. Our interest expenses decreased from $0.4 million in the six months ended June 30, 2004 to $0.3 million in the six months ended June 30, 2005. 

 

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Management's discussion and analysis of financial condition and results of operations 

Taxes on income 

Taxes on income decreased from $2.4 million in the six months ended June 30, 2004 to $2.1 million in the six months ended June 30, 2005, or 11.9%. This decrease was due primarily to the elimination of reserves for taxes for prior years, whose audits were completed during the six months ended June 30, 2005 and our ability to utilize tax credits from prior years for which no deferred taxes were recorded. Total income tax expense in the six months ended June 30, 2004 was 32.4% of pre-tax income, while in the six months ended June 30, 2005 it was 22.8% of pre-tax income. This decrease is primarily due to the application of certain Israeli government tax incentives to a business operation in Telematics Wireless that qualified as an "approved enterprise" under Israeli law and to the decrease of the Israeli corporate tax rate from 35% in 2004 to 34% in 2005. 

Year ended December 31, 2004 compared to the year ended December 31, 2003 

Revenues 

Total revenues increased from $64.1 million in 2003 to $77.9 million in 2004, or 21.6%. This increase consisted of $4.4 million from subscription fees from our location-based services and $9.9 million from sales of our wireless communications products. This increase was partially offset by a decline of $0.6 million in sales of our cellular services. 

Location-based services segment 

Revenues in our location-based services segment increased from $32.1 million in 2003 to $36.5 million in 2004, or 13.9%. This increase was primarily due to an increase in the number of our Brazilian and Argentine subscribers, from approximately 64,000 at December 31, 2003 to approximately 111,000 at December 31, 2004, or 73.4%. 

Wireless communications products segment 

Revenues in our wireless communications products segment increased from $23.5 million in 2003 to $33.5 million in 2004, or 42.2%. This increase was primarily due to an increase in sales of our AVL products, which resulted from an increase in our subscriber base and an increase in sales of our AMR and RFID products to Arad Technologies and Derech Eretz, respectively. 

Other 

Revenues from our celluar services decreased from $8.5 million in 2003 to $7.9 million in 2004, or 6.4%. This decrease was due to the decline in revenues from sales of pre-paid phone cards. 

Cost of revenues 

Total cost of revenues increased from $37.4 million in 2003 to $41.9 million in 2004, or 11.9%. This increase consisted of an increase of $0.7 million in our location-based services segment and $4.2 million in our wireless communications products segment. This increase was partially offset by a decline of $0.4 million in sales of our cellular services. As a percentage of total revenues, cost of revenues decreased from 58.4% in 2003 to 53.8% in 2004. 

Location-based services segment 

Cost of revenues for our location-based services segment increased from $12.3 million in 2003 to $12.9 million in 2004, or 5.6%. This increase was primarily due to the significant increase in our subscriber base. As a percentage of total revenues for this segment, cost of revenues declined from 38.2% in 2003 to 35.4% in 2004, primarily due to our ability to increase our subscribers without a commensurate increase in related costs. 

Wireless communications products segment 

Cost of revenues for our wireless communications products segment increased from $19.1 million in 2003 to $23.2 million in 2004, or 21.8%. This increase was primarily due to increased sales of our AVL products, including PAL, as well as a significant increase in sales of our AMR and RFID products. As a percentage of total revenues for this segment, cost of revenues declined from 81.1% in 2003 to 69.4% in 2004. This decline was  

 

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Management's discussion and analysis of financial condition and results of operations 

due to an increase in the proportion of sales of our higher-margin AMR and RFID products in the Israeli and US markets in 2004 and a one-time write-off of inventory for discontinued products in 2003 in the amount of $1.2 million. 

Other 

Cost of revenues from our cellular services decreased from $6.1 million in 2003 to $5.7 million in 2004, or 6.5%. This decrease was due to the decline in revenues. As a percentage of total revenues from our cellular services, cost of revenues decreased slightly, from 72.4% in 2003 to 72.3% in 2004. 

Operating expenses 

Research and development 

Research and development expenses increased from $1.7 million in 2003 to $2.0 million in 2004, or 19.4%. This increase was due to the hiring of additional personnel in Telematics Wireless in 2004. As a percentage of total revenues, research and development expenses remained constant at 2.6%. 

Selling and marketing 

Selling and marketing expenses increased from $2.9 million in 2003 to $4.1 million in 2004, or 41.1%. This increase was due to additional advertising expenses in Brazil and Argentina for the principal purpose of increasing our brand recognition in such markets. As a percentage of total revenues, selling and marketing expenses increased from 4.5% in 2003 to 5.2% in 2004. 

General and administrative 

General and administrative expenses increased from $11.4 million in 2003 to $11.7 million in 2004, or 2.2%. This increase was due to an additional $0.8 million of bonus payments to senior management that was partially offset by a decrease of $0.3 million in the allowance for doubtful accounts and a decrease of $0.2 million in royalty payments for our use of the name "Tadiran." As a percentage of total revenues, general and administrative expenses decreased from 17.9% in 2003 to 15.0% in 2004. 

Operating income 

Total operating income increased from $10.3 million in 2003 to $18.3 million in 2004, or 77.6%. This increase consisted of $1.1 increase in our location-based services segment, a $6.6 increase in our wireless communications products segment, and a $0.3 increase from our cellular services. 

Location-based services segment 

Operating income in our location-based services segment increased from $9.9 million in 2003 to $11.0 million in 2004, or 11.1%. This increase was primarily due to an increase in our revenues from $32.1 million in 2003 to $36.5 million in 2004 and a decline in cost of revenues as a percentage of revenues for this segment from 38.2% in 2003 to 35.4% in 2004. 

Wireless communications products segment 

Operating income in our wireless communications products segment increased from negative $0.6 million in 2003 to $6.0 million in 2004. This increase was primarily due to an increase in revenues for this segment of $9.9 million and a decline in cost of revenues as a percentage of revenues from 81.1% in 2003 to 69.4% in 2004 and to a write-off of inventory in the amount of $1.2 million in 2003. This increase was partially offset by additional research and development costs. 

Other 

Operating income from our cellular services increased from $0.9 million in 2003 to $1.2 million in 2004, or 29.0%. This increase was due to the sale of a higher margin product in 2004. 

 

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Management's discussion and analysis of financial condition and results of operations 

Financing expenses, net 

Financing expenses, net, increased from $0.6 million in 2003 to $2.1 million in 2004 or 234.3%. This increase was due to exchange rate differences on the principal of our NIS-denominated loans that resulted in a $0.1 million loss in 2004 compared to a $2.9 million gain in 2003 and to an increase in our interest expenses. Our interest expenses increased slightly from $1.1 million in 2003 to $1.2 million in 2004 or 14.8%, despite a reduction in the outstanding principal amount of our loans, as a result of the continued appreciation of the NIS against the dollar. This increase was partially offset by differing results of forward exchange derivative transactions that we entered into that did not qualify for hedge accounting under FAS No. 133, from a loss of $2.3 million in 2003 to a loss of $0.7 million in 2004. 

Taxes on income 

Taxes on income increased from $3.4 million in 2003 to $4.4 million in 2004, or 29.4%. This increase was primarily due to the increase in our taxable income over such period. Total income tax expense in 2003 was 35.3% of pre-tax income, while in 2004 it was 27.3% of pre-tax income. This decrease is primarily due to the application of certain Israeli government tax incentives to a business operation in Telematics Wireless that qualified as an "approved enterprise" under Israeli law. 

Year ended December 31, 2003 compared to the year ended December 31, 2002 

Revenues 

Total revenues increased from $49.7 million in 2002 to $64.1 million in 2003, or 28.9%. This increase consisted of $8.0 million in subscription fees derived from our location-based services, $5.7 million from sales of our wireless communications products and $0.6 million from our cellular services. 

Location-based services segment 

Revenues in our location-based services segment increased from $24.1 million in 2002 to $32.1 million in 2003, or 33.4%. This increase was due to an increase in the number of our Brazilian and Argentine subscribers, from approximately 30,000 at December 31, 2002 to approximately 64,000 at December 31, 2003, or 113.3%. 

Wireless communications products segment 

Revenues in our wireless communications products segment increased from $17.8 million in 2002 to $23.5 million in 2003, or 32.3%. This increase was primarily due to an increase in sales of our AVL products, which resulted from the increase in our subscriber base and an increase in sales of our AMR products due to additional purchase orders from Arad Technologies. 

Other 

Revenues from our cellular services increased from $7.9 million in 2002 to $8.5 million in 2003, or 7.6%. This increase was due to an increase in sales of installation and warranty services. 

Cost of revenues 

Total cost of revenues increased from $30.8 million in 2002 to $37.4 million in 2003, or 21.5%. This increase consisted of an increase of $0.1 million in our location-based services segment and $6.1 million in our wireless communications products segment and $0.4 million from our cellular services. As a percentage of total revenues, cost of revenues decreased from 62.0% in 2002 to 58.4% in 2003. 

Location-based services segment 

Cost of revenues for our location-based services segment increased slightly from $12.2 million in 2002 to $12.3 million in 2003, or 0.8%. As a percentage of total revenues for this segment, cost of revenues declined from 50.6% in 2002 to 38.2% in 2003, primarily due to our ability to increase our subscribers without a commensurate increase in related costs. 

 

41

 

Management's discussion and analysis of financial condition and results of operations 

Wireless communications products segment 

Cost of revenues for our wireless communications products segment increased from $12.9 million in 2002 to $19.1 million in 2003, or 47.5%. This increase was primarily due to an increase in sales of our AVL and AMR products and a $1.1 million one-time write-off of inventory for discontinued products in 2003. As a percentage of total revenues for this segment, cost of revenues increased from 72.7% in 2002 to 81.1% in 2003. 

Other 

Cost of revenues of our cellular services increased from $5.7 million in 2002 to $6.1  million in 2003, or 6.5% due to an increase in sales. As a percentage of total revenues from our cellular services, cost of revenues declined from 73.1% in 2002 to 72.4% in 2003. 

Operating expenses 

Research and development 

Research and development expenses remained constant at $1.7 million in 2003 compared to 2002. As a percentage of total revenues, research and development expenses decreased from 3.5% in 2002 to 2.6% in 2003. 

Selling and marketing 

Selling and marketing expenses increased from $2.4 million in 2002 to $2.9 million in 2003, or 22.1%. This increase was due to increased advertising expenses, primarily in Brazil and Argentina. As a percentage of total revenues, selling and marketing expenses decreased from 4.8% in 2002 to 4.5% in 2003. 

General and administrative 

General and administrative expenses increased from $9.8 million in 2002 to $11.4 million in 2003, or 17.3%. This increase was primarily due to the expansion of our operations into the Argentine market and our continued growth in the Brazilian market. As a percentage of total revenues, general and administrative expenses decreased from 19.6% in 2002 to 17.9% in 2003. 

Operating income 

Total operating income increased from $4.3 million in 2002 to $10.3 million in 2003, or 140.4%. This increase was primarily due to a $6.4 million increase in our location-based services segment, as well as a $0.1 million increase from our cellular services. This increase was partially offset by a decline of $0.6 million in our wireless communications products segment. 

Location-based services segment 

Operating income in our location-based services segment increased from $3.5 million in 2002 to $9.9 million in 2003, or 185.8%. This increase was due to an increase in our revenues from $24.1 million in 2002 to $32.1 million in 2003 and a decline in cost of revenues for this segment as a percentage of revenues from 50.6% in 2002 to 38.2% in 2003 as well as a reduction in our general and administrative costs as a percentage of revenues for this segment from 30.0% to 24.0%. 

Wireless communications products segment 

Operating income in our wireless communications products segment decreased from $0.0 million in 2002 to negative $0.6 million in 2003. This decrease was primarily due to an increase in cost of revenues as a percentage of revenues for this segment from 72.7% in 2002 to 81.1% in 2003 and to a $1.2 million write-off of inventory in 2003. 

Other 

Operating income from our cellular services increased slightly from $0.8 million in 2002 to $0.9 million in 2003, or 17.8%. This increase was due to a decrease in cost of revenues as a percentage of revenues for this segment from 73.1% in 2002 to 72.4% in 2003. 

 

42

 

Management's discussion and analysis of financial condition and results of operations 

Financing expenses, net 

Financing expenses, net, decreased from $6.0 million in 2002 to $0.6 million in 2003, or 89.8%. This decrease was due to a decrease in the amount of our short-term and long-term bank loans, exchange rate differences on the principal of our NIS-denominated loans that resulted in a $1.7 million expense in 2003 compared to $2.1 million income in 2003 and to a decrease in the amortization of a capital note, from $0.5 million in 2002 to $0.1 million in 2003. These decreases were partially offset by differing results of forward exchange derivative transactions that we entered into that did not qualify for hedge accounting under FAS No. 133, from a loss of $0.6 million in 2002 to a loss of $2.3 million in 2003. 

Taxes on income 

Taxes on income changed from a tax credit of $3.0 million in 2002 to a tax liability of $3.4 million in 2003. This increase was primarily due to the change in results of our operations from a pre-tax loss of $2.3 million in 2002 to a pre-tax income of $9.7 million in 2003, and was also affected by a significant decline in deductions for financing expenses related to additional paid-in capital from a tax credit of $1.8 million in 2002 to $0.2 million in 2003. 

Quarterly results of operations 

The following tables show our unaudited quarterly statements of income and as a percentage of revenues for the periods indicated. We have prepared this quarterly information on a basis consistent with the audited consolidated financial statements and we believe it includes all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the information shown. Operating results for any quarter are not necessarily indicative of results for a full year. 

 

43

 

Management's discussion and analysis of financial condition and results of operations 

Quarter ended
Consolidated statements of operations data: March 31,
2004 		June 30,
2004 		September 30,
2004 		December 31,
2004 		March 31,
2005 		June 30,
2005
(In thousands, except earnings per share data)
(Unaudited)
Revenues:
Location-based services $ 8,896 $ 8,961 $ 9,172 $ 9,520 $ 9,782 $ 10,783
Wireless communications products 6,612 7,820 8,742 10,287 10,068 10,890
Other 1,700 2,090 1,950 2,176 2,139 23
Total revenues 17,208 18,871 19,864 21,983 21,989 21,696
Cost of revenue:
Location-based services 3,198 3,168 3,185 3,393 3,665 3,955
Wireless communications products 4,253 5,343 6,479 7,149 6,964 7,495
Other 1,187 1,476 1,473 1,584 1,639 (66 )
Total cost of revenues 8,638 9,987 11,137 12,126 12,268 11,384
Gross profit 8,570 8,884 8,727 9,857 9,721 10,312
Operating expenses:
Research and development expenses 460 519 452 589 797 803
Selling and marketing expenses 965 1,163 797 1,149 799 1,407
General and administrative expenses 2,799 2,689 2,691 3,514 3,128 3,695
Other expenses (income), net (4 ) (7 ) 102 (103 ) 2 (7 )
Total operating expenses 4,220 4,364 4,042 5,149 4,726 5,898
Operating income 4,350 4,520 4,685 4,708 4,995 4,414
Financing expenses, net (949 ) (442 ) (180 ) (488 ) (230 ) 189
Other non-operating expenses, net 0 0 0 0 0 0
Income (loss) before taxes on income 3,401 4,078 4,505 4,220 4,765 4,603
Taxes on income (1,279 ) (1,141 ) (1,292 ) (711 ) (831 ) (1,302 )
Income after taxes on income 2,122 2,937 3,213 3,509 3,934 3,301
Share in losses of affiliated
companies, net 		(103 ) (64 ) (113 ) (44 ) (31 ) (57 )
Minority interests in (income) loss of subsidiaries (14 ) (1 ) (126 ) (97 ) (37 ) (25 )
Net income for the period $ 2,005 $ 2,872 $ 2,974 $ 3,368 $ 3,866 $ 3,219
Earning per share (1) :
Basic $ 0.11 $ 0.16 $ 0.16 $ 0.18 $ 0.21 $ 0.12
Diluted $ 0.10 $ 0.15 $ 0.15 $ 0.17 $ 0.21 $ 0.17
Weighted average number of shares outstanding:
Basic 18,562 18,566 18,577 18,503 18,608 18,610
Diluted 19,173 19,155 19,116 19,176 18,983 19,130

 

(1) 

Earnings per share and weighted average number of shares outstanding were adjusted to reflect the three-for-one share split of our ordinary shares to be effected immediately prior to the consummation of this offering.  

LIQUIDITY AND CAPITAL RESOURCES 

Since our inception, we funded our operations primarily from cash generated from operations, borrowings under our credit facilities with banks, historical proceeds from the initial public offering of our ordinary shares in Israel and the proceeds received from other public or private sales of our equity and debt instruments. As of December 31, 2004 and June 30, 2005, we had $4.6 million and $4.8 million in cash and marketable securities and $2.5 million and $3.4 million in working capital, respectively. In addition, as of December 31, 2004 and  

 

44

 

Management's discussion and analysis of financial condition and results of operations 

June 30, 2005, we had $10.1 million and $6.6 million, respectively, of outstanding long-term borrowings from banks, of which $6.5 million and $5.9 million, respectively, were current, and at each of such dates we also had $1.5 million available to us under existing lines of credit of which we were utilizing $0.1 and $0.0 million, respectively. Our long-term loans are secured by liens on all of our assets and properties in Israel. 

We believe that the net proceeds from this offering, our cash flow from operations, availability under our lines of credit and cash and marketable securities will be adequate to fund our capital expenditures, contractual commitments and other demands and commitments for the foreseeable future as well as for the long-term. We believe that cash flow generated from operations, proceeds of this offering and cash available to us from our credit facilities will be sufficient to cover future expansion of our various businesses into new geographical markets or new products, as currently contemplated and as we describe below. However, if existing cash and cash generated from operations are insufficient to satisfy our liquidity requirements, we may seek financing elsewhere by selling additional equity or debt securities or by obtaining additional credit facilities. 

We had long-term liabilities as of December 31, 2004 and June 30, 2005 of $4.3 million and $4.2 million, respectively, for employee pension costs for certain of our employees that become payable upon their retirement. Our Israeli employees are entitled to one month's salary, equal to the applicable monthly salary at the time of such employee's retirement, for each year of employment, or a portion thereof, upon retirement. This liability is partially funded by deposit balances maintained for these employee benefits in the amount of $2.9 million and $2.8 million as of December 31, 2004 and June 30, 2005, respectively. The deposited funds include profits accumulated up to the balance sheet date and may be withdrawn upon the fulfillment of the obligation pursuant to Israeli severance pay laws or labor agreements. 

As of June 30, 2005, we had outstanding capital notes. The holder of these capital notes and the Company are currently involved in legal proceedings over the terms of the notes. We believe that these notes may only be converted into approximately 2,802 of our ordinary shares (pre-split) and are not otherwise required to be repaid by us. The holder of these notes has made various alternative demands including the repayment in cash of the balance of the notes in the amount of approximately $6.2 million (plus accrued interest and expenses) and the payment of a cash amount equal to the amount obtained by multiplying 1,172,154 of our ordinary shares (pre-split) by the highest trading price of our ordinary shares between the maturity date and the date of a court decision, plus interest and expenses. Although we cannot predict the outcome of this case at this time, if the holder of these notes prevails, the award of damages could result in significant costs to us. See "Business—Legal Proceedings" for a description of this legal proceeding. 

We do not expect any significant capital expenditures during the next 12 months other than capital expenditures that will be incurred in connection with the establishment of the infrastructure for our SVR services in Rio de Janeiro, which we expect, based on our past experience, to be approximately $1.2 million. We expect to fund these expenses, as well as our other contractual obligations and commercial commitments, primarily from cash flow generated from operations. 

On January 29, 2004, we adopted a dividend policy providing for an annual dividend distribution in an amount equal to 25% of our net profits, calculated based on our financial statements for the period ending on December 31 of the fiscal year with respect to which the relevant dividend is proposed to be paid. Pursuant to such policy, we distributed NIS 6.0 million, or $1.3 million, on April 1, 2004 and NIS 11.8 million, or $2.7 million, on April 28, 2005. 

 

45

 

Management's discussion and analysis of financial condition and results of operations 

Historical cash flows 

The following table sets forth the components of our historical cash flows for the periods indicated: 

Year ended December 31, Six months ended June 30,
2002 2003 2004 2004 2005
(Unaudited)
(In thousands)
Net cash provided by operating activities $ 3,228 $ 15,787 $ 17,674 6,772 9,465
Net cash used in investing activities (2,818 ) (2,214 ) (2,910 ) (1,145 ) (2,968 )
Net cash provided by (used in) financing activities (28 ) (11,090 ) (14,142 ) (6,024 ) (6,018 )
Effect of exchange rate changes on cash and cash equivalents (69 ) 108 64 (103 ) (268 )
Net increase in cash and cash equivalents $ 313 $ 2,591 $ 686 $ (500 ) $ 211

Six months ended June 30, 2005 and June 30, 2004 

Net cash provided by operating activities 

Our operating activities provided cash of $6.8 million in the six months ended June 30, 2004, and $9.5 million in the six months ended June 30, 2005. The increase in cash from operations in the six months ended June 30, 2005 when compared to the six months ended June 30, 2004 was primarily due to an increase in net income of $2.2 million. This increase in cash from operations was partially offset by a gain of $0.5 million from exchange differences on principal of deposit and loan in the six months ended June 30, 2004 compared to a loss of $0.2 million in the six months ended June 30, 2005 as a result of fluctuations of the NIS and the Brasilian Real vis-a-vis the US dollar and an increase in other current assets of $0.8 million in the six months period ended June 30, 2005 as compared to a decrease of $0.1 million in the six months period ended June 30, 2004. 

Net cash used in investing activities 

Our investing activities used cash of $3.0 million in the six months ended June 30, 2005, primarily due to the purchase of property and equipment for $1.7 million, purchase of intangible assets for $0.9 million and the grant of a loan to an affiliated company of $0.2 million. Our investing activities used cash of $1.1 million in the six months ended June 30, 2004 primarily due to the purchase of property and equipment for $1.0 million. 

Net cash provided by (used in) financing activities 

Our financing activities used cash of $6.0 million in the six months ended June 30, 2005, primarily for repayment of our long-term loans totaling $3.3 million and a dividend payment of $2.7 million paid during such period. Our financing activities in the six months ended June 30, 2004 used cash of $6.0 million primarily for repayment of our short-term and long-term loans totaling $15.6 million and a dividend payment of $1.3 million paid during such period, which was partially offset by the incurrence of new long-term loans totaling $9.4 million and proceeds of sales of our shares held by one of our subsidiaries in the amount of $1.4 million. 

Years ended December 31, 2004, December 31, 2003 and December 31, 2002 

Net cash provided by operating activities 

Our operating activities provided cash of $3.2 million in 2002, $15.8 million in 2003 and $17.7 million in 2004. The increase in cash from operations in 2004 was primarily due to an increase in net income of $5.4 million, an increase in accounts payable of $2.6 million, compared to a decrease of $0.8 million in 2003, resulting from our decision to increase our inventories due to increasing levels of sales, an increase in other current liabilities of $1.9 million, compared to an increase of $2.0 million in 2003, resulting from tax liabilities, and an increase in exchange differences on principal of deposits and loans of $0.4 million, compared to a decrease of $0.8 million in 2003. This increase in cash from operations was partially offset by an increase in inventories of $1.3 million, compared to a decrease of $3.6 million in 2003, resulting from expected growth in the sale of our products in Brazil and Argentina and an increase in accounts receivable of $3.0 million,  

 

46

 

Management's discussion and analysis of financial condition and results of operations 

compared to an increase of $0.6 million in 2003, resulting from the sale of our RFID products to Derech Eretz and an increase in the sale of our AVL products in Brazil. The increase in cash from operations in 2003 was primarily due to an increase in net income of $5.0 million, an increase in deferred taxes of $2.2 million, compared to a decrease of $3.4 million in 2002, a decrease in inventories of $3.6 million, compared to a decrease of $0.4 million in 2002, resulting from reduction of inventories, an increase in other current liabilities of $2.0 million, compared to a decrease of $1.7 million in 2002, resulting from our change from net loss to net income and an increase of accounts receivable of $0.6 million, compared to an increase of $3.0 million in 2002, resulting from sales of our wireless communications products on better credit terms. This increase in cash from operations was partially offset by a decrease in accounts payable of $0.8 million, compared to an increase of $2.7 million in 2002, resulting from a reduction in levels of inventories, a decrease in exchange differences on principal of deposits and loans of $0.8 million, compared to an increase of $0.7 million in 2002, and a decrease in liability for employee rights upon retirement of $0.3 million, compared to an increase of a $0.9 million in 2002. 

Net cash used in investing activities 

Our investing activities used cash of $2.9 million in 2004 primarily due to the purchase of property and equipment for $2.4 million and a decrease in funds with respect to employee rights upon retirement of $0.4 million. Our investing activities used cash of $2.2 million in 2003, primarily due to the purchase of property and equipment for $2.3 million and proceeds from the sale of property and equipment for $0.1 million. Our investing activities in 2002 used cash of $2.8 million primarily due to the purchase of property and equipment for $2.2 million and the purchase of intangible assets of $0.6 million. 

Net cash provided by (used in) financing activities 

Our financing activities used cash of $14.1 million in 2004 primarily for repayment of our short-term and long-term loans totaling $23.6 million and a dividend payment of $1.3 million paid during such period which was partially offset by the incurrence of new loans totaling $9.4 million. Our financing activities in 2003 used cash of $11.1 million primarily for repayment of our short-term and long-term loans totaling $16.2 million, which was partially offset by the incurrence of new long-term loans totaling $5.1 million. Our financing activities in 2002 used cash for repayment of our short-term and long-term loans totaling $6.4 million, which was offset by the incurrence of new long-term loans in an almost equal aggregate amount. 

Contractual obligations and commercial commitments 

The following table summarizes our material contractual obligations as of June 30, 2005: 

Payments due by period
Contractual obligations (1) Total July 2005
through June
2006 		July 2006
through June
2007 		July 2007
through June
2008 		July 2008
through June
2009 		From July
2009
(In thousands)
Operating leases $ 3,415 $ 996 $ 842 $ 684 $ 397 $ 496
Long-term loans 6,608 5,944 664 — — —
Total $ 10,023 $ 6,940 $ 1,506 $ 684 $ 397 $ 496

 

(1) 

We may have to commence paying royalties at a rate of 3% with respect to revenues derived from services provided and products sold in Brazil and Argentina pursuant to the terms of royalty provisions in some of our license agreements with Teletrac if we elect to retain our exclusive rights in these countries.  

CORPORATE TAX 

Israeli companies are generally subject to income tax at the corporate rate of 34% for the 2005 tax year, 31% for the 2006 tax year, 29% for the 2007 tax year, 27% for the 2008 tax year, 26% for the 2009 tax year and 25% thereafter. Our subsidiary, Telematics Wireless, benefits from an Israeli government tax exemption program that reduces its effective tax rate. Telematics Wireless currently has an effective expansion program that has been granted "approved enterprise" status and an expansion program for which it has requested such  

 

47

 

Management's discussion and analysis of financial condition and results of operations 

designation. Therefore, it is eligible for tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959. The tax benefits from the effective program expire at the end of 2010. Subject to compliance with applicable requirements, the portion of our undistributed income derived from our "approved enterprise" was exempt from income tax in 2004 and 2005 and thereafter will be subject to a reduced tax rate of 25% for the remaining five years of the program. In order to enjoy these benefits, we have determined not to declare dividends or otherwise distribute earnings out of tax-exempt income. The availability of these tax benefits is subject to certain requirements, including making specified investments in property and equipment, and financing a percentage of investments with capital contributions. If we do not meet these requirements in the future, the tax benefits may be canceled and we could be required to refund any tax benefits that we have already received, plus interest and penalties thereon. See "Israeli Taxation—Law for the Encouragement of Capital Investments, 1959." Since part of Telematic Wireless' taxable income is not derived from an "approved enterprise" (including any taxable income of its subsidiaries), its effective tax rate is a weighted average rate based on the various applicable rate and tax exemptions. 

Quantitative and qualitative disclosures about market risk 

Foreign exchange risk 

Although we report our consolidated financial statements in dollars, in 2004 and for the six months ended June 30, 2005, a portion of our revenues and expenses was derived in other currencies. For fiscal year 2004 and for the six months ended June 30, 2005, we derived approximately 45.5% and 46.3% of our revenues in dollars, 33.4% and 24.7% in NIS, 15.8% and 21.9% in Brazilian Reals and 5.3% and 7.1% in Argentine Pesos, respectively. In fiscal year 2004 and for the six months ended June 30, 2005, 43.5% and 47.1% of our expenses were incurred in dollars, 41.5% and 35.6% in NIS, 11.2% and 12.7% in Brazilian Reals and 3.8% and 4.6% in Argentine Pesos, respectively. 

Exchange differences upon conversion from our functional currency to dollars are accumulated as a separate component of accumulated other comprehensive income under shareholders' equity. As of June 30, 2005, accumulated other comprehensive income increased by $0.3 million compared to June 30, 2004. As of December 31, 2004, accumulated other comprehensive income decreased by $0.2 million compared to December 31, 2003. As of December 31, 2003, accumulated other comprehensive income increased by $0.5 million compared to December 31, 2002. Exchange differences upon conversion from the functional currency from our other selling and marketing subsidiaries to dollars are reflected in our income statements under financing expenses, net. 

The fluctuation of the other currencies in which we incur our expenses or generate revenues against the NIS or the dollar has had the effect of increasing or decreasing (as applicable) reported revenues, cost of revenues and operating expenses in such foreign currencies when converted into dollars from period to period. The following table illustrates the effect of the changes in exchange rates on our revenues, gross profit and operating income for the periods indicated: 

Year Ended December 31, Six Months
Ended June 30,
2002 2003 2004 2005
Actual At 2001
exchange
rates (1) 		Actual At 2002
exchange
rates (1) 		At 2003  
exchange
Actual            rates (1)    		At 2004  
exchange
Actual        rates (1)   
     (Unaudited)
(in thousands)
Revenues $ 49,691 $ 53,341 $ 64,071 $ 63,440 $ 77,926 $ 77,263 $ 43,685 $ 42,400
Gross profit 18,858 17,102 26,623 26,947 36,038 35,895 20,033 19,573
Operating Income 4,279 483 10,286 10,929 18,263 18,370 9,409 9,238

 

(1) 

Based on average exchange rates during the period.  

In the past, we entered into foreign currency forward contracts generally of 12 to 18 months' duration to hedge a portion of our foreign currency risk on the subscription fees payable in connection with our location-based services. The objective of these transactions is to hedge cash flow against fluctuations in the exchange rates of  

 

48

 

Management's discussion and analysis of financial condition and results of operations 

the dollar, NIS, Brazilian Real and Argentine Peso. All these contracts expired in September 2004. Our policy remains to reduce exposure to exchange rate fluctuations by entering into foreign currency forward transactions that qualify as hedging transactions under FAS No. 133, the results of which are reflected in our income statements as revenues. The result of these transactions, which are affected by fluctuations in exchange rates, could cause our revenues, gross profit and operating income to fluctuate. 

In addition, due to increased fluctuations in the exchange rate of the US dollar vis-à-vis the Israeli Shekel in 2002, in December 2002 we commenced acquiring derivative financial instruments in order to convert currency fluctuation risks related to our US dollar denominated loans from the US dollar to other currencies which we thought would be more stable. We do not anticipate entering into such transactions in the future unless we incur significant debt in currencies that are different from the functional currency of the entity within our group incurring such debt, and any decision to enter into such transactions will require the approval of our Board of Directors and will only be made after consulting with our advisors. Gains or losses from such derivative financial instruments do not qualify for hedge accounting under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and are reflected in financing expenses, net. As of June 2005, we have no more open positions on such derivative financial instruments and any remaining effects on our financial results from such derivative financial instruments are reflected in our financial results for the second quarter of 2005 and will not affect our results of operations for any subsequent period. 

Interest rate risk 

We invest our cash balances primarily in bank deposits and therefore, we are exposed to market risks resulting from changes in general interest rates, primarily in the United States and Israel, but we do not believe such risks to be material. We do not use derivative financial instruments to limit exposure to interest rate risk. 

 

49

 

Business 

OVERVIEW 

We believe we are a leading provider of location-based services, consisting predominantly of stolen vehicle recovery and tracking services. We also provide wireless communications products used in connection with our location-based services and for various other applications, including automatic meter reading and radio frequency identification. We currently provide our services and sell our products in Israel, Brazil, Argentina and the United States. In addition, we have recently entered into contracts to deploy our automatic vehicle location infrastructure and sell our end-units in China and South Korea, and commenced deploying such infrastructure in China in 2004 and in South Korea in 2005. We utilize technologies that enable precise and secure high-speed data transmission and analysis. Some of the technology underlying our products was originally developed for the Israeli Defense Forces in order to locate downed pilots. 

We generate our revenues primarily from subscription fees paid for our location-based services and from the sale of our wireless communications products. We have achieved 14 consecutive quarters of growth in our subscriber base. In every quarter since 1998, we have achieved sequential growth in quarterly revenues from subscription fees. Our revenues and net income have increased from $49.7 million and $0.9 million for the year ended December 31, 2002, to $77.9 million and $11.2 million for the year ended December 31, 2004, representing annualized growth rates of 25.2% and 252.0%, respectively. 

We were incorporated in Israel in 1994 and began marketing our location-based services and wireless communications products in 1995. In May 1998, we completed the initial public offering of our ordinary shares in Israel and our ordinary shares began trading on the Tel Aviv Stock Exchange. As of June 30, 2005, we had 761 employees worldwide. 

Location-Based Services 

For the year ended December 31, 2004, 46.9% of our revenues were attributable to our location-based services, and for the six months ended June 30, 2005, 47.1% of our revenues were attributable to our location-based services. As of June 30, 2005, we provided our services in Israel, Brazil, Argentina and the United States to approximately 152,000, 90,000, 47,000 and 9,000 subscribers, respectively. 

Stolen vehicle recovery services 

Our stolen vehicle recovery and tracking services, which we refer to as SVR services, enable us to locate, track and recover stolen vehicles for our subscribers. Our customers include both individual vehicle owners who subscribe to our services directly and insurance companies that either require their customers to install a security system or offer their customers financial incentives to subscribe to SVR services such as ours. In certain countries, insurance companies directly subscribe to our SVR services and purchase automatic vehicle location products supporting these SVR services from us on behalf of their customers. According to a report published in 2004, Dun & Bradstreet, an independent market research firm, estimated that our market share for SVR services in Israel is approximately 75%, based on the aggregate number of installed AVL systems. We estimate that in the markets in which we operate, we have recovered vehicles worth over $400 million in over seven years of operations. In 2004, we recovered 3,787 vehicles with a total value of approximately $90 million. We have been experiencing strong penetration in Brazil and Argentina where we have grown our subscriber base from approximately 25,000 and 5,000 as of December 31, 2002 to approximately 90,000 and 47,000 as of June 30, 2005, representing an increase of 360.0% and 940.0% respectively over such 30 month period. Over the last three years, our monthly subscriber churn rates have averaged under 2.0% per month, our stolen vehicle recovery rates have averaged approximately 85%, based on the total number of our subscribers' vehicles stolen and recovered in the markets we serve, and our average vehicle recovery time, from the time an unauthorized entry is confirmed or reported to the time the vehicle is recovered, has, based on our records, averaged approximately 20 minutes. 

 

50

 

Business 

Fleet management services 

Our fleet management services enable corporate customers to track and manage their vehicles in real time. Our services improve appointment scheduling, route management and fleet usage tracking, thereby increasing efficiency and reducing operating costs for our customers. We market and sell our services to a broad range of vehicle fleet operators in different geographic locations and industries. As of June 30, 2005, we provided our services to approximately 30,000 end-users through 2,000 corporate customers in Israel, Brazil and the United States. 

Value-added services 

Our Personal Advanced Locator, which we refer to as PAL, services allow customers to protect valuable merchandise and equipment, as well as track individuals. In addition, through a call center we provide 24-hour on-demand navigation guidance, information and assistance to our customers. We currently provide our PAL services in Israel only and, as of June 30, 2005, we had approximately 4,200 subscribers to this service. 

Wireless Communications Products 

For the year ended December 31, 2004, 42.9% of our revenues were attributable to the sale of our wireless communications products, and for the six months ended June 30, 2005, 48.0% of our revenues were attributable to the sale of our wireless communications products. Our wireless communications products employ short- and medium-range communication between two-way wireless modems and are used for various applications, including: 

 

automatic vehicle location, which we refer to as AVL; 

 

automated meter reading, which we refer to as AMR; and 

 

radio frequency identification, which we refer to as RFID. 

Our AVL products enable the location and tracking of vehicles and are used by us primarily to provide SVR and fleet management services to our customers. Each subscriber to our SVR services has our AVL end-unit installed in his or her vehicle. In addition, we recently entered into contracts with third-party service providers who intend to provide location-based services in China and South Korea. These contracts involve the setting up and deployment of the necessary terrestrial network and base stations throughout the relevant regions, establishing the control centers and providing the necessary end-units to be installed in vehicles. In 2004, we commenced deploying our AVL infrastructure in China and in 2005, we commenced deploying our AVL infrastructure in South Korea. Once the AVL infrastructure for our AVL system is established in these regions, we expect a significant increase in sales of our AVL end-units, initially in China and, at a later stage, in South Korea. 

Our AMR products enable the remote reading of water meters from a range of up to 1,000 feet. This allows the operator to extract information by walking or driving by the water meter, thus reducing the time and manual labor required to obtain the necessary information. In addition, our AMR wireless transmitter is integrated into the water meter, as opposed to systems where the transmitter and the water meter are separate components connected by a wire, which makes our system less susceptible to damage and tampering. As a result, we believe that our AMR products improve billing accuracy, reduce costs and increase reliability of collecting consumer usage data. We sell our AMR products exclusively to Arad Technologies that incorporates our AMR products into a water meter product that it markets and distributes to utilities in the United States through its wholly-owned subsidiary, Master Meter. 

Our RFID products enable high-speed communication between mobile transponders and roadside readers and are primarily used for electronic toll collection systems. Other applications of our RFID products include electronic security seals for containers and border crossings, and electronic weigh station devices. We sell our electronic toll collection devices to Derech Eretz, the sole toll road operator in Israel, and to the transit authority of the State of Minnesota. We sell our electronic weigh station devices to ACS-SLS, a subsidiary of ACS, and to Norpass, a provider of mainline screening systems at weigh stations. In addition, we are currently engaged as the sole technology provider in several pilot programs for our RFID products with various federal and state governmental agencies, such as the United States Department of Homeland Security and the United States  

 

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Customs and Border Protection Agency. We were selected to participate in these pilot programs on the basis of our competitive bids to provide our RFID products in response to requests for proposal made by the relevant federal or state governmental agencies or through third-party bidders or pilot program participants seeking to outsource the production of RFID products for use in their RFID-based systems. We believe our selection for these pilot programs represents a first step in our attempt to penetrate the radio frequency identification market in the United States and is strategically important for producing revenue-generating contracts. 

INDUSTRY OVERVIEW 

While we believe that the statistical data, industry data forecasts and market research discussed below are reliable, we have not independently verified the data, and we do not make any representation as to the accuracy of the information. 

Location-based services 

Stolen vehicle recovery 

The demand for vehicle security products and services is driven by vehicle theft rates, increasing security awareness among customers and insurance companies' efforts to reduce incidents of loss. According to a 2003 report by Ward's Communication, an independent provider of automobile industry research, approximately 55 million vehicles were sold globally in 2002, and according to a United Nations survey of crime trends covering the period 2001 to 2002, approximately 3.1 million vehicles were stolen globally during the same period. According to a March 2005 report by the Insurance Information Institute, in the United States alone, vehicle thefts accounted for 2% of the premiums paid for private passenger car insurance in 2003, or $3 billion. Interpol estimates in a November 2001 press release that the value of vehicles stolen from 45 countries in 2001 was approximately $21.0 billion. According to a March 2004 report by the Freedonia Group, an independent market research firm, the United States market for vehicular security monitoring services, which includes dedicated alarm monitoring and integrated telematics systems, was valued at $800 million in 2003 and is expected to increase to $2.2 billion in 2008, representing an average annual growth rate of 22.4%, at which time the market is expected to support 7.9 million subscribers for these services. In some of our markets, demand for SVR services has been further enhanced by incidents of carjackings and car-related kidnappings that have increased consumers' perceived crime risk. Additionally, theft of trucks carrying valuable or hazardous cargo (e.g., microchips and chemicals) represents a threat to commercial, industrial, public and personal safety and security. 

As indicated below, vehicle theft rates vary by geographic region. 

 

Israel:     According to a 2004 report by the Israeli police and the Israeli Central Bureau of Statistics, 30,851 vehicles were stolen in Israel in 2004, representing an increase of 19.4% compared to 2003. 

 

Brazil:     According to the official website of the police force of the state of São Paulo, 75,898 stolen vehicles and vehicle robberies were reported in 2004. 

 

Argentina :    According to a 2002 study by the Ministry of Justice, Safety and Human Rights of Argentina, 2.5% of the population of Buenos Aires, or approximately 275,000 people, were victims of vehicle theft in 2001. 

 

United States :    According to a 2003 FBI Uniform Crime Report, the State of Florida had the third highest incidence of vehicle theft in the United Sates in 2003, with 81,563 vehicles stolen. 

A wide range of vehicle security products, with varying degrees of sophistication and pricing, are available to vehicle owners today. These products can be divided roughly into two categories: 

1) 

Traditional products, such as locks, alarms and traditional immobilizers. These devices are limited in their effectiveness as most can be disarmed easily and typically require the driver to activate the device upon leaving the vehicle. Also, unmonitored alarms that set off sirens are routinely ignored by people as the incidence of false alarms has been historically high. Furthermore, these products can only help in preventing theft and not in recovering the vehicle once it is stolen. 

 

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2) 

More sophisticated products that include some form of remote monitoring and communication. This category can be further separated into devices that simply provide information on the general direction of the vehicle and those that enable the location, tracking and recovery of the vehicle in real time. 

AVL technology is typically used to report stolen vehicles to police, provide real-time location and tracking information and immobilize the vehicle if necessary. The application of AVL technology has proven to be effective in increasing the recovery rates of stolen vehicles. As a result, many insurance companies in countries such as Israel, Brazil and Argentina either offer discounts between 15% and 25% on insurance premiums for vehicles equipped with AVL systems or require customers to install such AVL systems in vehicles above a pre-determined value. 

Fleet management 

The market for fleet management services ranges from very large fleets of thousands of vehicles to very small fleets of five vehicles or less, with smaller fleets constituting a significant portion of the market given the large number of companies that maintain a fleet today. Fleet management services allow fleet operators to locate, monitor and communicate with their vehicles and employees in the field in real time. This helps them to better track loads, predict arrival times, schedule customer appointments, reduce fuel usage and manage vehicles' maintenance schedules. By increasing efficiency and reducing costs, fleet management can provide a quantifiable return on investment for fleet operators, as well as improve customer satisfaction. In addition, fleet management services can enhance driver security and can notify the fleet operator if a vehicle leaves a prescribed geographic region, reducing theft-related liabilities. 

A principal factor supporting fleet management industry growth is the presence of millions of vehicles that are in commercial use but which are not yet equipped with fleet management systems. According to a 2004 report, Frost & Sullivan, an independent market research firm, estimates that in mid-2003 there were over 50 million commercial vehicles in North America, of which only 1.0% to 2.0% were equipped with telematics systems. According to the same report by Frost & Sullivan, the total North American commercial vehicle telematics market was valued at approximately $705.0 million in 2003. In addition, they estimate that telematics-related hardware revenues are projected to grow from $239.0 million in 2003 to $1.8 billion in 2012, representing a compounded annual growth rate of 25.3%, while related service revenues are projected to grow from $466.0 million in 2003 to $4.8 billion in 2012, representing a compounded annual growth rate of 29.7%. 

Wireless communications products 

Automatic vehicle location 

AVL is one of the many possible applications for wireless location technology and is an umbrella term used for communication equipment and services that facilitate wireless vehicle tracking. 

Typical AVL applications include: 

Security Transportation Emergency and
health care 		Telecommunication
services 		Government
Car tracking Fleet management Patient tracking Maintenance vehicle
tracking 		Government
vehicle
tracking
Personal tracking Parcel tracking Ambulance tracking
Asset tracking Public transit

Currently, the main underlying technologies available for wireless location and tracking in the AVL industry are terrestrial network triangulation, GPS (in combination with wireless communication), network-based cellular communication and radio frequency-based homing. 

 

Terrestrial network triangulation uses the wireless signals transmitted by an end-unit in the vehicle and received by a network of land-based wireless antennas (base stations) installed in the relevant coverage region in order to determine the precise location of the transmitter. 

 

GPS-based systems utilize specially designed GPS devices in the vehicle that receive data from three or more satellites in order to determine the location of the device. Once located, GPS-based systems require a cellular or another wireless network to communicate with a remote control center. 

 

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Network-based cellular systems utilize signals between the wireless device and the cellular operator's network of land-based antennas in order to triangulate the location of the relevant device. These systems require two-way communication between the device and antennas and, therefore, both a transmitter and receiver need to be installed in the vehicle. 

 

RF-based homing systems utilize direction-finding technology based on a tracking signal transmitted by the end-unit in the vehicle, which is activated by a unique radio signal from the tracking unit once the vehicle is reported stolen. 

Automatic meter reading 

The AMR market includes systems that enable water, gas and electricity meters to be read remotely. Drive-by and walk-by systems are the primary AMR market segments today and are most economical for rural and suburban areas. The overall benefit of AMR technology is the enhanced access to data relating to the use of the relevant utility at a lower cost. Demand for AMR products is primarily driven by the potential for utilities to improve billing accuracy, reduced costs and increased reliability. 

We estimate that the United States represents a significant portion of the global market for AMR products. Demand for AMR systems in the United States is driven by the approximate five- to seven-year replacement cycle for existing water meters, the trend towards automatic meter readers versus legacy meters and the increase in the number of customers as a result of increased levels of housing starts since 2001. According to a 2003 report by Frost & Sullivan, the annual AMR revenues and unit shipments in North America are forecasted to increase from 2002 levels of $580.5 million and 8.9 million units, respectively, to $690.9 million and 12.1 million, respectively, in 2010. 

Radio frequency identification 

The segment of the RFID market that we address includes three principal applications: electronic toll collection, electronic security seals and electronic weigh stations. Wireless communications technology is used in RFID applications where data exchange is rapid, communication zones are dynamically and rapidly changing and where battery life of months or even years is desirable. 

Electronic toll collection is a technology that allows for electronic payment of highway tolls and replaces the need for manual collection tollbooths. In addition, it can allow such transactions to be performed while vehicles travel at near-highway cruising speeds. Electronic toll collection systems are a significant improvement over conventional toll collection techniques because such systems reduce lines at toll plazas, reduce toll collection costs, save fuel, reduce mobile emissions by reducing or eliminating waiting times, and enhance audit control by centralizing user accounts. In the United States, the increase in the overall number of vehicles has led to growing congestion on roads and an increase in the average time a commuter spends sitting idle in the car due to traffic jams. This has led to an increased demand for paid express lanes, which enable paying commuters to save time and avoid traffic jams. Approximately 25 states in the United States have passed legislation allowing some form of private toll roads, including the transit authority of the State of Minnesota, which is converting car pool lanes on Interstate 394 into paid express lanes. 

Electronic sealing is commonly used as a freight security system where transponders are used to automatically identify individual containers or trucks at border entry points. The growth of the RFID market for this application in the United States has largely been driven by the recent standardization of the communications protocols on which RFID technology operates. Such standardization increases the interoperability of devices which, in turn, increases demand for such products from various organizations, including the United States Department of Homeland Security and the United States Customs and Border Protection Agency. 

Electronic weigh stations allow for identification and weighing of trucks in real time at near-highway cruising speeds, thus allowing trucks that comply with the weight limitations to bypass conventional weigh stations. 

 

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OUR PRODUCTS AND SERVICES 

Location-based services 

Stolen vehicle recovery 

Our stolen vehicle recovery system is based on three main components: an AVL end-unit that is installed in the vehicle, a network of base stations and a 24-hour manned control center. 

Once the control center receives indication of an unauthorized entry into a vehicle equipped with our AVL end-unit, our operators decide whether it is a false alarm or an actual unauthorized entry. If it is determined to be an unauthorized entry, or if a notification of the vehicle's theft is received directly from the vehicle operator, our operators transmit a signal that activates the transmitter installed in the vehicle. We then pinpoint the location of the transmitter with terrestrial network triangulation technology and notify the relevant law enforcement agency. In Israel, Brazil and Argentina, we also maintain private enforcement units, which work together with local police to recover the vehicle. In addition, we have the capability to immobilize vehicles remotely from our control centers. 

Fleet management 

We are among the few companies that offer their customers the use of a comprehensive application for fleet management both by using an Internet site and workstations. Our system allows our customers 24-hour access to information on their fleets through our active control center and also provides alerts on vehicle temperature and driver emergencies. 

Value-added services 

Personal advanced locator services.     Our services allow consumers to protect valuable merchandise and equipment, as well as to track individuals. Currently, we provide our PAL services in Israel only. 

The PAL device is a two-way pager that helps us determine the location of the relevant equipment or person being tracked. Our PAL services, which are based on terrestrial network triangulation, have numerous applications, including location of patients with amnesia, portable distress buttons for the elderly and children, theft protection for valuable equipment and merchandise and other assets, such as computer equipment and beehives. In addition, there has been an increased use of our PAL devices in vehicles as back-up to our AVL systems. 

 

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Concierge services     Through a call center, we provide 24-hour on-demand navigation guidance, information and assistance to our customers. Such services include the provision of traffic reports, help with directions and information on the location of gas stations, car repair shops, post offices, hospitals and other facilities. We provide our concierge services to subscribers in Israel and have recently begun offering such services in Argentina and in Brazil. 

Wireless communications products 

Our wireless communications products are used for various applications in the AVL, AMR and RFID markets. 

Automatic vehicle location 

Our AVL products enable the location and tracking of vehicles and are used by us in providing our SVR and fleet management services. Each subscriber to our SVR services has one of our AVL end-units installed in his or her vehicle. In addition, we have recently entered into two contracts with third-party service providers for the deployment of our turn-key location-based solution consisting of our AVL infrastructure and AVL products that includes the deployment of a network of base stations throughout a region, the establishment and operation of a control center, the supply and installation of vehicular end-units and a range of value-added services, in China and South Korea and we are currently in the initial set-up and network deployment phase in Beijing, Shanghai and Seoul. Our key wireless communications products for AVL applications include: 

 

TULIP:     a transmitter installed in vehicles that sends a signal to the base site, enabling the location of a vehicle; 

 

MAPLE:     an alarm system that identifies an intruder and activates the transmitter to send a signal to the base site; 

 

PAL:     a portable transmitter located on an asset or on an individual that sends a signal to the base site, enabling the location of the asset or individual; 

 

Base Site:     a radio receiver, which includes a processor and a data computation unit to collect and send data to and from transponders and send that data to control centers as part of the terrestrial infrastructure of the location system; and 

 

Control Center:     a center consisting of software used to collect data from various base sites, conduct location calculations and transmit location data to various customers and law enforcement agencies. 

Automatic meter reading 

Our AMR products enable the remote reading of water meters. Our AMR systems include wireless modems that are installed inside water meters and transmit relevant metering data for the purposes of automatic billing, prevention of leaks and the preparation of on-line reports. Our AMR products, which were jointly developed by Arad Technologies and us, are commercially named Dialog-3G. Our key AMR products include: 

 

TMW:     a transponder installed inside a water meter for the purpose of receiving measurement data and wirelessly transmitting such data to the MMR; 

 

UNIVERSAL:     a transponder functionally similar to the TMW, but which is installed outside the relevant water meter for "add-on" applications; 

 

MMR:     a transceiver that is used for remote reception of the TMW's transmission data, either as a hand-held or drive-by unit; and 

 

DS Line of Products:     a new product line launched in the second quarter of 2005, functionally parallel to the TMW, UNIVERSAL and MMR devices, but with further reception range and improved resistance to interference. 

 

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Radio frequency identification 

Our RFID products enable communication between mobile transponders and roadside readers and are primarily used for electronic toll collection systems. Other emerging applications include electronic security seals for containers and border crossings, and electronic weigh stations. Our key RFID products include: 

 

FP-100AT:     a transponder designed to send signals to the FP-300 or FP100RA reader for use on toll roads and at border crossings and electronic weigh stations; 

 

FP-300/FP100RA:     a transceiver/reader that is used for remote reception of the FP-100AT transponders that are installed along the relevant roadside, border crossings and weigh stations; 

 

Electronic Seal for Containers – FP-200SA:     these products are used for the identification and reporting of unauthorized entry to containers in transit that employs such systems and are interoperable with FP-300, FP100RA, FP-200HH readers; and 

 

FP-200HH:     a hand-held transceiver used primarily at border crossings and for other short distance reading and programming. 

DESCRIPTION OF OPERATIONS IN KEY GEOGRAPHIES 

The following table lists the key services and products that we currently sell or intend to sell in different regions of the world: 

Country Services offered Products sold
Israel SVR
Fleet management
Value-added services
AVL
RFID
Brazil SVR
Fleet management
Value-added services 		AVL
Argentina SVR
Value-added services 		AVL
United States SVR
Fleet management 		AVL
AMR
RFID
China (1) AVL
South Korea (1) AVL (2)

 

(1) 

SVR services to be provided by third parties. 

(2) 

Not currently being sold. We intend to sell these products to third-party providers of SVR services. 

The following is a short description of key operating statistics about our location-based services in the countries in which we operate: 

 

Israel:     We commenced operations in Israel in 1995 and we had approximately 152,000 subscribers as of June 30, 2005. We maintain 96 base stations in Israel, which provide complete coverage within the country. Our control center operates 24 hours a day, 365 days a year and is located in Azour. In addition, our RFID products are used in the Derech Eretz toll road. 

 

Brazil:     We commenced operations in Brazil in 2000 and we had approximately 90,000 subscribers as of June 30, 2005. We currently operate only in the metropolitan areas of São Paulo and Campinas. 

 

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Argentina:     We commenced operations in Argentina in 2002 and we had approximately 47,000 subscribers as of June 30, 2005. We currently operate only in the metropolitan area of Buenos Aires. 

 

United States:     We commenced operations in the United States in 2000 and until 2004 we operated only in Florida. As of June 30, 2005, we had approximately 9,000 subscribers for our location-based services in the United States. 

OUR COMPETITIVE STRENGTHS 

We believe that we maintain the following competitive strengths: 

Superior technology .    Our AVL products, SVR services and value-added services (PAL and concierge) are based mainly on terrestrial network triangulation, which enables accurate tracking even in dense urban areas and underground locations. Products based on terrestrial network triangulation are less susceptible to jamming than products based on other available technologies, including GPS and network-based cellular systems, and, unlike direction-finding homing devices, provide precise location information. In areas where we do not have terrestrial network triangulation system coverage, we also rely on GPS technology for our fleet management services, which allows our customers to receive 24-hour access to vehicle information, including driver emergencies. Our AMR products enable the remote reading of water meters from a range of up to 1,000 feet and our wireless transmitter is integrated into the water meter, as opposed to systems where the transmitter and the water meter are separate components connected by a wire, which makes our system less susceptible to damage and tampering. Our RFID products, specifically our electronic toll collection devices, allow the reading device to process signals from the transponder accurately, even when the vehicle is traveling at speeds as high as 120 miles per hour. 

Comprehensive solution .    We offer a comprehensive turn-key location-based solution consisting of our AVL infrastructure and AVL products that includes the deployment of a network of base stations throughout a region, the establishment and operation of a control center, the supply and installation of vehicular end-units and a range of value-added services. We have recently entered into contracts to sell this comprehensive turn-key location-based solution in China and South Korea to third-party service providers and are currently in the initial set-up and network deployment phase in Beijing, Shanghai and Seoul. 

Strong relationships with insurance companies .    We have established relationships with both global and local insurance companies, including AIG, Generali, HSBC, Mapfre, Porto Seguro and La Caja. Insurance companies drive demand for our SVR and our AVL products by requiring our customers to install a security system and offering financial incentives through insurance premium discounts. Insurance companies provide us with a significant distribution channel, while allowing us to save on selling and marketing costs. 

Established subscriber base with generally predictable subscriber fees .    We have an established and growing global customer base of approximately 298,000 subscribers as of June 30, 2005, approximately 47.1% of our revenues were attributable to recurring subscription fees. Assuming no additional growth in our subscriber base, based on our historical churn rate of under 2% per month, we can anticipate that at least 90% of our subscription fees generated in a prior quarter will recur in the following quarter. 

Leverageable subscription model.     Our location-based services business model generally allows us, once we incur the initial cost involved in deploying the infrastructure in a region, to increase the number of our subscribers without a commensurate increase in additional direct costs. For example, between December 31, 2002 and June 30, 2005, we added approximately 120,000 net subscribers, which translated into additional annual revenues of approximately $15.6 million with only an approximate $3.1 million increase in related annual cost of revenues. 

Proven track record.     We have over 10 years of experience in providing SVR services. Over the last three years, we achieved an average stolen vehicle recovery time of approximately 20 minutes from the time an unauthorized entry is confirmed or reported to the time the vehicle is recovered and an average recovery rate of approximately 85% based on the total number of our subscribers' vehicles that were stolen and recovered in the markets we serve. 

 

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OUR GROWTH STRATEGY 

Key elements of our growth strategy include: 

Increase penetration rates in our existing geographical market for location-based services and expand into new markets .    We believe that there is significant potential to increase our subscriber fees and sales of related AVL products in both our existing markets and new markets. For example, in Buenos Aires, Argentina, we started offering our SVR services in 2002 and had approximately 47,000 subscribers as of June 30, 2005. We believe that there is a significant potential for us to further increase our subscriber base in this market based on the number of vehicles and high vehicle theft rates. 

We also intend to identify additional cities where our services and technology platform meet evolving customer needs. For example, based on our results and experience in São Paulo, Brazil, insurance companies have encouraged us to expand our services to Rio de Janeiro, Brazil, and we have commenced the deployment of the initial infrastructure there this year. 

Offer turn-key product solutions .    We anticipate a significant increase in the sale of our AVL products in 2005 and 2006 resulting from our recently executed contracts with third-party SVR service providers in China and South Korea. These contracts involve the deployment of our entire AVL system, including the related network infrastructure, base stations, control centers and end-unit devices. We commenced receiving revenues under the China contract in the fourth quarter of 2004 as we began the deployment of our AVL infrastructure in Shanghai. Once our infrastructure is fully deployed in a region, we expect additional revenues from an increase in sales of our AVL end-units. 

Expand applications for our wireless communications products.     In addition to existing applications for our AMR and RFID products, we are actively promoting new applications for our products with existing and potential customers. We were recently awarded contracts from the transit authority of the State of Minnesota, ACS-SLC, a subsidiary of ACS, and Norpass for the provision of our RFID products, and are currently engaged as the sole technology provider in several pilot programs for our RFID products with various federal and state governmental agencies, including the United States Department of Homeland Security. In addition, our Research and Design department is currently working on expanding our AMR product lines to include fixed area network systems and to adapt the Dialog 3G product lines for the electrical power and natural gas meter industry. 

Offer new value-added services for our subscribers .    We will continue to add new features and functionality to our services, some of which will be incorporated into our services as free upgrades while others will be offered for additional subscription fees. We aim to use these services to generate incremental subscriber fees and to enhance our customer retention. Our concierge and PAL services are examples of such value-added services. 

Acquire complementary businesses and technologies .    We are currently looking to acquire businesses that will increase our location-based services market share in the markets in which we currently operate and/or provide us an established subscriber base in additional markets. In addition, we are looking to acquire businesses and/or technologies that address applications that are complementary to our existing product lines. 

CUSTOMERS 

We market and sell our products and services to a broad range of customers that vary in size, geographic location and industry. In 2002, 2003 and 2004 and the six months ended June 30, 2005, other than Arad Technologies, which represented 10.2% of our revenues in 2004, no single customer or group of related customers comprised more than 10% of our total revenues. 

Location-based services 

Stolen vehicle recovery 

Our customers in the SVR market include insurance companies as well as individual vehicle owners. As of
June 30, 2005, we had approximately 298,000 subscribers. 

 

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Fleet management 

Our customers in the fleet management market include small-, mid- and large-size enterprises. As of June 30, 2005, approximately 2,000 corporate customers had installed our wireless communications products in approximately 30,000 vehicles in industries such as telecommunications, courier/delivery, field service, distribution, construction, security, facilities/waste management, cable/broadband, freight and passenger transportation and utilities. 

Value-added services 

Our concierge services are provided to existing SVR customers. As of June 30, 2005, we had approximately 15,000 subscribers to our concierge service in Israel and approximately 4,200 of our PAL devices were installed in valuable merchandise and equipment, or carried by individuals. 

Wireless communications products 

Historically, we only provided our AVL products in connection with our own SVR services. However, we recently signed an agreement with third-party service providers in China and South Korea to provide a turn-key location-based solution consisting of deploying our AVL infrastructure and selling our AVL end-units and we are currently in the initial set-up and deployment phase of our AVL infrastructure in Shanghai, Beijing and Seoul. We expect to commence sales of our AVL end-user units in Shanghai, Beijing and Seoul in 2006. 

We believe that we have sold our AMR products to over 1,000 water utilities through Master Meter, a wholly-owned subsidiary of Arad Technologies, with whom we have an exclusive agreement. Our RFID products are sold in Israel and the United States. Our electronic toll collection devices are deployed by Derech Eretz, the sole toll road operator in Israel, and by the transit authority of the State of Minnesota and we sell our electronic weigh station devices to ACS-SLS, a subsidiary of ACS, and Norpass. In addition, we are currently engaged as the sole technology provider in several pilot programs for our RFID products with various federal and state governmental agencies, including the United States Department of Homeland Security and the United States Customs and Border Protection Agency. Although these pilot programs do not currently represent a material portion of our business or revenues, and we do not know if they may lead to revenue-generating contracts in the future, we believe our selection for these pilot programs represents a first step in our attempt to penetrate the RFID market in the United States. 

SELLING AND MARKETING 

Our selling and marketing objective is to achieve broad market penetration through targeted marketing and sales activities. As of June 30, 2005, our selling and marketing team consisted of 82 employees. 

Location-based services 

Stolen vehicle recovery 

Our marketing and sales efforts are principally focused on four target groups: insurance companies and agents, car dealers and importers, cooperative sales channels (mostly vehicle fleet operators and owners) and private subscribers. 

We maintain marketing and sales departments in each geographical market in which we operate. Each department is responsible for maintaining our relationships with our principal target groups. These responsibilities also include advertising and branding, sales promotions and sweepstakes. 

In Israel, Brazil and Argentina, we focus our marketing efforts primarily on insurance companies. In the United States, we believe that insurance companies do not constitute a material influence in the marketing of SVR services or AVL products. Most of our sales in the United States are made through car dealers for new or used cars. 

 

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Fleet management 

Vehicle fleet management systems are marketed through a vehicle fleets department, which is a part of our marketing department. We conduct in-depth research to identify companies that will gain efficiency and cost savings through the implementation of our products and services, and conduct targeted marketing campaigns to these companies. In addition, we participate in professional conventions and advertise in professional publications and journals designed for our target customers. Currently, our fleet management services are also marketed by the sales force of one of the largest cellular service providers in the United States. 

Wireless communications products 

Our AVL end-units are primarily used by us in providing our location-based services in Israel, Brazil, Argentina and the United States. In China and South Korea, we plan to sell our AVL end-units to third parties who intend to provide location-based services based on these products. 

Our AMR products are incorporated into products of Arad Technologies, which, through its wholly-owned subsidiary Master Meter, markets and distributes its products independently. Our exclusive agreement with Arad Technologies is in effect until 2009 and covers, in addition to water meters, electricity, gas meters and other applications using AMR technology. 

In Israel, Derech Eretz undertakes marketing and distribution of our RFID products. In the United States, we market our RFID products independently, focusing our efforts on corporations and/or integrators that market our products to consumers and state agencies. 

COMPETITION 

We face strong competition for our services and products in each market in which we operate. We compete primarily on the basis of superior technology, functionality, ease of use, quality, price, service availability, geographic coverage, track record of recovery rates and response times and financial strength. For example, we believe terrestrial network triangulation technology, which we use for most of our location-based services and our AVL products, is superior to other technologies used by our competitors because our products are less susceptible to jamming, provide greater geographic coverage and, unlike direction-finding homing systems, provide precise location information. With respect to our AMR products, we believe our products are superior to our competitors due to our products' ability to enable the remote reading of water meters from a range of up to 1,000 feet and because our wireless transmitter is integrated into the water meter, as opposed to systems where the transmitter and the water meter are separate components connected by a wire, which makes our system less susceptible to damage and tampering. With respect to our RFID products, specifically our electronic toll collection devices, we believe our products are superior because they allow the reading device to process signals from the transponder accurately, even when the vehicle is traveling at speeds as high as 120 miles per hour. 

Location-based services 

We currently compete with a variety of companies in each of our markets. The three major technologies utilized by our competitors are GPS/cellular, network-based cellular and radio frequency-based homing systems. In addition, new competitors utilizing other technologies may continue to enter the market. 

Stolen vehicle recovery 

The specific competitive challenges we face in each geographic region that we operate in are described below: 

 

Israel.     According to a Dun & Bradstreet report published in 2004, we currently hold a 75% market share of the Israeli vehicle location market. Our primary competitors in Israel are Eden Telecom Ltd. (Pointer) and Rav-Bariah Satellite Location Ltd. 

 

Brazil.     Brazil is a highly fragmented market with many companies selling competing products and services (including immobilizers and other less-sophisticated vehicle security systems). Our main competitors in Brazil are LoJack Corporation, Car System and Sascar Corporation. 

 

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Argentina.     Argentina is also a highly fragmented market with many companies selling competing products and services (including immobilizers and other less-sophisticated vehicle security systems). Our principal competitors in Argentina are LoJack Corporation, Pointer Corporation, Ovi Car, Nexus Telocation Systems Ltd. and Hawk Corporation. 

 

United States.     In the United States, there are at least three major companies offering various theft protection and recovery products that compete with our product and service offerings, including LoJack Corporation, OnStar Corporation and Air Cept Corporation. 

We are currently unable to provide market share information other than our market share information for the vehicle location market in Israel for various reasons, including the broad range of services and products that compete in these markets, the non-existence of trade publications with respect to the products and services we offer in such markets and the lack of meaningful or accurate market research or data available to us. 

Fleet Management 

The vehicle fleet management market is highly fragmented with many corporations offering location products and services. Our major competitors in the United States are @Road, Navtrack and Teletrac. In Brazil, our main competitors are Autotrack, Controlsat and Omnilink. 

Wireless communications products 

Automatic vehicle location 

Our AVL system is based on terrestrial network triangulation technology and primarily competes with companies that use one of three main technologies: GPS (in combination with wireless communication), network-based cellular communication and radio frequency-based homing. 

Although AVL products based on GPS, network-based cellular and homing technologies do not require the construction of a separate infrastructure of base stations as with terrestrial network triangulation systems such as ours, such solutions have certain drawbacks. GPS receivers require line of sight to at least three satellites, which reduces their effectiveness in areas where the satellite signals are subject to interference and "noise" (such as urban areas, buildings or parking garages, forests and other enclosed or underground spaces). GPS and network-based cellular systems are also prone to jamming since the tracking signal receivers are located in the vehicle and can be easily tampered with. In addition, the satellites utilized by GPS devices are managed by the United States Department of Defense and can be subject to forced temporary outages. For example, during the first Gulf War, the United States Department of Defense prohibited the commercial use of the GPS satellites for a two-week period. The main disadvantage of homing systems is that they provide only the general direction and not the precise location of the end-unit. In addition, homing systems require that the vehicle be reported stolen before the tracking signal can be activated, which may result in a delay between vehicle theft and recovery. 

Terrestrial network triangulation systems have succeeded in overcoming some of the challenges faced by systems based on other technologies. Terrestrial network triangulation technology does not require line of sight and the signals are not easily interrupted in densely populated or obstructed areas. Also, the signals are transmitted from the end-unit in the vehicle to a network of base stations. Therefore, in order to jam the system, receivers in each individual base station within range of the end-unit would have to be jammed, which is difficult to accomplish. Additionally, since the primary application of terrestrial network triangulation systems in the AVL industry is vehicle location and not continuous two-way communication, short bursts of data are sufficient for tracking purposes, which enable the network of base stations to be deployed at a much lower density in the coverage area than traditional network-based cellular base stations. Terrestrial network triangulation systems are capable of determining the precise location, and not just the general direction, of a vehicle at any moment in time. Furthermore, when connected with the existing theft protection system in the vehicle, terrestrial network triangulation systems automatically alert the control center when a vehicle is stolen and do not require that the vehicle be reported stolen, which can potentially reduce stolen vehicle recovery times to a few minutes. The main disadvantage of terrestrial network triangulation systems is the necessity to deploy a physical infrastructure,  

 

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including the construction, development and deployment of a network of base stations and a control center and the need to address the various financial, legal and practical issues associated with such deployment. Any such deployment entails an investment of a sizable amount of money prior to the receipt of any revenues. 

Automatic meter reading 

Our AMR product, which is marketed through Master Meter, competes with products developed and marketed by Hexagram Inc., Itron Inc. Invensys, Neptune Technology Group, Inc., Datamatic, Ltd., Ramar Technology Ltd., American Meter Company and DSCI Corp. Our AMR products enable the remote reading of water meters from a range of up to 1,000 feet. This allows the operator to extract information by walking or driving by the water meter, thus reducing the time and manual labor required in order to obtain the information. In addition, our AMR wireless transmitter is integrated into the water meter, as opposed to systems where the transmitter and the water meter are separate components connected by a wire, which makes our system less susceptible to damage and tampering. 

Radio frequency identification 

In the United States, the principal market in which we operate, our primary competitors are Mark IV (the provider of the E-ZPass product), Delco and Raytheon. Our RFID products are characterized by the ability of the reader to process transmissions from the in-vehicle unit, even when the vehicle is traveling at speeds of as high as 120 miles per hour. This eliminates the need for the vehicle to slow down in the toll booth area, as is required with currently available electronic toll products, such as the E-ZPass product in the United States. 

TECHNOLOGY 

Our wireless communications applications tend to have the following characteristics: 

 

relatively small data packets; 

 

data distribution in short bursts; 

 

low power consumption; 

 

transmissions in the unlicensed and licensed channels of the communications spectrum; 

 

relatively short transmittal distances; 

 

priority on precision and delivery timing (latency); 

 

low cost; and 

 

smart protocols for large number of terminals. 

Our wireless communications platform comprises several critical components that utilize technologies that are either proprietary to us or are based on industry standards. While the applications of our products differ in terms of the purpose and utilization of the data transmitted, our products are similar in that each radio device transmits identifying signals to one or more fixed or mobile base station or receiver. 

AVL technology 

Our AVL products are based on terrestrial network triangulation technology that relies on three main components: an end-unit that is installed in the vehicle, a network of base stations and a 24-hour manned control center. The transmission of a Direct Sequence Spread Spectrum, which we refer to as DSSS, signal from the transmitter (uplink) located in the vehicle is triggered via (i) a physical connection (for example, the unauthorized opening of the car door) or (ii) remotely by an interrogation signal sent by a distant operator and addressed to the specific device (downlink). Several remote base stations receive the DSSS signal from the transmitter. The base stations then perform an accurate measurement of the time of arrival of the signal and send this information to the relevant control center. A computer located in the control center calculates the precise location of the device using sophisticated algorithms and our control center personnel then communicate with the relevant law enforcement agency to recover the vehicle. 

 

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Use of terrestrial network triangulation technology requires the construction, development and deployment of a network of base stations. The number of base stations required to obtain complete communications coverage is dependent on the size and geography of a particular region. Base stations, consisting of a radio receiver, which includes a processor and a data computation unit to collect and send data to and from transponders and send that data to a control center, are erected on land and the installation and operation of the base sites require licenses from relevant local and regional governmental and regulatory authorities, including (i) a license that allows us to use designated frequencies for broadcasting, transmission or reception of signals and information and to provide telecommunication services to our customers, (ii) a building permit, which permits us to erect our base sites and transmit therefrom, (iii) product specific licenses (commonly known as type approvals), which enable us to use the equipment necessary for our services, and (iv) a general commerce license, which allows us to offer our services to the public. It is also necessary to construct a control center employing software used to collect data from the various base sites, conduct location calculations and transmit data to various customers and law enforcement agencies. 

AMR technology 

As with AVL technology, automatic meter reading involves the transmission of relatively small amounts of data in short bursts. Low-power operation is essential since the signals must travel up to 1,000 feet. In addition, delivery reliability and timing are important elements of a successful operation. Our AMR products are based on radio frequency technology, which is a widely adopted automatic meter reading technology. Differentiating aspects of our AMR technology include: 

 

The remote reading of water meters from a range of up to 1,000 feet, which allows the operator to extract information by walking or driving by the water meter, thus reducing the time and labor associated with manual data collection. This translates into cost savings as well as incremental revenue for utilities since every meter can be read and billed accurately and efficiently. 

 

Optimal utilization of FCC regulations using several configurations/models providing high marketing flexibility with a high power digital wideband module, a high power frequency hopping module, a high power input module, a low power narrow band module and a recently introduced DSSS high power module. 

 

Unique base station/reader modules based on the principles of "software radio", allow high flexibility and easy configuration. 

RFID technology 

In the electronic toll application of RFID technology, fixed readers continuously transmit special signals, which are received by in-vehicle transponders entering the reader's communication zone. During a short communication at a high data rate, the reader "extracts" relevant information required for the transaction from the transponder's memory. Secure TDMA protocol enables reliable simultaneous communications between the reader and many transponders in the range without interference. This allows for a much faster transaction process, which eliminates the need for the vehicle to slow down in the toll booth area. 

GPS technology 

While our SVR services and value-added services, consisting of PAL services and concierge services rely mainly on terrestrial network triangulation technology, our fleet management services in areas where we do not have terrestrial network triangulation system coverage rely on GPS technology. GPS technology utilizes three or more satellites communicating with a ground station to triangulate (measure distance using the travel time of radio signals) in order to determine the location and other information concerning a vehicle. We are among the few companies that offer their customers the use of a comprehensive GPS-based application for fleet management both by using an Internet site and workstations. Our system allows our customers 24-hour access to information on their fleets through our active control center and also provides alerts on vehicle temperature and driver emergencies. 

 

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INTELLECTUAL PROPERTY AND LICENSES 

We seek to protect our intellectual property through patents, trademarks, contractual rights, trade secrets, know-how, technical measures and confidentiality, non-disclosure and assignment of inventions agreements and other appropriate protective measures to protect our proprietary rights in the primary markets in which we operate. We do not believe that our viability or profitability substantially depends on any single patent, trademark, trade secret, know-how or other piece of intellectual property other than some of the licenses obtained from Teletrac. 

We typically enter into non-disclosure and confidentiality agreements with our employees and consultants. We also seek these protective agreements from some of our suppliers and subcontractors who have access to sensitive information regarding our intellectual property. These agreements provide that confidential information developed or made known during the course of a relationship with us is to be kept confidential and not disclosed to third parties, except in specific circumstances. 

Our stolen vehicle recovery system is based on three main components: (i) an AVL end-unit that is installed in the vehicle, the components of which were originally developed by Tadiran and were acquired and improved by us, (ii) a network of base stations that relay information between the vehicle location units and the control center, certain components of which were developed by Teletrac and are currently licensed to us by Teletrac and (iii) a 24-hour manned control center consisting of software used to manage communications and the exchange of information among the hardware components of the AVL system, certain components of which were developed by Teletrac and licensed to us under exclusive and non-exclusive licenses. 

Certain technology for our AVL end-units is subject to the terms of a grant Telematics Wireless received from the Israeli Office of Chief Scientist to partially fund the development of certain components of our AVL system. Pursuant to the terms of this grant, which required repayment and has already been paid in full, we are not permitted to transfer the relevant technology to a foreign entity without the prior approval of the Israeli Office of Chief Scientist. 

Ituran, Mr. Big, Rav-Tag and the related logos are our trademarks, which have been registered in Israel. This prospectus also refers to brand names, trademarks, service marks and trade names of other companies and organizations, each of which is the property of its respective holder. 

MANUFACTURING OPERATIONS AND SUPPLIERS 

Most of our wireless communications products are manufactured and assembled by a limited number of unaffiliated manufacturers in Israel. We usually engage with our manufacturers either on a full turn-key basis, where we supply detailed production files and materials list and receive a final product that we sell directly to our clients, or on a partial turn-key basis in which we purchase the raw materials and deliver them to our manufacturers that do the manufacturing, assembly and quality assurance checks. We do not depend on a single manufacturer for the production of our products. Our main manufacturers are R.H. Electronics, Ltd., an enterprise located in Nazareth, Israel, Flextronics (Israel) Ltd., an enterprise located in Migdal Haemek, Israel, and Teliran, Ltd., an enterprise located in Petach Tikva, Israel. 

Our quality assurance and testing operations are performed by our manufacturers at their facilities, while using our quality assurance and testing equipment and in accordance with the test procedures designated by us. We monitor quality with respect to key stages of the production process, including the selection of components and subassembly suppliers, warehouse procedures, assembly of goods, final testing, packaging and shipping. We are ISO 9001 certified. We believe that our quality assurance procedures have been instrumental in achieving the high degree of reliability of our products. 

Some of our products (principally the integration and testing of base sites, which are manufactured in low quantities and tend to be more technically sophisticated) are manufactured by us in Telematics Wireless' facilities in Holon. 

 

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Several components and subassemblies included in our products are presently obtainable from a single source or a limited group of suppliers and subcontractors. We maintain strong relationships with our manufacturers and suppliers to ensure that we receive an adequate supply of products, components and raw materials at favorable prices and to access their latest technologies and product specifications. 

Our engagements in China and South Korea require us to gradually commence manufacturing activity of our AVL products in both countries, which we intend to do once the performance of these contracts progresses. 

FACILITIES 

We do not own any real estate. All of our offices, headquarters, control centers and facilities are leased in accordance with our specific needs in the areas in which we operate. Additionally, we lease space for our base sites, in order to operate the reception and transmission stations of the system, in each area in which we provide our SVR services. 

We currently lease an aggregate of approximately 26,180 square feet of office space in Azour, Israel. In 2004, annual lease payments for this facility were approximately $380,000. This lease expires on March 31, 2008 and may be renewed by us for an additional 48-month period, subject to a 10% increase in the amount of rent and maintenance payments. These premises include our executive offices and the administrative and operational centers for our operations as well as our customer service, value-added services and technical support centers for the Israeli market. 

Our subsidiary Telematics Wireless currently leases approximately 17,600 square feet of office space and other facilities in Holon, Israel. Annual lease payments for this space in 2004 were approximately $180,000. This lease expires on November 30, 2006 and is automatically extended at Telematics Wireless' election, for successive two-year periods, until November 30, 2016. In addition, Ituran Cellular Communications leases 8,800 square feet of office space and other facilities in Holon, Israel, at an annual rent of approximately $73,800. This lease will expire in February 2006 and will be automatically extended for additional successive two-year periods until February 2012. Both facilities in Holon are leased from a related party. See "Transactions with related parties." 

In Brazil, we lease approximately 1,040 square feet of office space and our control center for approximately $22,600 annually. 

In Buenos Aires, Argentina, we lease approximately 4,270 square feet of office space for approximately $27,130 annually and approximately 7,150 square feet for our control center for approximately $12,000 annually. 

We lease approximately 7,500 square feet for our offices and control center in Florida for an approximate monthly rate of $7,530, subject to a 3% annual increase. 

We believe that our facilities are suitable and adequate for our operations as currently conducted. In the event that additional facilities will be required, we believe that we could obtain such facilities at commercially reasonable rates. 

The size of our base station sites varies from approximately one to eight square feet. In Israel, we have 96 base stations and we rent most base station sites independently for a monthly rate ranging from $100 to $1,400 per site depending on the location, size and other factors; for certain sites we do not pay any rent. The typical duration of a lease agreement for our base stations in Israel is five years and we generally have a right to renew the term of the lease agreements for a period ranging between two and five years. In Brazil, we have 58 base station sites, of which 33 sites are leased from the same entity for a monthly rate ranging from $534 to $1490 per site and the duration of each lease is 10 years. The remaining 25 sites are leased independently for an annual rate ranging from $100 to $685 depending on the location, size and other factors, and the typical duration for these leases is five years. In Argentina, we have 35 base station sites, all of which are leased from two entities for a monthly rate ranging from $400 to $850 per site. The duration of the lease ranges from two to three years. In Florida, we have 39 base station sites, leased primarily from property management companies. The annual rental rates vary from $3,717 to $25,021 and the duration of most leases is between three and five years, typically with options to renew for additional similar periods. 

 

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We do not believe that we have a legal retirement obligation associated with the operating leases for our base sites pursuant to FAS No. 143, Accounting for Asset Retirement Obligations , since we do not own any real property. However, we are obligated pursuant to certain of the operating leases for our base sites, mainly for base sites in Israel, Brazil and Argentina, to restore facilities or remove equipment at the end of the lease term. Since the restoration is limited to any construction or property installed on the property, which in our case is only the installed antennas, we do not believe that these obligations, individually or in the aggregate, will result in us incurring a material expense. 

REGULATORY ENVIRONMENT 

In order to provide our SVR services in the locations where we currently operate, we need to obtain four primary types of licenses and permits: (i) a license that allows us to use designated frequencies for broadcasting, transmission or reception of signals and information and to provide telecommunication services to our customers, (ii) a building permit, which permits us to erect our base sites and transmit therefrom, (iii) product specific licenses (commonly known as type approvals), which enable us to use the equipment necessary for our services, and (iv) a general commerce license, which allows us to offer our services to the public. 

The frequency license and general commerce licenses we require are granted by the applicable national agency regulating communications in the markets in which we operate, specifically, the Ministry of Communication, in Israel, Anatel – Agencia Nacional de Telecomunicaçoes, in Brazil, the Comisión Nacional de Comunicaciones, in Argentina, and the Federal Communications Commission, in the United States. The product specific licenses we require are granted in Israel by the Ministry of Communication, in Brazil by IBRACE (the Instituto Brasileiro de Certificaçao de Productos para Telecominicaçoes), in Argentina by the National Technological Institute of Argentina and in the United States by the Federal Communications Commission. 

Our frequency licenses in all of the locations where we operate are "secondary" or "joint", which means that the government may grant another person or persons, typically a cellular operator, a primary license to the same frequencies and, to the extent our operations interfere with the operations of the other person, we would have to modify our operations to accommodate the joint use of the frequencies. All of these licenses are also subject to revocation, alteration or limitation by the respective authority granting them. While any events that would cause us to change frequencies or to modify our operations could have a material adverse effect on us, we do not believe that this is a likely event in any of the locations where we provide our SVR services. 

Our frequency license in Israel expired on November 30, 2004 and was temporarily extended until September 30, 2005. We have met with the Ministry of Communications, which grants this license, to discuss our receipt of a new five-year license and we do not anticipate any issues in obtaining this extension. Our frequency licenses in Brazil expire in 2009 and, in Miami and Orlando, our licenses expire between 2009 and 2013. In Argentina, our frequency license expires in 2007. We have options to extend all of our frequency licenses for periods ranging from three- to 10-year periods. 

In Israel and Brazil, like our competitors and most cellular operators, we are not in compliance with all relevant laws and regulations in connection with the erection of transmission antennas (our base sites). As of June 30, 2005, most of our base sites in Israel and Brazil are operating without local building permits. Currently, there is heightened awareness of this issue in Israel, particularly in connection with base sites of cellular providers, and possible sanctions could include fines and even the closure or demolition of these base sites. However, we do not believe this is likely. Obtaining such required permits may involve additional fees as well as payments to the Land Administration Authority. 

The required permits and approvals include: 

 

erection and operating permits from the Israeli Ministry of the Environment; 

 

permits from the Israeli Civil Aviation Authority, in certain cases; 

 

permits from the Israeli Defense Forces; 

 

approval from Israel's Land Administration, which usually also involves payment for the land use rights; and 

 

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building permits from local or regional zoning authorities in Israel and Brazil. 

We have commenced a process for obtaining the relevant permits required for the construction of our base sites in Israel, however, to date, we have not been issued these permits. With respect to the general permit from Israel's Land Administration, we have been in discussions for approximately two years with the relevant authorities and expect that the permit may be issued in the coming months. The process for obtaining these approvals in Israel is generally a time-consuming, highly bureaucratic and lengthy process. As a result, it is common practice among providers of wireless telecommunications services in Israel to continue operations while engaged in the approval process. In Brazil, very few providers of wireless telecommunications services obtain the required permits due to the nature of the approval process. We have applied for the necessary permits, but do not expect to receive such permits in the near future. In Brazil, we try to minimize our risk by locating most of our equipment in sub-leased sites which are already used by other telecommunication service providers, such as cellular operators. 

We have been declared a monopoly under the Israeli Restrictive Trade Practices Law, 1988, in the provision of systems for the location of vehicles in Israel. This law prohibits a monopoly from abusing its market position in a manner that might reduce competition in the market or negatively affect the public. For instance, a monopoly is prohibited from engaging in predatory pricing and providing loyalty discounts, which prohibitions do not apply to other companies. The law empowers the Commissioner of Restrictive Trade Practices to instruct a monopoly abusing its market power to perform certain acts or to refrain from taking certain acts in order to prevent the abuse. Additionally, any declaration by the Israeli antitrust authority that a monopoly has abused its position in the market may serve in any suit in which it is claimed that such a monopoly engages in anti-competitive conduct, as prima facie evidence that it has engaged in anti-competitive behavior. Our declaration as a monopoly in the market of "provision of systems for the location of vehicles in Israel" was not accompanied with any instructions or special restrictions beyond the provisions of the Restrictive Trade Practices Law. Although we may be ordered to take or refrain from taking certain actions, to date we have not been subject to such restrictions. 

LEGAL PROCEEDINGS 

From time to time, we (and our subsidiaries) are a party to various lawsuits, claims and other legal and regulatory proceedings that arise in the ordinary course of our (and their) business. These actions typically seek, among other things, compensation for alleged breach of contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to such lawsuits, claims and proceedings, we accrue reserves in accordance with US generally accepted accounting principles. We do not believe that any of these proceedings, individually or in the aggregate, would materially and adversely affect our business, financial condition or results of operations. 

We are involved in a litigation with Leonardo L.P., a US-based hedge fund, arising out of a financial transaction entered into between us and Leonardo in February 2000. Pursuant to the terms of this financial transaction, we received a cash investment of $12 million in exchange for certain notes that were convertible into our ordinary shares according to a pre-determined formula. Pursuant to the formula, the conversion price of the notes was the lower of NIS 67.3 ($14.7) or an average trading price of our shares for a defined period prior to conversion. The conversion price is used to determine the number of shares into which the notes may be converted by dividing the notional principal amount of the notes, initially $12 million, by the conversion price. On the date the notes were issued, March 2, 2000, the notes were convertible into approximately 720,000 of our ordinary shares. As part of the terms of this financial transaction, and, as required by the rules of the TASE where our ordinary shares are currently traded, we were required to seek the approval from the TASE for the issuance of the ordinary shares underlying the notes. The TASE approved the issuance of 2,250,000 of our ordinary shares as the number of registered shares that could be issued under the notes. We understood the terms of our financial transaction with Leonardo to provide that, except in certain limited circumstances, the amounts advanced to us, together with accrued interest on these advances at the annual rate of 3.5%, would be repaid and satisfied solely through the delivery of ordinary shares and that under no circumstance would we be required to deliver more than 2,250,000 of our ordinary shares. We believe that Leonardo also recognized that there was a limit on the number of shares issuable under the notes, and in fact at no time on or prior to the  

 

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maturity date of the notes did Leonardo seek to convert the notes for more than 2,250,000 of our ordinary shares. Prior to the maturity date of the notes, Leonardo converted approximately $6.7 million of the notional principal amount of the notes into an aggregate of 2,241,594 of our ordinary shares. We believe that the holders of the notes are therefore only entitled to convert the balance of their notes into 8,406 shares, although in the pending litigation Leonardo has indicated that it does not believe that the notes were subject to any limit on the number of shares that could be issued to them on conversion and is seeking to recover damages based on this allegation. 

The terms of the documents and agreements that comprise the financial arrangement with Leonardo contain provisions regarding the repayment and conversion of the notes which may be regarded as conflicting or subject to different interpretations. Accordingly, we believe that the matter may only be resolved through a litigation in which the parties present evidence as to the proper meaning and operation of the repayment and conversion provisions of documents and agreements comprising the financing transaction with Leonardo. The parties are currently in early stages of pleading the case before a district court in Israel and are in the process of undertaking discovery. In its pleadings, Leonardo is seeking alternative remedies and relief, including (a) the repayment in cash of the balance of the notes in the amount of approximately $6.2 million (plus accrued interest and expenses), (b) the delivery to Leonardo of the maximum number of our ordinary shares into which the notes could have been converted on the maturity date without regard to the 2,250,000 share limitation, or 3,516,462 ordinary shares, plus additional monetary damages, or (c) the payment of a cash amount equal to the amount obtained by multiplying the 3,516,462 shares mentioned in the preceding clause by the highest trading price of our ordinary shares between the maturity date and the date of the court's decision, plus interest or expenses. Although there can be no assurances as to the final outcome of this litigation, we believe that the maximum liability that we could have in this matter, assuming that a court rejects our interpretation of the agreements or determines that we have otherwise defaulted in the notes, is approximately $5.9 million. In addition, on January 27, 2005, Leonardo moved to have its complaint amended to add an additional cause of action, claiming that on January 29, 2002 we also breached our agreement because Moked Ituran distributed some of our shares to its shareholders, in violation of the covenant that requires Moked Ituran to maintain at least 70% of the number of our shares that it held at the time we entered into the financial transaction with Leonardo. Based on such alleged breach, Leonardo is seeking an additional alternative remedy of $9.6 million, plus interest and expenses. We intend to vigorously defend ourselves in this litigation and we believe that we have meritorious defenses to the claims of Leonardo based on the language of the documents and agreements comprising the financial transaction and the additional evidence we have reflecting the intentions of the parties. At the court's suggestion, we have currently entered into a non-binding mediation process with Leonardo. The mediation process has no time limit and may be terminated at any time by either party. Any disclosures made during the mediation process are confidential and any fact admitted during the mediation process will not serve as evidence in the court action should the mediation process fail. To date, one mediation meeting has occurred. While we cannot predict the outcome of this case or the mediation process at this time, if Leonardo prevails, the award to Leonardo of damages, either in cash or by delivery of our ordinary shares, could result in significant costs to us, adversely affecting our results of operations. In addition, the issuance of our ordinary shares to Leonardo may impact the share price of our ordinary shares and would dilute our shareholders' ownership percentage. 

Consistent with the presentation throughout this prospectus, all share numbers reported in this discussion were adjusted to reflect the three-for-one share split of our ordinary shares to be effected immediately prior to the consummation of this offering. 

On March 17, 2005, a suit was filed against us in an amount of NIS 4.7 million, or $1.0 million. The suit was filed by an attorney and the collection company managed by such attorney that acted on our behalf in collecting customer debts claiming that we owed him certain amounts in respect of unpaid fees and expenses. A significant portion of such attorney's claim is based on the allegation of damage to the plaintiffs' reputation. We believe the plaintiffs' case to be without merit and have filed a counter-claim. Recently, a settlement agreement was signed between the parties pursuant to which the attorney and the collection company repudiated their claim and accepted the position of the Company in full. We are currently awaiting the court's approval of this agreement. 

 

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On July 8, 2005 a class action was filed against our subsidiary, Ituran Florida Corporation, in the First Judicial District Court in Philadelphia, Pennsylvania. The lawsuit claims that Ituran Florida sent fax advertisements to the named plaintiff and the other members of the class allegedly in violation of the Telephone Consumer Protection Act of 1991. The maximum potential amount of damages that we estimate our subsidiary may be liable for pursuant to the provisions of the Telephone Consumer Protection Act if the plaintiffs prevail is approximately $1.5 million in the aggregate for all class plaintiffs, plus punitive damages and expenses. We do not believe that the plaintiffs will prevail and, even if they do prevail, we do not believe that the resolution of this claim will have a material effect on our revenues, operations or liquidity. 

EMPLOYEES 

As of June 30, 2005, we had 761 employees worldwide. The breakdown of our employees by country in the last three years was as follows: 

As of December 31, As of June 30,
2002 2003 2004 2005
Israel 363 359 387 399
Brazil 69 86 125 218
Argentina 54 55 115 119
United States 22 25 24 25
Total 508 525 651 761

As of June 30, 2005, we employed 272 employees in our control centers, 82 in marketing and sales, 50 in research and development, 143 in management, finance and general administration, 148 in technical support and IT and 66 in private enforcement and operations. 

We consider our relations with our employees to be satisfactory and have no ongoing major labor disputes or material labor-related litigation. Our employees are subject to local labor laws and regulations, which in some countries are more stringent than others. Some of the senior executives in Ituran and our subsidiaries also have employment agreements that may grant them rights in excess of those provided by the applicable laws. 

Israel 

Our employees in Israel are subject to Israeli labor laws and regulations and employment customs. The applicable labor laws and regulations principally concern matters such as paid annual vacation, paid sick days, length of the workday, payment for overtime and severance pay. Israeli law generally requires severance pay equal to one month's salary for each year of employment upon retirement or death of an employee or termination of employment without cause. Furthermore, Israeli employees and employers are required to pay predetermined sums to the National Insurance Institute, which is similar to the United States Social Security Administration. Since January 1, 1995, these amounts also include payments for national health insurance. 

In addition, the provisions of a special collective agreement between our subsidiary, Telematics Wireless, the Histadrut (the General Federation of Labor in Israel) and the workers' representatives are applicable to some of the employees of Telematics Wireless. This agreement includes the following provisions: 

 

Telematics Wireless is obligated to share its profits with its employees each year, based on a formula that takes into consideration Telematics Wireless' profits and the employee's salary for the applicable year. 

 

Telematics Wireless agreed that in the event that its shares are registered in a public offering, it will offer employees subject to this collective bargaining agreement the option to purchase no less than 2% of its shares on the same basis and based on the same criteria as its shares are offered to employees who joined Telematics Wireless after July 2000 (the date of the collective bargaining agreement) and who are not party to this collective bargaining agreement. 

In addition, by order of the Israeli Ministry of Labor and Welfare, the provisions of several collective bargaining agreements between Telematics Wireless, the Histadrut and the Industrialists Association in Israel may be  

 

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applicable to a segment of our employees other than managerial, finance and administrative, and marketing and sales personnel. However, we believe we provide our employees with benefits and working conditions that are at least as favorable as the conditions specified in these collective bargaining agreements. 

Brazil 

Our employees in Brazil are subject to Brazilian labor laws and regulations and employment customs. The laws and regulations in Brazil govern all aspects of labor relations and designate a general employment contract with which all employees and employers must comply. This general employment contract adopts by reference the provisions of the Labor Law which principally relates to matters such as paid annual vacation, paid sick days, the length of the workday, payment for overtime and severance pay. Brazilian law generally requires severance pay equal to 50% of the sum the dismissed worker accumulated in its pension fund during the period of employment upon the retirement or death of an employee or termination of employment without cause. Brazilian employers are also required to purchase health insurance for employees, cover employees' food and travel costs, and allocate sums to the employees' pension fund. Furthermore, Brazilian employees and employers are required to pay predetermined sums to the National Insurance Institute, which is similar to the United States Social Security Administration. Our payments to the National Insurance Institute amount to 34.5% to 37.8% of the wages paid, depending on the amount of the wages, of which the employee contributes 7.7% to 11% and we contribute a fixed amount equal to 26.8%. 

All of our employees in Brazil, excluding the chief executive officer, are members of a labor union and the employee member fees to the union are paid by us. 

Argentina 

Our employees in Argentina are subject to Argentine labor laws and regulations and other special practices and employment customs. The laws and regulations in Argentina control all aspects of labor relations and designate a general Employment Contract with which all employees and employers must comply. This general Employment Contract adopts by reference the provisions of the Labor Law which principally concerns matters such as paid annual vacation, paid sick days, the length of the workday, and payment for overtime and severance pay. Argentinean law generally requires severance pay equal to one month per year of service upon the retirement or death of an employee or termination of employment without cause. Argentine employers are also required to purchase health insurance for employees, cover employee's food and travel costs, and allocate sums to the employee's pension fund. Our payments for pension funds and healthcare amount to approximately 15% of the wages for pension funds and 9% for healthcare up to a specified cap, of which the employee contributes 2.5% and 3%, respectively, and we contribute 12.5% and 6%, respectively. 

Our employees in Argentina, excluding the chief executive officer and a number of other employees, are members of a labor union and the employee member fees are paid by the company. 

United States 

We have no collective bargaining agreements with any of our employees in the United States and none of our employees are members of a union. 

HISTORY AND DEVELOPMENT OF OUR COMPANY 

Our company was initially incorporated as a subsidiary of Tadiran, an Israeli-based designer and manufacturer of telecommunications equipment, software and defense electronic systems, whose original business purpose was to adapt military-grade technologies for the civilian market. In July 1995, Moked Ituran Ltd. purchased our company and the assets used in connection with its operations from Tadiran and Tadiran Public Offerings Ltd. The AVL infrastructure and AVL end-units for the operation of our SVR services were originally developed by an independent division of Tadiran Communications and Systems Group. These operations were later transferred to a Tadiran subsidiary, Tadiran Telematics Ltd. In November 1999, we purchased Tadiran Telematics from Tadiran and in 2002, we changed its name to Telematics Wireless. 

 

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CORPORATE STRUCTURE 

Our corporate structure setting forth our material subsidiaries is as follows: 

Our material subsidiaries include the following: 

Telematics Wireless Ltd., an Israeli company, is a subsidiary of which we own approximately 97% of the outstanding shares. The remaining 3% are held by the company's management and employees. Telematics Wireless designs, develops and markets all of our products for the AVL, AMR and RFID markets. 

Ituran Cellular Communications Ltd. and Hotas Holding Ltd., our indirect subsidiaries, are both Israeli companies that provided our cellular services. Hotas Holding is a wholly-owned subsidiary of Ituran Cellular Communications, of which we directly own 50% of the outstanding shares. Another 45% of the shares are owned by Ituran-Network Ltd. (of which we own 95% of the shares, Avi Maimon owns 5% and one share is owned by Moked Ituran Ltd.) and the remaining 5% are held by York The 4th Musketeer Ltd. 

Ituran U.S.A. Inc. is a Delaware holding company through which we hold the shares of our service and operating companies in Brazil, Argentina and the United States. 

Ituran NY Corporation, a Delaware corporation, is the licensee of the technology related to our land-based radio location systems from Teletrac, which it sublicensed to Ituran Beheer B.V. Ituran NY is responsible for collecting all of the royalty payments due us from our subsidiaries in Israel, Brazil and Argentina in relation to the license. 

Ituran Beheer B.V., a Dutch company, sublicenses the technology related to our land-based radio location systems to our subsidiaries who are the local operators of our location systems in Brazil and Argentina. 

 

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Ituran Florida Corporation, a Delaware corporation, operates our SVR and fleet management services in the United States. It is approximately 94% owned by Ituran U.S.A. with the remaining shares being held by Ituran Florida's employees. 

Ituran License Corp., a Delaware corporation, is a wholly-owned subsidiary which holds the FCC licenses for our operations in the United States. 

Ituran de Argentina S.A. is our operating company in Argentina and is 91% owned by Ituran U.S.A., with the remaining shares owned by Avi Anais, the CEO of Ituran de Argentina. 

Teleran Localizacao e Controle Ltda. and Ituran Servicios Ltda. are Brazilian corporations operating our SVR services in Brazil. Teleran Localizacao e Controle is primarily engaged in the sale of equipment. One share (quota) is held by Avner Kurz, the CEO of Teleran Holding Ltda. and 70,000 shares are held by Carteletrack Limited. Ituran Servicios is 97.5% owned by us and is our service provider in Brazil. The remaining 2.5% of its shares are held by Betina Sofia Secemski-Cohen. 

Teleran Holding Ltda., the holding company of Teleran Localizacao e Controle, is indirectly owned by us, with the exception of one share (quota), which is held by Inêz Warmling. 

 

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Material agreements 

Following is a description of some of the material agreements to which we or our subsidiaries are a party. The descriptions provided below are only summaries and should be read in conjunction with, and are qualified in their entirety by, the complete agreements, which are attached to the registration statement of which this prospectus is a part. 

THE TELETRAC AGREEMENTS 

Our AVL system is based on three main components: (i) an AVL end-unit that is installed in the vehicle, the components of which were originally developed by Tadiran and acquired and were improved by us, (ii) a network of base stations that relay information between the vehicle location units and the control center, certain components of which were developed by Teletrac and are currently licensed to us by Teletrac and (iii) a 24-hour manned control center consisting of software used to manage communications and the exchange of information among the hardware components of the AVL products, certain components of which were developed by Teletrac and licensed to us under exclusive and non-exclusive licenses. 

The technology licensed to us by Teletrac, which we refer to as the Teletrac intellectual property, is licensed to us by virtue of a series of agreements pursuant to which we have secured the exclusive rights to use the Teletrac intellectual property in Israel, Brazil, Argentina, and certain cities in the United States. We have also secured certain exclusive rights to use the Teletrac intellectual property in other designated countries and non-exclusive rights to use the Teletrac intellectual property in every country outside of the United States and Europe, including China and South Korea where we have sublicensed the rights to third parties. 

We are not required to pay any ongoing royalties for use of the Teletrac intellectual property in Israel, although we may be required in the future to pay a royalty up to 3% of sales of products and services utilizing the Teletrac intellectual property in countries where we wish to maintain our exclusive rights. We also have the right to use the Teletrac intellectual property in any country outside of Europe and the United States on a non-exclusive basis upon payment to Teletrac of a fee of $100,000 for each country in which the Teletrac intellectual property is so used or sold. Generally, our agreements with Teletrac and our rights to the Teletrac intellectual property may be terminated by Teletrac only in the event of a material breach of the agreement by us, or our assigns or sublicensees. 

THE ARAD TECHNOLOGIES AGREEMENTS 

Telematics Wireless has entered into a series of agreements with Arad Technologies for the manufacture and supply by Telematics Wireless of its transponders for incorporation in Arad Technologies' AMR systems. The agreements provide for the joint development, manufacturing and marketing of the AMR systems, as well as the provision of the Telematics Wireless transponders to Arad Technologies. Pursuant to these agreements, each party retains its intellectual property rights in the components of the AMR system that it develops. Since the execution of the original agreement in 2000, the parties have entered into a number of amendments, each of which consist of Arad Technologies' order of additional transponders at varying prices per transponder. The agreements contain mutual exclusivity obligations, pursuant to which the parties agreed not to develop, manufacture, market and/or enter into an agreement with another provider in the radio frequency-based automatic meter reading field, subject to certain limited exceptions. Pursuant to the most recent amendment to the Arad agreements, the agreements will terminate on December 28, 2009. In the event that Arad ceases to market and sell AMR products, it may request Telematics Wireless to terminate the production of its transponders by giving Telematics Wireless four months prior written notice. 

THE DERECH ERETZ AGREEMENT 

In January 2000, Telematics Wireless entered into a Supply Agreement with Derech Eretz, the concessionaire of the cross-Israel highway project, pursuant to which Telematics Wireless was retained to develop, manufacture and supply the wireless transponders for the electronic toll and traffic management system in connection with the operation of the first, and currently only, toll road in Israel. 

 

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Pursuant to the agreement, Derech Eretz ordered from Telematics Wireless an initial quantity of 150,000 of our RFID products. In addition, Derech Eretz is entitled under the agreement to order an additional quantity of our RFID products from Telematics Wireless for an agreed-upon price. On February 29, 2004, Derech Eretz ordered an additional 100,000 of our RFID products. 

The intellectual property incorporated in our RFID products remains Telematics Wireless' property, although we have agreed to grant Derech Eretz all requisite licenses for all intellectual property utilized in connection with the transponders. In addition, we agreed to grant the Israeli government a license to use our RFID products for the operation of the toll road upon termination of the Israeli government's agreement with Derech Eretz, as well as for its use in other transport projects in Israel. 

THE CHINA AGREEMENT 

On August 28, 2004, Telematics Wireless entered into an agreement with Golden Net Communication Technology, a Chinese company, and Digitrack Wireless (China) Group Co. Ltd., a Hong Kong company for the deployment of independently operated AVL systems in China, Hong Kong, Macao and Taiwan. Pursuant to the agreement, we are required to provide Golden Net with a turn-key project management, specific hardware and software, engineering and technical planning and design of the system, as well as training qualified personnel to operate the system. In addition, we agreed to supply to the applicable local operators established by Golden Net the base stations and hardware required for the construction and operation of the system. We have been informed by Golden Net that the Chinese government will hold a direct or indirect interest in these local operators. The AVL infrastructure is to be constructed in phases, beginning in Shanghai. 

Pursuant to the agreement, Golden Net agreed to exclusively purchase required equipment from us. The agreement also provides that following the initial purchase of base stations and AVL end-units specified in the agreement, the base stations and AVL end-units will be manufactured, on our behalf, by a local manufacturer approved by the buyers and that, after the deployment of the first system in Shanghai, a research and development center will be set up in China for the future development of AVL systems in China. 

The term of the agreement commences (per project deployed) from the advance payment date for the system until our fulfillment and Golden Net's final acceptance of our obligations under the agreement with respect to such project, including the satisfaction of any applicable warranty, spare parts, maintenance and option obligations. The agreement may be terminated by either party in the event of a material breach of the agreement by the other party. A separate agreement will be executed by the parties at a later date governing the purchase of the AVL end-units. It will contain the pricing, local manufacturing and intellectual property rights terms, among others, set forth in the existing agreement. 

The agreement became effective upon the payment of $732,000 as an advance for the Shanghai system and in May 2005 we received an additional advance of $400,000. The agreement provides for payments to us for deployment costs, system license fees and all provided equipment. We expect to receive a letter of credit in 2005 in an amount of approximately $3.9 million (less the amount of the advances) that guarantees the payment of expected obligations under the agreement for the deployment of the AVL system in Shanghai or to continue to receive advance payments as the project progresses. In April 2005, Golden Net notified us that it intends to proceed with the deployment of the system in Beijing and since such date has advanced payments to us in an aggregate amount of approximately $600,000. 

Although the agreement requires the initial deployment of the AVL system in Shanghai by November 1, 2005, due to delays in the organization and registration of Golden Net's local operating company in Shanghai, deployment of the first phase of the AVL system in Shanghai, consisting of the erection of ten base sites, was rescheduled and is now required to be completed by December 31, 2005. The deployment of an additional 45 base sites is scheduled for no later than mid-year 2006. According to the agreement, the first ten base sites (the first phase) in Beijing are to be deployed by December 31, 2005, preferably in October, 2005. Our ability to meet our scheduled deployment depends, in part, on Golden Net's ability to obtain necessary infrastructure components, such as standard equipment purchases, and satisfy their financial obligations. We believe that Golden Net has obtained to date all of the necessary local and regional governmental permits and approvals necessary to construct the AVL system in Shanghai and Beijing. 

 

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Currently, the total expected revenues from the agreement with Golden Net are $5.4 million, $4.3 million of which are attributable to the deployment of the AVL system in Shanghai and $1.1 million of which is attributable to the first phase of the deployment of the AVL system in Beijing. The revenues recorded in our financial statements for these contracts for the fiscal year ended December 31, 2004 are $0.7 million and $0 million, respectively. These amounts exclude expected sales of AVL end-units, which we cannot currently estimate as they are dependent on the ability of the customer to market its services and our AVL products. Following the development and deployment of the AVL system in Shanghai and Beijing, we expect to receive ongoing additional revenues from Golden Net from maintenance contracts, sales of spare parts for the base sites in each of the markets, further deployment contracts for additional cities (over ten deployments are currently contemplated), and sales of our AVL end-units (manufactured locally) to Golden Net. We will not receive any revenues from the end-user subscriber fees collected by Golden Net for the provision of its SVR services. 

Pursuant to the agreement, in the event payments made by Golden Net to us exceed $150.0 million on a cumulative basis, the title and ownership to all of our intellectual property rights in our AVL system will be transferred to Golden Net solely for use in China, Hong Kong, Macao and Taiwan. Currently, a portion of the technology used in connection with the implementation of our AVL system is subject to the terms of a grant Telematics Wireless received from the Israeli Office of Chief Scientist to partially fund the development of certain components of our AVL system, which terms state that the technology may not be transferred without the prior approval of the Israeli Office of the Chief Scientist. See "Business—Intellectual Property and Licences." The Golden Net agreement does not condition the transfer on the receipt of the consent of the Israeli Office of Chief Scientist. In the event that at the time Telematics Wireless would need to transfer technology pursuant to the agreement such technology will still include elements subject to the Israeli Office of Chief Scientist grant, Telematics Wireless would need to seek the consent of the Israeli Office of Chief Scientist to do so. The Israeli Office of Chief Scientist may not provide such consent or may, as is often done in such cases, condition its consent upon the payment of royalties, penalties, or other amounts. 

THE SOUTH KOREA AGREEMENT 

On August 31, 2004, Telematics Wireless entered into a license and supply agreement with Vision Plant Inc., a South Korean corporation that, on June 15, 2005, assigned its rights and obligations under the agreement to Korean Location Information and Communications Company Ltd. The agreement provides for the construction and operation of an AVL system in South Korea. Pursuant to the agreement, Koran Location Information has received a sole and exclusive license to use our AVL infrastructure-related technologies in South Korea for the purpose of operating an AVL system. The agreement is in effect for 10 years, automatically renewable for an additional term of 10 years, after which the agreement will remain in effect indefinitely and shall be terminable by three years' prior notice by either party or by the injured party in the event of a material breach by the other party. The agreement became effective in July, 2005, upon the procurement by Korean Location Information of all necessary governmental permits and approvals, the establishment of its local operating company, and the transfer to us of a down payment. 

Pursuant to this agreement, Telematics Wireless undertook to provide services including the design, integration, update of software and hardware applicable to the system and the training of personnel and Vision Plant undertook to purchase the equipment required for the construction and operation of the system exclusively from Telematics Wireless. During the construction stage, we are required to supply the base stations and oversee the deployment of the AVL system in cooperation with Korean Location Information. In addition, Telematics Wireless will supply the subscriber equipment (vehicle location end-units, people and merchandise) to Korean Location Information. The consummation of the agreement is contingent upon Korean Location Information obtaining from the appropriate authorities the required permits and licenses. 

Pursuant to the agreement, there are three phases of the development and construction of the complete AVL system in South Korea: 

 

Phase I relates to the Seoul metropolitan area and neighboring vicinities. This phase consists of 82 base sites to be deployed by September 2006 and is valued at $5.4 million, excluding the sale of our AVL end-units following the establishment of the Phase I infrastructure. 

 

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Phase II relates to five other major metropolitan areas in South Korea. This phase consists of an additional 124 base sites to be deployed at a date to be determined by Korean Location Information. We will commence providing deliveries for construction of the base sites five months following the placement of an order. Phase II is valued at $4.8 million, excluding the sale of our AVL end-units following the establishment of the Phase II infrastructure. 

 

Phase III relates to coverage across South Korea. This phase consists of an additional 294 base sites to be deployed at a date to be determined by Korean Location Information. We will commence providing deliveries for construction of these base sites five months following Korean Location Information's placement of the order. Phase III is valued at $9.8 million, excluding the sale of our AVL end-units following the establishment of the Phase III infrastructure. 

In each phase, a local operating company established by Korean Location Information will deploy the AVL infrastructure, under our supervision. In the event that these three phases are completed and we supply the equipment as contemplated under the agreement, we will be paid up to $20.0 million (not including revenues from sales of our AVL end-units following the establishment of the AVL system). 

Following the development and deployment of the AVL system, we expect to receive ongoing revenues from Korean Location Information from maintenance contracts, sales of spare parts for the base sites in each of the markets and sales of our AVL end-units (manufactured locally) to Korean Location Information. We will not receive any revenues from the end-user subscriber fees collected by Korean Location Information for provision of its SVR services. 

A separate agreement will be executed by the parties at a later date governing the purchase of the AVL end-units. It will contain the pricing, local manufacturing and intellectual property rights terms, among others, set forth in the existing agreement. 

In addition to rights in South Korea, Korean Location Information was granted a right of first refusal for the development, construction and operation of our AVL system in all countries in the far east and south-east Asia, including Japan (but excluding China, Hong Kong and Taiwan), as long as the technology license and all AVL products, whether the components of the infrastructure or the end-units, are exclusively purchased from us. In the event this right is exercised by Korean Location Information, the agreement provides for payments to us for deployment costs, system license fees and all provided equipment. This right will terminate with respect to any country if within four years from the date of execution of the agreement there is no significant progress in constructing the system by Korean Location Information in the relevant country. 

 

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DIRECTORS AND EXECUTIVE OFFICERS 

The following table sets forth information for our directors and executive officers as of the date of this prospectus. Unless otherwise stated, the address for our directors and executive officers is c/o Ituran Location and Control Ltd., 3 Hashikma Street, Azour, Israel 58001. 

Name Age Position(s)
Izzy Sheratzky 59 Chairman of the Board of Directors
Yehuda Kahane 61 Director
Ron Benjamin (1) 73 Director
Avner Kurz 52 Director
Amos Kurz 49 Director
Yigal Shani 61 Director
Eyal Sheratzky 37 Co-Chief Executive Officer and Director
Nir Sheratzky 33 Co-Chief Executive Officer and Director
Gil Sheratzky 28 Director
Yoav Kahane 31 Director
Orna Ophir (1) 55 Director
Israel Baron (1) 52 Director
Eli Kamer 37 Executive Vice President, Finance; Chief Financial Officer
Guy Aharonov 40 General Counsel
Eddy Kafry 53 President & Chief Executive Officer of Telematics Wireless

 

( 1 )  

Member of our audit committee and an independent director under the Nasdaq National Market listing requirements.  

Izzy Sheratzky is a co-founder of our company and has served as the Chairman of our Board of Directors, which in our company constitutes both an officer and director position, ever since our company was acquired from Tadiran in 1995. Until 2003, Mr. Sheratzky also served as our Chief Executive Officer. Mr. Sheratzky also serves as the Chairman of the Board of Directors of Telematics Wireless, Moked (1973) Investigations Company, Moked Services, Information and Investments Ltd., and Moked Ituran. He also serves as a director in Tikal Document Collection Ltd. Mr.  Sheratzky is the father of Eyal, Nir and Gil Sheratzky. 

Yehuda Kahane is a co-founder of our company and has served as a director since its acquisition from Tadiran in 1995. Professor Kahane is a full-time professor at the Faculty of Management, Tel Aviv University. Professor Kahane founded and served as the first Dean of the Israeli Academic School of Insurance until 2000. In addition, he is the co-founder and co-owner of the managing firm of the first pension fund in Israel, Teshura, a co-owner of the technological incubators Weizman, Ofakim and Katzrin, and is involved in the formation, seed investment and management of start-up companies. Professor Kahane serves as a consultant to various companies and organizations in the areas of actuary and risk management, such as the Insurance Fund for Natural Risks in Agriculture, the National Fund for Compensating Traffic Accident Victims and New Dimension Software Ltd., and has been providing financial consulting services to our company since 1998. Professor Kahane also serves as a director of Telematics Wireless and of Moked Ituran. Professor Kahane holds a BA degree in Economics and Statistics, an MA degree in Business Administration and a PhD in Finance from the Hebrew University of Jerusalem. He is the father of Yoav Kahane. 

Ron Benjamin has served as a director of our company since its acquisition in 1995 and serves as a member of our audit committee. Mr. Ron also serves as Co-Chief Executive Officer and director of Moked (1973) Investigations Company and Moked Services, Information Management and Investments and as a director of Moked Ituran and of Tikal Document Collection. 

 

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Avner Kurz has served as a director of our company since its acquisition in 1995. Mr. Kurz is the Chairman and director of P.K. Generators & Equipment Ltd. and serves as a Chief Executive Officer of Teleran Holding, our subsidiary in Brazil. Mr. Kurz also serves as a director of Telematics Wireless, El-Ram, Moked Ituran, Totam Plus, Expandis and several other private companies abroad. Mr. Kurz is the brother of Amos Kurz. 

Amos Kurz has served as a director of our company since its acquisition in 1995. Mr. Kurz also serves as a director of Telematics Wireless, and as Chief Executive Officer and director of P.K. Generators & Equipment. Mr. Kurz is the brother of Avner Kurz. 

Yigal Shani has served as a director of our company since its acquisition in 1995. Mr.  Shani is an insurance agent and a partner in the insurance agency Tzivtit Insurance, Ltd., which provides insurance services to our company. Mr. Shani also serves as a director of Gir Magen. 

Eyal Sheratzky has served as a director of our company since its acquisition in 1995 and as a Co-Chief Executive Officer since 2003. Prior to such date, he served as an alternate Chief Executive Officer of our company in 2002 and as Vice President of Business Development during the years 1999 through 2002. Mr. Sheratzky also serves as a director of Moked Ituran and certain of our other subsidiaries, including Telematics Wireless, Ituran Network and Ituran Cellular Communications. From 1994 to 1999, he served as the Chief Executive Officer of Moked Services, Information and Investments and as legal advisor to several of our affiliated companies. Mr. Sheratzky holds LLB and LLM degrees from Tel Aviv University School of Law and an Executive MBA degree from Kellogg University. Mr. Sheratzky is the son of Izzy Sheratzky, the brother of Nir and Gil Sheratzky. 

Nir Sheratzky has served as a director of our company since its acquisition in 1995 and as a Co-Chief Executive Officer since 2003. Prior to such date, Mr. Sheratzky served as alternate Chief Executive Officer of our company from 1995 to 2003. Mr.  Sheratzky is also a director of Telematics Wireless and of Moked Ituran. He holds BA and MA degrees in Economics from Tel Aviv University. Nir is the son of Izzy Sheratzky, the brother of Eyal and Gil Sheratzky. 

Gil Sheratzky has served as a director of our company and as our advertising officer since 2003. Prior to such date, he worked in our control center during the years 2000 and 2001, and during the years 2001 and 2002, he worked in an advertising agency. Mr. Sheratzky holds a BA degree in Business Management from the Interdisciplinary Center, Herzlya. Mr. Sheratzky is the son of Izzy Sheratzky, the brother of Eyal and Nir Sheratzky. 

Yoav Kahane has served as director of our company since 1998 and also serves as a director of Telematics Wireless. Since 2004, Mr. Kahane has been serving as Vice President of Sales and Marketing in Elbit Vision Systems Ltd. Prior to that date, during the years 2001 and 2002, he served as Manager of Business Development in Denver Holdings and Investments Ltd. In 2000, Mr. Kahane established Ituran Florida Corp. and served as its Chief Executive Officer until 2001. Mr. Kahane has been providing consulting services to our company since 2004. Mr. Kahane holds a BA degree in Insurance and an MBA degree from the University of Haifa. Yoav Kahane is the son of Professor Kahane. 

Orna Ophir has been serving as an external director of our company since 2003 and is a member of our audit committee. Dr Ophir has been serving as Medical Director of Assuta hospitals in Israel since November 2004 and as Chief Executive Officer of the Golden Tower hospital (Bat Yam, Israel) since 2001. Prior to such date, Dr Ophir served as Executive Vice President of Assuta Hospital (Tel Aviv, Israel) during the years 1997 to 2000. In addition, Dr Ophir is a director of Macabi Health Services, one of the principal health providers in Israel. Dr Ophir holds MD and MBA degrees from Tel Aviv University. 

Israel Baron has been serving as an external director of our company since 2003 and is a member of our audit committee. Mr. Baron has been serving as Chief Executive Officer of several public sector employee retirement and saving plans since 2003. Prior to such date, Mr. Baron managed an organizational consulting firm, served as an investment manager in the Isaac Tshuva group during the years 1999 to 2001 and as Chief Executive Officer of Gmulot Investment Company Ltd. Mr. Baron serves as director of Quality Baron Management Services Ltd. and until 2004 he served as a director of Brill Shoe Industries Ltd. Mr. Baron is a certified CPA and holds a BA degree in Economics and Accounting. 

 

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Eli Kamer has served as Executive Vice President, Finance and Chief Financial Officer of our company since 1999, after serving as its Finance Department Manager since 1997. Prior such date, Mr. Kamer worked as an accountant in Fahn Kanne & Co., our independent auditors. Mr. Kamer is a CPA and holds a BA degree in Business Administration from the Israel College of Management. 

Guy Aharonov has served as our in-house legal counsel since 1999. Prior to joining our company, he has worked as an attorney in Cohen Lahat & Co. Mr. Aharonov holds a LLB and LLM degrees from Tel Aviv University. 

Eddy Kafr y is President and Chief Executive Officer of Telematics Wireless. Mr. Kafry worked for Tadiran Ltd. until 1989 in the development of various weapon systems. He then spent five years with Kollsman leading the development and engineering of the Night Targeting System for the USMC AH-1W "Cobra" Attack Helicopter. In 1995 Mr. Kafry founded Telematics Wireless within Tadiran. He has served as President and Chief Executive Officer since then. He holds a BSc degree from the Israel Institute of Technology. 

All of our directors (other than our external directors) serve from one annual meeting of shareholders to the next. We expect that prior to the consummation of this offering we will revise our articles of association to provide for staggered three-year terms for all of our directors. Our independent directors who also qualify as external directors under the Israeli Companies Law, Orna Ophir and Israel Baron, are serving three-year terms in accordance with Israeli law. Their three-year terms expire at the general meeting of shareholders to be held in 2006, at which point their terms may be extended for one additional term of three years to 2009. 

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS 

The aggregate direct compensation we paid to our directors who are not officers for their services as directors as a group for the year ended December 31, 2004 was approximately $16,000. Directors are reimbursed for expenses incurred in connection with their attendance of board or committee meetings. 

The aggregate compensation paid to our Co-Chief Executive Officers in 2004 was $579,000. Our four highest paid officers in 2004, other than our Co-Chief Executive Officers, were the active Chairman of our Board of Directors, who was paid $1,031,000 in 2004, and our Vice President, IT and Systems Operation, our Purchase and Logistics Manager and our Vice President, Sites, who were paid $132,000, $128,000 and $127,000, respectively. The aggregate compensation paid to all Ituran officers as a group during 2004 was $2,387,000. In 2004, we also paid an aggregate amount of $40,000 to a director for services provided to us and employment compensation in an aggregate amount of $252,000 to three directors who are our employees but are not Ituran officers. These compensation amounts include amounts attributable to automobiles made available to our officers and other fringe benefits commonly reimbursed or paid by companies in Israel. Employee directors do not receive additional fees for their services as directors. During 2004, we set aside $269,000 for the benefit of our officers for pension, retirement or similar benefits. We do not set aside any funds for the benefit of our directors who are not employees for any pension, retirement or similar benefits. All numbers in this paragraph are rounded to the nearest thousand. 

Messrs. Izzy Sheratzky, Eyal Sheratzky and Nir Sheratzky provide their services as Chairman of our Board of Directors and Co-Chief Executive Officers, respectively, as independent contractors pursuant to services agreements between the company and A. Sheratzky Holdings, a company controlled by Izzy Sheratzky. See "Transactions with related parties." 

The compensation paid to Mr. Izzy Sheratzky included a bonus in an amount equal to 5% of our profits before tax, on a consolidated basis, based on our audited consolidated financial statements for the relevant year, to which Mr. Izzy Sheratzky is entitled pursuant to his services agreement with the company. The compensation paid to each of our Co-Chief Executive Officers, Eyal Sheratzky and Nir Sheratzky, includes a bonus in an amount equal to 1% of our profits before tax, on a consolidated basis, based on our audited consolidated financial statements for the relevant year, granted pursuant to a resolution of our Board of Directors from January 2004. See "Transactions with related parties." 

 

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As of the date of this prospectus, our executive officers and directors held options to purchase an aggregate of 384,048 of our ordinary shares. The exercise price of these options is NIS 0.33⅓, the par value of the shares, and they are fully vested and exercisable into ordinary shares. 

We do not have any agreements with directors providing for benefits upon termination of their respective employment. 

SHAREHOLDERS AGREEMENT AND ARTICLES OF ASSOCIATION OF MOKED ITURAN 

On May 18, 1998, a shareholders agreement was entered into between Moked Ituran Ltd. and each of Moked's shareholders, Moked Services, Information, Management and Investments Ltd. (38%), P.K. Generators and Equipment (26%), Yehuda Kahane Ltd. (26%), Gideon Ezra Ltd. (2.5%), TSD Holdings Ltd. (3.75%) and G.N.S. Holdings Ltd. (3.75%). We expect the agreement to be amended prior to the consummation of this offering and this discussion of the agreement contemplates such amendment. On May 18, 1998, Moked's articles of association were amended to incorporate some of the provisions of the shareholders agreement as well as other provisions governing the relationship of its shareholders. 

Gideon Ezra is a company controlled by Gideon and Hanna Ezra with each owing 50% of the capital stock of such company. Moked Services, Information, Management and Investments is a company owned by A. Sheratzky Holdings Ltd. (a company controlled by Izzy Sheratzky) (66.6%) and Ron Benjamin (2003) Ltd. (a company controlled by Ron Benjamin) (33.3%). P.K. Generators and Equipment is a company owned by Perfect Quality Trading Ltd. (51%), a company wholly-owned by Avner Kurz, and Bareket P.K. Projects Ltd. (49%), a company wholly-owned by Amos Kurz. Yehuda Kahane Ltd. is a company owned by Professor Kahane and Rivka Kahane. TSD Holdings is a company controlled by Efraim Sheratzky. G.N.S. Holdings is a company controlled by Yigal Shani. 

The shareholders agreement (as amended) and Moked's amended articles of association provide as follows: 

 

Prior to the time a shareholders meeting of our company takes place, a separate meeting of the shareholders of Moked will be convened. 

 

At the Moked shareholders meeting, all matters included in our meeting's agenda will be discussed and voted on. 

 

The required quorum in the Moked meeting will be any number of the shareholders actually present. The resolutions will be adopted by a majority of the votes present and voting is based on the relative shareholdings in Moked, with the exception of Moked Services, Information, Management and Investments, which is entitled to 41.5% of the voting rights, thereby decreasing the voting rights of P.K. Generators and Equipment to 22.5% on the vote of any matter other than issues in which Izzy Sheratzky has a direct or indirect interest. 

 

With respect to director elections, every Moked shareholder holding at least 3.5% of Moked's shares is entitled to designate one director in our annual shareholders meeting.  Each Moked shareholder holding over 10% of Moked's shares may nominate an additional director for every additional 10% of Moked shares held by him or her in excess of the initial 10%.  For the purpose of nominating additional directors, shareholdings may be aggregated. 

 

As discussed in "—Board Practices—Board of Directors" below, our directors (excluding the external directors) shall be divided into three classes as follows: class A – Amos Kurz, Yoav Kahane, Eyal Sheratzky and Yigal Shani (with their term of office expiring in 2007), class B – Yehuda Kahane, Avner Kurz and Nir Shertazky (with their term of office expiring in 2008); and class C – Gil Sheratzky, Ron Benyamin and Izzy Sheratzky (with their term of office expiring in 2009). 

 

Upon the expiration of the term of office of our class A directors, each of Moked Services, Information and Investment, provided it holds at least 40% of the voting rights (together with the 3.5% of the voting rights held by P.K. Generators and Equipment), Yehuda Kahane Ltd., provided it holds at least 20% of the voting rights, P.K. Generators and Equipment, provided it holds at least 20% of the voting rights, and Yigal Shani or G.N.S. Holdings, provided either of them holds at least 3.5% of the voting rights, shall be  

 

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entitled to require Moked to appoint one director to class A. Upon the expiration of the term of office of the directors in class B, each of Moked Services, Information and Investment, provided it holds at least 40% of the voting rights (together with the 3.5% of the voting rights held by P.K. Generators and Equipment), and Yehuda Kahane, provided it holds at least 20% of the voting rights, and P.K. Generators and Equipment, provided it holds at least 20% of the voting rights, shall be entitled to require Moked to appoint one director to class B. Upon the expiration of the term of office of the directors in class C, (i) Moked Services, Information and Investment, provided it holds at least 40% of the voting rights (together with the 3.5% of the voting rights held by P.K. Generators and Equipment) shall be entitled to require Moked to appoint two directors and (ii) Efraim Sheratzky or TSD Holdings, provided either of them holds at least 3.5% of the voting rights, shall be entitled to require Moked to appoint one director to class C. 

 

Moked has agreed to vote all of its shares at our shareholders meetings in accordance with the resolutions adopted at the Moked shareholders meeting or, with regard to director elections, as described above. In the event of a tie with respect to a certain issue, Moked has agreed to vote its shares against the relevant resolution at our shareholders meeting. 

 

Moked's shareholders have a right of first refusal on any sale of our shares by Moked. This right does not apply to open market sales by Moked of up to 2% of the issued share capital of our company in any given calendar year. 

 

According to Moked's articles of association, each of the shareholders of Moked may direct Moked to dispose of a portion of Moked's holdings in our company that corresponds to such shareholders' proportional holdings in Moked and to distribute the proceeds of such disposition to such directing shareholders. 

This shareholders agreement is in effect only for as long as Moked holds at least 20% of our issued and outstanding share capital. We expect Moked to continue to hold at least 20% of our issued and outstanding share capital following the consummation of this offering. 

BOARD PRACTICES 

Board of Directors 

Currently, pursuant to our articles of association as presently in effect, our Board of Directors consists of twelve directors, including two external directors in accordance with Israeli law and three independent directors in accordance with the listing requirements of the Nasdaq National Market. Pursuant to our articles of association, other than the external directors, for whom special election requirements apply (see "—External directors"), our directors are elected and may in certain circumstances be removed by the majority of our shareholders. Prior to the consummation of this offering, we will amend and restate our articles of association to provide for staggered three-year terms for all of our directors. The directors on our Board (excluding the external directors) will be divided into three classes, and each class of directors will serve for a term of three years. The term of office of the directors assigned to class A will expire at our annual meeting of shareholders to be held in 2007, and at each third succeeding annual meeting thereafter. The term of office of the directors assigned to class B will expire at the annual meeting of shareholders to be held in 2008, and at each third succeeding annual meeting thereafter. The term of office of the directors assigned to class C will expire at the annual meeting of shareholders to be held in 2009, and at each third succeeding annual meeting thereafter. This classification of the Board of Directors may delay or prevent a change of control of our company or in our management. The external directors, under Israeli law, serve a three-year term which may be extended for an additional term of three years. Our directors may at any time and from time to time appoint any other person as a director to fill a vacancy until the general meeting of shareholders in which the term of service of the replaced director was scheduled to expire. External directors may be removed from office pursuant to the terms of the Israeli Companies Law, 5759 – 1999, which we refer to as the Israeli Companies Law. See "—External directors." 

Pursuant to our articles of association, our chairman convenes and presides over the meetings of the Board. A quorum consists of two-thirds of the members of the Board, and decisions are taken by a vote of the majority of the members present. 

 

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The Israeli Companies Law provides that an Israeli company may, under certain circumstances, exculpate an office holder from liability with respect to a breach of fiduciary duties, see "—Indemnification of officers and directors and limitation of liability." 

We are incorporated in Israel and are listed on the Tel Aviv Stock Exchange, and therefore we are subject to various corporate governance requirements pursuant to Israeli law relating to external directors, our audit committee and our internal auditor. 

External directors 

Under Israeli law, the board of directors of companies whose shares are publicly traded are required to include at least two members who qualify as external directors. External directors must be elected by the vote of a majority of the shares present and voting at a shareholders meeting provided that either: 

 

such majority includes at least one-third of the shares held by all non-controlling shareholders present and voting at such meeting; or 

 

the total number of shares voted against the election of the external director and held by shareholders other than controlling shareholders must not exceed 1.0% of the shares whose holders are entitled to vote at any meeting of shareholders. 

External directors are elected to serve an initial term of three years and may be reelected to serve in that capacity for an additional three years. External directors may be removed from office by the same percentage of shareholders required for their election or by a court, in each case, only under limited circumstances, including ceasing to meet the statutory qualification for their appointment or violating the duty of loyalty to the company. If all directors are of the same sex, the next external director elected must be of the other sex. Each committee of the board of directors must include at least one external director, except that the audit committee must include all external directors then serving on the board of directors. Israeli law regulating the compensation of external directors prohibits external directors from receiving, directly or indirectly, any compensation other than for services as an external director pursuant to the provisions and limitations set forth in the regulations promulgated under the Israeli Companies Law. 

Israeli law provides that a person is not qualified to serve as an external director if, at any time during the two years preceding his or her appointment, that person, a relative, partner or employer of that person, or any entity under that person's control has had any affiliation or business relationship with the company, any entity controlling the company or an entity that, as of the date of appointment, or at any time during the two years preceding that date, is controlled by the company or by any entity controlling the company. In addition, no person may serve as an external director if that person's professional activities create, or may create, a conflict of interest with that person's responsibilities as a director or otherwise interfere with that person's ability to serve as a director. Until the lapse of two years after termination of an external director's membership on a board of directors, such company may not engage an external director to serve as an executive officer or director and cannot employ or retain that person to provide paid professional services, whether directly or indirectly. 

Dr. Ophir and Mr. Baron have been elected as our external directors through 2006, and may be re-elected for one additional three-year term expiring 2009. 

Audit committee 

Under Israeli law, the board of directors of a public company must appoint an audit committee. The audit committee must comprise of at least three directors, including all of the external directors. The audit committee may not include the chairman of the board, any director who is employed by the company or regularly provides services to the company (other than as a board member), a controlling shareholder or any relative of such person. 

Our Board of Directors has formed an audit committee that is empowered to exercise the powers of the Board of Directors for our accounting, reporting and financial control practices. The members of the audit committee  

 

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are Dr Orna Ophir and Messrs. Israel Baron and Ron Benjamin. Our Board of Directors has determined that Mr. Israel Baron is the committee's "financial expert," as such term is defined by the rules of the Nasdaq National Market and the Securities and Exchange Commission. 

Compensation committee 

Upon the completion of this offering our Board of Directors will appoint a Compensation Committee, pursuant to the listing requirements of the Nasdaq National Market. The members of the Compensation Committee will be Orna Ophir, Israel Baron and Ron Benjamin. The Compensation Committee of our Board of Directors will recommend review and oversee the salaries, benefits and stock option plans for our employees, consultants, directors and other individuals whom we compensate. The Compensation Committee will also administer our compensation plans. Our Board of Directors has determined that each member of the Compensation Committee is independent. 

Internal auditor 

The board of directors of an Israeli public company must appoint an internal auditor nominated by the audit committee. An internal auditor may not be: 

 

a person (or a relative of a person) who holds more than 5% of the company's shares; 

 

a person (or a relative of a person) who has the power to appoint a director or the general manager of the company; 

 

an executive officer, director or other affiliate of the company; or 

 

a member of the company's independent accounting firm. 

The role of the internal auditor is to examine, among other things, the compliance of the company's conduct with applicable law and orderly business procedures. Our internal auditor is Simon Yarel, CPA. 

The Sarbanes-Oxley Act of 2002 and the Nasdaq National Market listing standards 

The Sarbanes-Oxley Act of 2002, as well as related new rules subsequently implemented by the Securities and Exchange Commission, requires foreign private issuers, such as us, to comply with various corporate governance practices. In addition, Nasdaq has recently adopted amendments to its requirements for companies that are listed on the Nasdaq National Market. Nasdaq Marketplace Rule 4350 was amended to permit foreign private issuers, such as us, to follow certain home country corporate governance practices without the need to seek an individual exemption from Nasdaq. 

In reliance upon Nasdaq Marketplace Rule 4350(a)(1), as a foreign private issuer, we have elected not to follow the requirement that a majority of the members of our Board of Directors be independent, pursuant to Marketplace Rule 4350(c) and accordingly, the composition of our Board of Directors shall remain as is. The composition of our audit committee will remain unchanged as well, with three independent members, two of whom are able to read and understand fundamental financial statements as required by Nasdaq Marketplace Rule 4350(d)(2). In addition, our Board of Directors will not appoint a nominating committee as required by Nasdaq Marketplace Rule 4350(c)(4). 

APPROVAL OF RELATED PARTY TRANSACTIONS UNDER ISRAELI LAW 

Directors and executive officers 

Fiduciary duties 

Israeli law codifies the fiduciary duties that directors and executive officers owe to a company. These fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires a director or executive officer to act with the level of care with which a reasonable director or executive officer in the same position would have acted under the same circumstances. The duty of loyalty requires that a director or executive officer act in good faith and in the best interests of the company. 

 

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Personal interest 

Israeli law requires that a director or executive officer promptly disclose to the board of directors any personal interest that he or she may have and all related material information known to him or her concerning any existing or proposed transaction with the company. A personal interest includes an interest in any company in which the person, his or her relative or any entity in which such person or relative has a personal interest, is a direct or indirect 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager. Board approval is required for the transaction and no transaction that is adverse to the company's interest may be approved. Approval by the company's audit committee and board of directors is required for an extraordinary transaction, meaning any transaction that is not in the ordinary course of business, not on market terms or is likely to have a substantial effect on the company's profitability, assets or liabilities. If a majority of the board of directors has a personal interest in the transaction, shareholder approval is also required. 

Compensation arrangements 

Pursuant to the Israeli Companies Law, all compensation arrangements for executive officers who are not directors require approval of our board of directors. Extraordinary transactions with executive officers who are not directors require additional approvals. Compensation arrangements with directors require the approval of our audit committee, board of directors and shareholders, in that order. Transactions relating to exculpation, insurance or indemnification of (a) executive officers require audit committee approval and subsequent board of directors approval and (b) directors require audit committee approval, board of directors approval and subsequent shareholder approval. 

Shareholders 

Controlling shareholders 

Pursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controlling shareholder of a public company. A controlling shareholder is a shareholder who has the ability to direct the activities of a company, including a shareholder who owns 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights. Currently Moked Ituran Ltd. is considered a "controlling shareholder" of our company under Israeli law and we expect it will continue to be a "controlling shareholder" following the consummation of this offering. Mr. Izzy Sheratzy beneficially owns the shareholdings of Moked Ituran due to his shared voting and investment power over such shares in accordance with a shareholders agreement, dated May 18, 1998, among Moked Ituran and its shareholders. In addition, all shareholders of Moked Ituran who are parties to such shareholders agreement, may also be considered "controlling shareholders" under Israeli law. 

Required approval 

Extraordinary transactions with a controlling shareholder, or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest, and the terms of compensation or employment of a controlling shareholder or his or her relative who is a director, executive officer or employee, require the approval of the audit committee, the board of directors and the shareholders, in that order. This shareholder approval must include the majority of shares voted at the meeting. In addition, either: 

 

the majority must include at least one-third of the shares of disinterested shareholders voted at the meeting; or 

 

the total number of shares of disinterested shareholders who voted against the transaction must not exceed 1.0% of the aggregate voting rights in the company. 

The approval of the board of directors and shareholders is required for a private placement of securities (or a series of related private placements during a 12-month period or that are part of one continuous transaction or transactions conditioned upon each other) that: 

 

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represents at least 20% of a company's actual voting power prior to the issuance of such securities, and that would increase the relative holdings of a 5% shareholder or that would cause any person to become a 5% shareholder the consideration for which (or a portion thereof) is not cash or securities listed on a recognized stock exchange, or is not at fair market value; or 

 

results in a person becoming a controlling shareholder of the company. 

For these purposes, a controlling shareholder is any shareholder that has the ability to direct actions of the company, including any shareholder holding 25% or more of the company's voting rights if no other shareholder owns more than 50% of such voting rights. Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder. 

Shareholder duties 

Pursuant to the Israeli Companies Law, a shareholder has a duty to act in good faith and in customary way toward the company and other shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at the general meeting of shareholders and class meetings with respect to the following matters: 

 

an amendment to the company's articles of association; 

 

an increase of the company's authorized share capital; 

 

a merger; or 

 

interested party transactions that require shareholder approval. 

In addition, specified shareholders have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that it possesses the power to determine the outcome of a shareholder vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Israeli Companies Law does not define the substance of this duty of fairness. 

INDEMNIFICATION OF OFFICERS AND DIRECTORS AND LIMITATION OF LIABILITY 

Pursuant to the Israeli Companies Law, an Israeli company may not exculpate a director or officer from liability for a breach of his or her duty of loyalty. A company may, however, approve an act performed in breach of the duty of loyalty provided that the director or officer acted in good faith, neither the act nor its approval harms the company, and the director or officer discloses the nature of his or her personal interest and all material facts and documents a reasonable time before discussion of the approval. A company may exculpate a director or officer in advance from liability to the company for a breach of his or her duty of care, but only if a provision authorizing such exculpation is included in its articles of association and such breach does not relate to a dividend or other distribution by the company. Our articles of association include such a provision. 

A company may indemnify a director or officer in respect of certain liabilities either in advance of an event or following an event provided that a provision authorizing such indemnification is inserted in its articles of association. Our articles of association contain such a provision. An undertaking by a company to indemnify a director or officer for civil actions by third parties must be limited to foreseeable liabilities and reasonable amounts or criteria determined by the board of directors. A company may insure a director or officer against the following liabilities incurred for acts performed as a director or officer: 

 

a breach of duty of care to the company or to a third party; 

 

a breach of duty of loyalty to the company, provided the director or officer acted in good faith and had a reasonable basis to believe that the act would not prejudice the interests of the company; and 

 

monetary liabilities imposed for the benefit of a third party. 

We have acquired directors' and officers' liability insurance covering our officers and directors and the officers and directors of our subsidiaries against certain claims. To date, no claims for liability have been filed under this policy. Immediately prior to the consummation of this offering, we intend to enter into indemnification  

 

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agreements with each of our directors and officers and the officers and directors of our subsidiaries providing them with indemnification for liabilities or expenses incurred as a result of acts performed by them in their capacity as our directors and officers. 

EMPLOYEE AND DIRECTOR SHARE OPTIONS 

We adopted two option plans for managers and employees. The first option plan was adopted immediately prior to the time of our initial public offering on the Tel Aviv Stock Exchange in May 1998, pursuant to which we issued to our employees options to purchase 360,546 shares at a per-share exercise price of NIS 0.33⅓, or $0.07, the par value of our ordinary shares. All options granted under the 1998 plan are fully vested and were exercised. Pursuant to our 2001 option plan, which was adopted on August 23, 2001, options to purchase an aggregate of 244,875 of our ordinary shares were granted to our employees, one of whom was also a director. All of these options were granted at a per-share exercise price of NIS 0.33⅓, or $0.07. The closing price of our ordinary shares on the TASE on the date these options were granted was NIS 12.20, or $2.67 per share. All of the options granted under the 2001 plan are fully vested and were exercised. In addition, on August 23, 2001, our Board of Directors resolved to grant options to purchase an aggregate of 601,857 ordinary shares to some of our directors and officers as follows: options to purchase 461,784 ordinary shares were granted to Mr.  Izzy Sheratzky, our Chairman of the Board of Directors, options to purchase 50,796 ordinary shares were granted to each of Eyal Sheratzky and Nir Sheratzky, our Co-Chief Executive Officers and options to purchase 38,481 ordinary shares were granted to Mr. Yoav Kahane, our director. All such options were granted at a per-share exercise price of NIS 0.33⅓ or $0.07 and are all fully vested and exercisable. Of these additional options, 217,809 ordinary shares were issued pursuant to exercise of options by Yoav Kahane, Izzy Sheratzky, Eyal Sheratzky and Nir Sheratzky and options for the purchase of 50,796 ordinary shares held by Eyal Sheratzky and Nir Sheratzky expired. On July 18, 2005, a special meeting of our shareholders approved the issuance of fully vested options to Eyal Sheratzky and Nir Sheratzky, in place of those options that expired. These options are exercisable for one year at a per-share exercise price of NIS 0.33⅓ or $0.07. As of the date of this prospectus, options to purchase 384,048 of our ordinary shares are outstanding, all of which are fully vested and exercisable. 

The following table sets forth information on stock options that have been granted and are outstanding as of the date of this prospectus: 

Name of grantee Number of shares to
be issued upon
exercise of options 		Weighted-average
per-share
exercise price 		Expiration date (1)
Izzy Sheratzky 307,854 NIS 0.33⅓ 50% expire in September 2006 and 50% expire in September 2007
Eyal Sheratzky 38,097 NIS 0.33⅓ 66.6% expire in July 2006 and 33.3% expire in September 2006
Nir Sheratzky 38,097 NIS 0.33⅓ 66.6% expire in July 2006 and 33.3% expire in September 2006
All directors and officers as a group 384,048 NIS 0.33⅓
Other employees —
Total 384,048

 

(1)  

All options are fully vested. 

 

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Transactions with related parties 

Following is a description of some of the transactions with related parties to which we or our subsidiaries are party. The descriptions provided below are only summaries and should be read in conjunction with, and are qualified in their entirety by, the complete agreements, which are attached to the registration statement of which this prospectus is a part. 

We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained from unaffiliated third parties. We are required by law to ensure that all future transactions between us and our officers, directors and principal shareholders and their affiliates are approved by a majority of our Board of Directors, including a majority of the independent and disinterested members of our Board of Directors, and that they are on terms no less favorable to us than those that we could obtain from unaffiliated third parties. 

On December 30, 2002, we entered into an agreement with Telematics Wireless and its three executive officers, Eddy Kafry, Avri Franco and Roman Sternberg, pursuant to which such executive officers agreed to exchange all of the equity of Telematics Wireless held by them for 457,095 of our ordinary shares. As part of the agreement, the term of employment of such executive officers was extended by five years, to December 31, 2007, during which time they will continue to serve as directors of Telematics Wireless. In addition, these officers are entitled to an annual bonus in an amount equal to 3.0% of the operating profits of Telematics Wireless. It was further agreed that for as long as they are employed by Telematics Wireless and for six months thereafter, upon an initial public offering of the shares of Telematics Wireless or any of its subsidiaries that uses Telematics Wireless' intellectual property, these officers will be entitled to receive, for no cost, such number of shares or options of Telematics Wireless that will be equal to 7.5% of the post-offering issued and outstanding shares of Telematics Wireless in the event of an offering by Telematics Wireless, or 3.8% of the post-offering issued and outstanding shares of the relevant subsidiary in the event of an offering by a subsidiary, subject to the terms of the relevant underwriting arrangements. 

On January 14, 2003, we entered into an agreement with Telematics Wireless reducing the price of several AVL products supplied by Telematics Wireless to us and to our other subsidiaries. In addition, we agreed to price and budget the development, engineering and operating activities in our AVL products business in the future so that they would include a 5.0% profit margin to Telematics Wireless. 

In February 2003, we entered into a two-year services agreement with A. Sheratzky Holdings, a company controlled by Izzy Sheratzky, and Izzy Sheratzky pursuant to which Mr. Sheratzky agreed to (i) cease to act as our Chief Executive Officer and (ii)  to act as an independent contractor that provides us full-time services as Chairman of the Board of Directors, under the same terms of his previous employment as Chief Executive Officer. Pursuant to the agreement, A. Sheratzky Holdings will receive compensation equal to NIS 82,750, or $18,091, a month, adjusted for inflation, plus reimbursement of certain business expenses. In addition, Mr. Sheratzky will be entitled to participate in our profits in an amount equal to 5% of profits before tax, on a consolidated basis, based on our audited consolidated financial statements for the relevant year. This services agreement is automatically renewable for successive two-year periods until either party notifies the other of its intention to terminate the agreement, by providing a 180-day prior written notice. 

On September 5, 2002, we entered into independent contractor agreements with A. Sheratzky Holdings and each of Eyal Sheratzky and Nir Sheratzky pursuant to which A. Sheratzky Holdings will provide management services to us through Eyal Sheratzky and Nir Sheratzky in consideration of monthly payments in the amount of NIS 10,689 and NIS 49,307, or $10,732 and $10,780, respectively, in addition to providing each of them a company car and reimbursement of certain business expenses. In January 2004, a change in the employment terms of the Chief Executive Officer was approved providing each of our Co-Chief Executive Officers, Eyal Sheratzky and Nir Sheratzky, an annual bonus in an amount equal to 1.0% of our profits before taxes, on a consolidated basis, based on our audited consolidated financial statements for the year for which the bonus is paid. 

 

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Transactions with related parties 

The aggregate amounts paid to A.  Sheratzky Holdings in 2002, 2003, 2004 and the six months ended June 30, 2005 were approximately $333,000, $889,000, $1,723,000 and $953,000, respectively (all numbers include value added tax). 

On March 23, 1998, we entered into a financial services agreement with our director, Professor Kahane. Pursuant to this agreement, we are obligated to pay Professor Kahane a monthly consulting fee of NIS 4,000, or $875, linked to the Israeli consumer price index. The initial term of the agreement was two years, automatically renewable for additional two-year terms, until terminated by either party by providing a 180-day prior notice. In May 2003, the monthly fee payable to Professor Kahane under the agreement was increased to NIS 15,000, or $3,279, linked to the consumer price index. The aggregate amounts paid to Professor Kahane in 2002, 2003, 2004 and the six months ended June 30, 2005 were approximately $14,000, $31,000, $47,000 and $24,000, respectively (all numbers include value added tax). 

On May 29, 2002, Telematics Wireless entered into an addendum to a lease agreement with Rinat Yogev Nadlan, Ltd., a company controlled by some of our and Telematics Wireless' directors and executive officers. The addendum provides for the extension of the lease by Telematics Wireless for five automatically renewable two-year terms, up to a maximum period of 10 years, or until November 30, 2016. The property was originally leased to Telematics Wireless by Tadiran pursuant to a lease agreement dated September 13, 1998. In addition, pursuant to the original lease agreement, Telematics Wireless had a right of first refusal to purchase the property upon a proposed sale by Tadiran. In April 2002, Tadiran decided to sell the property and notified Telematics Wireless, which then transferred its right of first refusal, without consideration, to Rinat Yogev Nadlan. Rinat Yogev Nadlan exercised such right and purchased the property on April 18, 2002. Shortly following the purchase, Telematics Wireless entered into the addendum to the lease agreement with Rinat Yogev Nadlan. In addition to its agreement with Telematics Wireless, on May 29, 2002, Rinat Yogev Nadlan also entered into an agreement with our subsidiary Ituran Cellular Communications for the lease of the remainder of the property held by Rinat Yogev Nadlan under terms similar to those of the Telematics Wireless' lease to expire on February 2012. The aggregate amounts paid to Rinat Yogev Nadlan in 2002, 2003, 2004 and the six months ended June 30, 2005 were approximately $88,000, $257,000, $258,000 and $128,000, respectively (all numbers include value added tax). For further discussion regarding the terms of the lease agreements and the above-mentioned extension, see "Business—Facilities." 

We purchase our insurance policies, including our directors' and officers' insurance, through Tzivtit Insurance Agency (1998) Ltd., an insurance agency owned by Efraim Sheratzky and Yigal Shani, two of our directors. We pay an annual aggregate amount of NIS 1,064,370, or $232,700, for our basic insurance policies and NIS 313,831, or $68,612, for our directors' and officers' insurance policy. Tzivtit Insurance Agency is entitled to commissions in an aggregate amount of NIS 76,741, or $16,778 to be paid by the insurance company on account of these policies. 

Immediately prior to the completion of this offering, we will enter into indemnification agreements with each of our directors and officers and the officers and directors of our subsidiaries providing them with indemnification for liabilities or expenses incurred as a result of acts performed by them in their capacity as our directors and officers. 

 

89

 

Principal and selling shareholders 

The following table sets forth information regarding the beneficial ownership of our ordinary shares as of the date of this prospectus, including shares that may be acquired pursuant to options that are exercisable within 60 days of the date of this prospectus, by: 

 

each person or group of affiliated persons that, to our knowledge, beneficially owns more than 5.0% of our ordinary shares; 

 

each of our directors and executive officers; 

 

all of our directors and executive officers as a group; and 

 

each of our other selling shareholders who are selling shares in this offering. 

A total of up to 960,000 of our ordinary shares are being offered for sale by the selling shareholders listed below. The following table also provides information about each selling shareholder, including: 

 

the number and percentage of outstanding shares each selling shareholders owns as of the date of this prospectus; 

 

the number of shares offered by the selling shareholders for sale pursuant to this prospectus; and 

 

the number and percentage of outstanding shares each selling shareholder will own after the offering, assuming all shares covered by this prospectus are sold. 

We will not receive any of the proceeds from the sale of our ordinary shares by the selling shareholders. 

Beneficial ownership of shares is determined in accordance with the rules of the Securities and Exchange Commission and generally includes any shares over which a person exercises sole or shared voting or investment power. Percentage of ownership is based on 18,802,050 ordinary shares outstanding as of the date of this prospectus and 22,642,050 shares outstanding immediately following the completion of the offering, or 23,218,050 shares assuming the underwriters' over-allotment option is exercised in full. Except where otherwise indicated, we believe, based on information furnished by such owners, that the beneficial owners of the ordinary shares listed below have sole investment and voting power with respect to such ordinary shares. To our knowledge, none of our shareholders of record are US Holders, other than Yoav Kahane. Our principal shareholders do not have different or special voting rights. 

Unless otherwise noted below, each shareholder's address is c/o Ituran Location and Control Ltd., 3 Hashikma Street, Azour, Israel 58001. 

 

90

 

Principal and selling shareholders 

Shares beneficially
owned prior to offering 		Shares
beneficially
owned
being
offered 		Shares
beneficially
owned after
offering
(excluding
exercise of
over-allotment
option) 		Shares
beneficially
owned being
offered
pursuant to
over-allotment
option 		Shares
beneficially
owned after
offering
(including
exercise of
over-allotment
option)
Number Percent Number Number Percent Number Number Percent
Executive officers and directors:
Izzy Sheratzky (1) 6,848,181 35.8 % 394,602 6,453,579 28.1 % 144,000 6,309,579 26.8 %
Professor Yehuda Kahane (2)(12) 2,530,110 13.5 % 235,797 2,294,313 10.1 % 21,840 2,272,473 9.8 %
Ron Benjamin (3) 406,782 2.2 % — 361,782 1.6 % — 361,782 1.6 %
Avner Kurz (4)(12) 1,952,823 10.4 % 217,551 1,735,272 7.7 % 21,840 1,713,432 7.4 %
Amos Kurz (5)(12) 1,550,559 8.2 % 102,978 1,447,581 6.4 % 21,840 1,425,741 6.1 %
Yigal Shani (6)(12) 398,934 2.1 % 113,048 285,886 1.3 % 3,150 282,736 1.2 %
Eyal Sheratzky (7) 50,796 * 12,699 38,097 * — 38,097 *
Nir Sheratzky (8) 50,796 * 12,699 38,097 * — 38,097 *
Gil Sheratzky — — — — — — — —
Yoav Kahane 27,000 * — 27,000 * — 27,000 *
Orna Ophir — — — — — — — —
Israel Baron — — — — — — — —
Eli Kamer 24,435 * — 24,435 * — 24,435 *
Guy Aharonov 23,286 * — 23,286 * — 23,286 *
Eddy Kafry 139,842 * — 139,842 * — 139,842 *
All directors and executive officers as a group
(15 persons) 		9,247,643 48.2 % 930,000 8,317,643 36.7 % 144,000 8,173,643 35.2 %
Principal and Selling Shareholders:
Moked Ituran (11) 5,782,221 30.8 % 214,602 5,567,619 24.6 % 84,000 5,483,619 23.6 %
Bank Hapoalim 1,282,266 6.8 % — 1,282,266 5.7 % — 1,282,266 5.5 %
P.K Generators and Equipment Ltd. (9)(12) 1,532,312 8.1 % 84,731 1,447,581 6.4 % 21,840 1,425,741 6.1 %
T.S.D Holdings Ltd. (10)(12) 291,834 1.6 % 38,048 253,786 1.1 % 3,150 250,636 1.1 %

 

* 

Less than 1%.  

 

91

 

Principal and selling shareholders 

(1) 

Shares beneficially owned include: (a) 758,106 shares owned by Mr. Sheratzky; (b) an option for the purchase of 307,854 ordinary shares granted to Mr. Sheratzky pursuant to the company's share incentive plan, which is currently exercisable within 60 days of the date hereof; and (c) 5,782,221 shares owned by Moked Ituran Ltd., which Mr. Sheratzky beneficially owns due to his shared voting and investment power over such shares in accordance with a certain shareholders agreement, dated May 18, 1998, among Moked Ituran Ltd. and its shareholders, which we refer to as the Moked Shareholders Agreement. Shares beneficially owned after offering include: (a)  578,106 shares owned by Mr. Sheratzky; (b) an option for the purchase of 307,854 ordinary shares granted to Mr. Sheratzky pursuant to the company's share incentive plan, which is currently exercisable within 60 days of the date hereof; and (c) 5,567,619 shares owned by Moked Ituran Ltd., which Mr. Sheratzky beneficially owns due to his shared voting and investment power over such shares in accordance with the Moked Shareholders Agreement. Shares beneficially owned after offering (including exercise of over-allotment option) include: (a) 518,106 shares owned by Mr. Sheratzky; (b) an option for the purchase of 307,854 ordinary shares granted to Mr. Sheratzky pursuant to the company's share incentive plan, which is currently exercisable within 60 days of the date hereof; and (c) 5,483,619 shares owned by Moked Ituran Ltd., which Mr. Sheratzky beneficially owns due to his shared voting and investment power over such shares in accordance with the Moked Shareholders Agreement. Mr. Sheratzky has the sole voting and investment control over Moked Services, Information, Management and Investments Ltd., a holder of 38% of the shares of Moked Ituran Ltd. (and 41.5% of the voting power, subject to certain exceptions, as set forth in the Moked Shareholders Agreement). For further information concerning the Moked Shareholders Agreement see the discussion under — "Management—Shareholders agreement and articles of association of Moked Ituran."  

(2) 

Shares beneficially owned include: (a) 787,782 shares directly and jointly owned by Professor Kahane and Rivka Kahane, (b) 238,950 shares owned by Yehuda Kahane Ltd., which Professor Kahane may be considered to beneficially own by virtue of his shared voting and investment control of the company through his 50% shareholdings thereof, the other 50% being owned by his wife, Rivka Kahane; and (c) 1,503,378 shares owned by Moked Ituran, which Professor Kahane may be considered to beneficially own by virtue of his right to direct the disposition of such shares in accordance with Moked's articles of association. Shares beneficially owned after offering include: (a) 697,782 shares directly and jointly owned by Professor Kahane and Rivka Kahane, (b) 148,950 shares owned by Yehuda Kahane Ltd., which Professor Kahane may be considered to beneficially own by virtue of his shared voting and investment control of the company through his 50% shareholdings thereof, the other 50% being owned by his wife, Rivka Kahane; and (c) 1,447,581 shares owned by Moked Ituran, which Professor Kahane may be considered to beneficially own by virtue of his right to direct the disposition of such shares in accordance with Moked's articles of association. Shares beneficially owned after offering (including exercise of over-allotment option) include: (a) 697,782 shares directly and jointly owned by Professor Kahane and Rivka Kahane, (b) 148,950 shares owned by Yehuda Kahane Ltd., which Professor Kahane may be considered to beneficially own by virtue of his shared voting and investment control of the company through his 50% shareholdings thereof, the other 50% being owned by his wife, Rivka Kahane; and (c) 1,425,741 shares owned by Moked Ituran, which Professor Kahane may be considered to beneficially own by virtue of his right to direct the disposition of such shares in accordance with Moked's articles of association. Professor Kahane has shared voting and investment control over Yehuda Kahane Ltd., a holder of 26% of the shares of Moked Ituran.  

(3)  

Shares beneficially owned include 406,782 shares owned by Ron Benjamin (2003) Ltd., which Ron Benjamin may be considered to beneficially own by virtue of his sole voting and investment control over such shares through his 100% ownership thereof. Shares beneficially owned after offering include 361,782 shares owned by Ron Benjamin (2003) Ltd., which Ron Benjamin may be considered to beneficially own by virtue of his sole voting and investment control over such shares as described above.  

(4) 

Shares beneficially owned include: (a) 420,510 shares directly owned by Avner Kurz, (b) 28,935 owned by P.K Generators and Equipment, which Avner Kurz may be considered to beneficially own by virtue of his shared voting and investment control over such shares through his 50% ownership of Perfect Quality Trading, a majority shareholder of P.K. Generators and Equipment. The other 50% of the shares of Perfect Quality Trading are owned by Amos Kurz (Mr. Kurtz's brother) and (c) 1,503,378 shares owned by Moked Ituran that Avner Kurz may be considered to beneficially own by virtue of his right to direct the disposition of such shares in accordance with Moked's articles of association due to P.K. Generators and Equipment's 26% ownership of Moked Ituran. Shares beneficially owned after offering include: (a) 287,691 shares directly owned by Avner Kurz and (b) 1,447,581 shares owned by Moked Ituran that Avner Kurz may be considered to beneficially own as described above. Shares beneficially owned after offering (including exercise of over-allotment option) include: (a) 287,691 shares directly owned by Avner Kurz and (b) 1,425,741 shares owned by Moked Ituran that Avner Kurz may be considered to beneficially own as described above.  

(5) 

Shares beneficially owned include: (a)18,246 shares directly owned by Amos Kurz, (b) 28,935 owned by P.K Generators and Equipment, which Amos Kurz may be considered to beneficially own by virtue of his shared voting and investment control over such shares through his 50% ownership of Perfect Quality Trading, a majority shareholder of P.K. Generators and Equipment, the other 50% of the shares of Perfect Quality Trading are owned by Avner Kurz (Mr. Kurtz's brother) and (c) 1,503,378 shares owned by Moked Ituran that Amos Kurz may be considered to beneficially own by virtue of his right to direct the disposition of such shares in accordance with Moked's articles of association due to P.K. Generators and Equipment's 26% ownership of Moked Ituran. Shares beneficially owned after offering include 1,447,581 shares owned by Moked Ituran that Avner Kurz may be considered to beneficially own as described above. Shares beneficially owned after offering (including exercise of over-allotment option) include 1,425,741 shares owned by Moked Ituran that Avner Kurz may be considered to beneficially own as described above.  

(6) 

Shares beneficially owned include: (a) 182,100 shares owned by G.N.S Holdings Ltd. which Yigal Shani may be considered to beneficially own by virtue of his sole right to direct the disposition of such shares through his 100% ownership thereof, (b) 214,200 shares owned by Zivtit Insurance Agency (1998) Ltd., which Yigal Shani may be considered to beneficially own by virtue of his shared voting and investment control over such shares through his 50% ownership thereof, the other 50% of the shares held by Efraim Sheratzky, and (c) 216,834 shares owned by Moked Ituran, which Mr. Shani may be considered to beneficially own by virtue of his right to direct the disposition of such shares in accordance with Moked's articles of association. Mr. Shani may be considered to beneficially own such shares by virtue of his sole voting and investment control over GNS Holdings, the holder of 3.75% of Moked's shares, in which he owns 100% of the shares. Shares beneficially owned after offering include: (a) 137,100 shares owned by G.N.S Holdings Ltd. which Yigal Shani may be considered to beneficially own by virtue of his sole right to direct the disposition of such shares through his 100% ownership thereof (b) 154,000 shares owned by Zivtit Insurance Agency (1998) Ltd. which Yigal Shani may be considered to beneficially own as described above, and (c) 208,786 shares owned by Moked Ituran, which Mr. Shani may be  

 

92

 

Principal and selling shareholders 

considered to beneficially own by virtue of his right to direct the disposition of such shares as described above. Shares beneficially owned after offering (including exercise of over-allotment option) include: (a) 137,100 shares owned by G.N.S Holdings Ltd. which Yigal Shani may be considered to beneficially own by virtue of his sole right to direct the disposition of such shares through his 100% ownership thereof, (b) 154,000 shares owned by Zivtit Insurance Agency (1998) Ltd. which Yigal Shani may be considered to beneficially own as described above and (c) 205,636 shares owned by Moked Ituran, which Mr. Shani may be considered to beneficially own by virtue of his right to direct the disposition of such shares as described above.  

(7) 

Shares beneficially owned represent (a) 12,699 shares owned by Eyal Sheratzky, and (b) 38,097 ordinary shares issuable upon the exercise of options granted to Eyal Sheratzky, which are exercisable within 60 days of the date hereof. Shares beneficially owned after offering represent 38,097 ordinary shares issuable upon the exercise of options granted to Eyal Sheratzky, which are exercisable within 60 days of the date hereof.  

(8) 

Shares beneficially owned represent (a) 12,699 shares owned by Nir Sharatzky, and (b) 38,097 ordinary shares issuable upon the exercise of options granted to Nir Sheratzky, which are exercisable within 60 days of the date hereof. Shares beneficially owned after offering represent 38,097 ordinary shares issuable upon the exercise of options granted to Nir Sheratzky, which are exercisable within 60 days of the date hereof.  

(9)  

Shares beneficially owned include (a)28,935 shares owned by P.K Generators and Equipment Ltd. and (b) 1,503,378 shares owned by Moked Ituran, which P.K Generators and Equipment may be considered to beneficially own by virtue of its right to direct the disposition of such shares, through its 3.75% holdings of Moked's shares, in accordance with Moked's articles of association. Shares beneficially owned after offering include 1,447,581 shares owned by Moked Ituran, which P.K Generators and Equipment may be considered to beneficially own by virtue of its right to direct the disposition of such shares, as described above. Shares beneficially owned after offering (including exercise of over-allotment option) include 1,425,741 shares owned by Moked Ituran, which P.K Generators and Equipment may be considered to beneficially own by virtue of its right to direct the disposition of such shares as described above. 

(10) 

Shares beneficially owned include (a)75,000 shares owned by T.S.D Holdings Ltd. and (b) 216,834 shares owned by Moked Ituran, which T.S.D Holdings may be considered to beneficially own by virtue of its right to direct the disposition of such shares, through its 3.75% holdings of Moked's shares, in accordance with Moked's articles of association. Shares beneficially owned after offering include: (a) 45,000 shares directly owned by T.S.D Holdings, and (b) 208,786 shares owned by Moked Ituran, which T.S.D Holdings may be considered to beneficially own by virtue of its right to direct the disposition of such shares, as described above. Shares beneficially owned after offering (including exercise of over-allotment option) include: (a) 45,000 shares directly owned by T.S.D Holdings, and (b) 205,636 shares owned by Moked Ituran, which T.S.D Holdings may be considered to beneficially own by virtue of its right to direct the disposition of such shares as described above. 

(11) 

Moked Ituran is a company owned by Moked Services, Information, Management and Investments (38%), P.K. Generators and Equipment (26%), Yehuda Kahane Ltd. (26%), Gideon Ezra, Ltd. (2.5%), TSD Holdings (a company controlled by Efraim Sheratzky) (3.75%) and GNS Holdings (a company controlled by Yigal Shani (3.75%). Gideon Ezra, Ltd. is a company controlled by Gideon and Hanna Ezra, each owning 50% thereof. Moked Services, Information, Management and Investments is a company controlled by Izzy Sheratzky, who holds 66.6% of its issued and outstanding shares. P.K. Generators and Equipment is a company controlled by Perfect Quality Trading, a company owned by Avner Kurz and Amos Kurz in equal parts. Yehuda Kahane Ltd. is a company controlled by Professor Kahane and Rivka Kahane, each owning 50% thereof.  

(12) 

Moked's articles of association provide that each of Moked's shareholders shall have the right to direct Moked to dispose of such number of shares of the Company corresponding to his or her relative shareholding in Moked. See the discussion under "Management—Shareholders agreement and articles of association of Moked Ituran Ltd."  

 

93

 

Description of ordinary shares 

SHARE CAPITAL 

We are, prior to the consummation of this offering, authorized to issue 22,575,000 ordinary shares, par value NIS 0.33⅓ per share. As of the date of this prospectus, we had 18,802,050 ordinary shares issued and outstanding, including 20,736 shares held by Telematics Wireless and treated as treasury shares. 

Since January 1, 2002, we have issued the following ordinary shares: 

 

In 2002, we issued an aggregate of 1,702,557 of our ordinary shares upon exercise of capital notes held by Leonardo. 

 

During 2003, we issued 457,095 of our ordinary shares to three officers of our subsidiary, Telematics Wireless, in exchange for their holdings in Telematics Wireless, pursuant to a certain agreement dated December 30, 2002, and 257,460 of our ordinary shares upon exercise of options by our employees. 

 

During the years 2004 and 2005, we issued 53,859 and 206,853 of our ordinary shares, respectively, upon exercise of options by our employees and directors. 

Upon completion of this offering, all of our outstanding ordinary shares, including the ordinary shares issued in connection with the offering, will be validly issued and fully paid and will not have preemptive rights, rights of first refusal or co-sale rights. The ownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way by our memorandum of association, articles of association or the laws of Israel. 

REGISTER NUMBER AND PURPOSES OF THE COMPANY 

Our number with the Israeli Registrar of Companies is 52-004381-1. Our purpose appears in our memorandum of association and includes every lawful purpose. 

TRANSFER OF SHARES 

Our ordinary shares that are fully paid are issued in registered form and may be freely transferred under our articles of association unless the transfer is restricted or prohibited by applicable law. 

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, subject to the special approval requirements for external directors described under "Management—External directors." Pursuant to the Israeli Companies Law, the procedures for the appointment and removal and the term of office of directors, other than external directors, may be contained in the articles of association of a company. Our articles of association currently contain provisions for staggered terms for directors, which provision may be amended only by a vote of 75% of our shares voting at a meeting of shareholders. 

DIVIDEND AND LIQUIDATION RIGHTS 

We may declare a dividend to be paid to the holders of our ordinary shares according to their rights and interests in our profits. If we dissolve, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion to their shareholdings. This 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. Our articles of association do not require shareholder approval for the declaration of dividends. Dividends may only be paid out of our retained earnings or profits accrued over a period of two years, as defined in the Israeli Companies Law, whichever is greater, according to the last reviewed or audited financial reports of the company, provided that the date of the financial reports is not more than six months before the date of distribution, and further provided that there is no reasonable concern that a payment of a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due, as determined by our Board of Directors. 

 

94

 

Description of ordinary shares 

SHAREHOLDER MEETINGS 

We are required to hold an annual general meeting of our shareholders once every calendar year, but no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Our Board of Directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Israeli Companies Law provides that the board of directors of a public company is required to convene a special meeting upon the request of (a) any two directors of the company or one quarter of its board of directors or (b) one or more shareholders holding, in the aggregate, (i) 5% of the outstanding shares of the company and 1% of the voting power in the company or (ii) 5% of the voting power in the company. 

Pursuant to our articles of association, shareholders are entitled to participate and vote at general meetings and are the shareholders of record on a date to be decided by our Board of Directors, provided that such date is not more than 21 days, nor less than four days, prior to the date of the general meeting, except as otherwise permitted by the Israeli Companies Law. Furthermore, our articles of association dictate that resolutions regarding the following matters must be passed at a general meeting of our shareholders: 

 

amendments to our articles of association; 

 

appointment or termination of our auditors; 

 

appointment and dismissal of external directors; 

 

approval of acts and transactions requiring general meeting approval pursuant to the Israeli Companies Law; 

 

increase or reduction of our authorized share capital; 

 

a merger; and 

 

the exercise of the Board of Directors' powers by a general meeting, if the Board of Directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management. 

Our articles of association require that a notice of any annual or special shareholders meeting will be provided 21 days prior to the meeting. 

VOTING RIGHTS 

Quorum requirements 

Pursuant to our articles of association, holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of the shareholders. These voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that we may authorize in the future. The quorum required for our ordinary meetings of shareholders consists of at least two shareholders present in person or by proxy who hold or represent between them at least 33% of the total outstanding voting rights. 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 on a later date specified in the summons or notice of the meeting. At the reconvened meeting, any number of our shareholders present in person or by proxy shall constitute a lawful quorum. 

Vote requirements 

Pursuant to our articles of association, other than with respect to the amendment of the provisions of the articles of association with respect to the appointment of directors and a resolution for removal of a director, which action requires a majority vote of 75%, all resolutions of the shareholders require a simple majority. 

Israeli law does not provide for public companies such as ours to have shareholder resolutions adopted by means of a written consent in lieu of a shareholders meeting. The Israeli Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its other shareholders, must act in good faith and in an acceptable manner and avoid abusing his or her powers. This is required, among other things, when voting at general meetings on matters such as changes to the articles  

 

95

 

Description of ordinary shares 

of association, increasing the company's registered capital, mergers and approval of related-party transactions. In addition, pursuant to the Israeli Companies Law, any controlling shareholder, any shareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under the company's articles of association, can appoint or prevent the appointment of an office holder, is required to act with fairness towards the company. The Israeli Companies Law does not describe the substance of this duty and there is no binding case law that addresses this subject directly. Pursuant to Israeli Law, no voting agreement may circumvent these shareholder duties. 

RESOLUTIONS 

An ordinary resolution requires approval by the holders of a simple majority of the voting rights represented at the meeting, in person, by proxy or by written ballot, and voting on the resolution. Under the Israeli Companies Law, unless otherwise provided in the articles of association or applicable law, all resolutions of the shareholders require a simple majority. A resolution for the voluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by written ballot and voting on the resolution. For information regarding the majority required for approval of related party transactions, see "Management—Approval of related party transactions under Israeli law." 

ACCESS TO CORPORATE RECORDS 

Pursuant to the Israeli Companies Law, all shareholders generally have the right to review minutes of a company's general meetings, its shareholders register, articles of association and financial statements and any document it is required by law to file publicly with the Israeli Companies Registrar and the Israeli Securities Authority. We allow any shareholder who requests access to review any document in our possession that relates to any action or transaction with a related party that requires shareholder approval under the Israeli Companies Law. We may deny a request to review a document if we determine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document's disclosure may otherwise harm our interests. 

ACQUISITIONS UNDER ISRAELI LAW 

Tender offer 

A person wishing to acquire shares or any class of shares of a publicly traded Israeli company and who would, as a result, hold over 90% of the company's issued and outstanding share capital or of a class of shares that are listed, is required by the Israeli Companies Law to make a tender offer to all of the company's shareholders or all shareholders of such class of shares, as applicable, for the purchase of all of the issued and outstanding shares of the company or of that class of shares, as applicable. If the shareholders who do not respond to the offer hold less than 5% of the issued share capital of the company or of that class of shares, as applicable, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. However, the shareholders may petition the court to alter the consideration for the acquisition. If the dissenting shareholders hold more than 5% of the issued and outstanding share capital of the company or of such class of shares, as applicable, the acquirer may not acquire additional shares of the company or of such class of shares, as applicable, from shareholders who accepted the tender offer if following such acquisition the acquirer would then own over 90% of the company's issued and outstanding share capital or of the shares comprising such class, as applicable. 

The Israeli Companies Law provides that an acquisition of shares of a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights of the company. This rule does not apply if there is already another holder of 25% or more of the voting rights of the company. Similarly, the Israeli Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights of the company, if there is no other holder of more than 45% of the voting rights of the company. 

The foregoing provisions do not apply to: 

 

96

 

Description of ordinary shares 

 

a private placement in which the company's shareholders approved such holder owning 25% or more of the voting rights of the company (provided that there is no other shareholder that holds 25% or more of the voting rights of the company); or more than 45% of the voting rights of the company (provided that there is no other shareholder that holds 45% or more of the voting rights of the company); or 

 

a purchase from an existing holder of 25% or more of the voting rights of the company that results in another person becoming a holder of 25% or more of the voting rights of the company or purchase from an existing holder of more than 45% of the voting rights of the company that results in another person becoming a holder of more than 45% of the voting rights of the company. 

Merger 

The Israeli Companies Law permits merger transactions if approved by each party's board of directors and shareholders. Pursuant to the Israeli Companies Law and our articles of association, merger transactions may be approved by holders of a simple majority of our shares present, in person or by proxy, at a general meeting and voting on the transaction. In determining whether the required majority has approved the merger in the event of "cross ownership" between the merging companies, namely, if our shares are held by the other party to the merger, or by any person holding at least 25% of the outstanding voting shares or 25% of the means of appointing directors of the other party to the merger, then a vote against the merger by holders of the majority of the shares present and voting, excluding shares held by the other party or by such person, or anyone acting on behalf of either of them, including any of their affiliates, is sufficient to reject the merger transaction. If the transaction would have been approved but for the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration offered to the shareholders. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern 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 consummated unless at least 50 days have passed from the time that a proposal for approval of the merger has been filed with the Israeli Registrar of Companies and 30 days have passed from the date of the approval of the shareholders of the merging companies. 

The Israeli Companies Law further provides that the foregoing approval requirements will not apply to shareholders of a wholly-owned subsidiary in a roll-up merger transaction, or to the shareholders of the acquirer if: 

 

the transaction is not accompanied by an amendment to the acquirer's memorandum or articles of association; 

 

the transaction does not contemplate the issuance of more than 20% of the voting rights of the acquirer that would result in any shareholder becoming a controlling shareholder; and 

 

there is no "cross-ownership" of shares of the merging companies, as described above. 

For these purposes, "controlling shareholder" is a shareholder who has the ability to direct the activities of a company, including a shareholder who owns 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights. 

ANTI-TAKEOVER MEASURES 

The Israeli Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain preferred or additional rights to voting, distributions or other matters and shares having preemptive rights. In the future, if we do create and issue a class of shares other than our ordinary shares, such class of shares, depending on the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association, which requires the prior approval of a majority of our shareholders at a general meeting. Shareholders voting at such a meeting will be subject to the restrictions under the Israeli Companies Law. See "—Voting rights" above. 

 

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Description of ordinary shares 

BORROWING POWERS 

Under our articles of association, our Board of Directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised or taken by our shareholders, including the power to borrow money for the purposes of our company. 

CHANGES IN CAPITAL 

Our articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Israeli Companies Law and must be approved by a resolution passed by a simple majority of our voting power present, in person or by proxy, at a general meeting and voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits and an issuance of shares for less than their nominal value, require a resolution of the Board of Directors and court approval. 

TRANSFER AGENT AND REGISTRAR 

The transfer agent and registrar for our ordinary shares in the United States is American Stock Transfer & Trust Company. 

 

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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. 

When the offering is completed, we will have a total of 22,642,050 ordinary shares outstanding. All of our ordinary shares are tradable on the Tel Aviv Stock Exchange, subject to compliance with Regulation S in the case of ordinary shares held by affiliates that were not acquired in this offering. The 4,800,000 shares sold in this offering will be tradable in the United States unless they are purchased by our affiliates, persons who control us, are controlled by us or are under common control with us and persons who may sell these shares subject to the restrictions contained in Rule 144. 

The shares that were outstanding prior to this offering may be resold in the United States subject to compliance with Rule 144 or any other applicable exemption under the Securities Act of 1933. 

RULE 144 

In general, under Rule 144, as currently in effect, 90 days after the date of this prospectus, a person (or persons whose shares are aggregated) who has beneficially owned our 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 ordinary shares then outstanding, which will equal approximately 226,421 ordinary 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 in connection with the sale. 

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

RULE 144(k) 

In general, under Rule 144(k), as currently in effect, any person (or persons whose shares are aggregated) who is not our affiliate at the time of the proposed sale and was not an affiliate at any time during the three months preceding such sale, and who owns restricted shares that were purchased from us or any of our affiliates at least two years prior to such sale, would be entitled to sell such shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements. 

LOCK-UP AGREEMENTS 

We, our executive officers and directors listed in "Business—Management" and the beneficial owners of 5% or more of our ordinary shares, other than Bank Hapoalim Ltd., and, if such shareholder is a corporation, its shareholders and the natural persons having voting and investment control over it, who following the consummation of this offering will beneficially own an aggregate of 8,317,643 ordinary shares, have signed lock-up agreements under which, subject to certain exceptions, they have agreed not to sell or otherwise dispose of their ordinary shares or any securities convertible into or exchangeable for our ordinary shares for a period of 180 days after the date of this prospectus without the prior written consent of UBS Securities LLC. At any time and without public notice, UBS Securities LLC may, in their sole discretion, release some or all of the securities from these lock-up agreements. 

 

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United States tax considerations 

The following discussion is a description of the material United States, or US, federal income tax considerations applicable to the acquisition, ownership and disposition of our ordinary shares by holders who acquire their shares pursuant to this offering and who hold such ordinary shares as "capital assets". As used in this section, the term "US Holder" means a beneficial owner of an ordinary share who is: 

 

a citizen or resident of the United States; 

 

a corporation or partnership created or organized in or under the laws of the United States or of any state of the United States or the District of Columbia (other than a partnership that is not treated as a US person under any applicable Treasury regulations); 

 

an estate, the income of which is subject to United States federal income taxation regardless of its source; or 

 

a trust if the trust has elected validly to be treated as a US person for United States federal income tax purposes or if a US court is able to exercise primary supervision over the trust's administration and one or more US persons have the authority to control all of the trust's substantial decisions. 

The term "Non-US Holder" means a beneficial owner of an ordinary share who is not a US Holder. The tax consequences to a Non-US Holder may differ substantially from the tax consequences to a US Holder. Certain aspects of US federal income tax relevant to a Non-US Holder are discussed below. 

This description is based on provisions of the United States Internal Revenue Code of 1986, as amended, which we refer to as the Code, existing, proposed and temporary US Treasury regulations and administrative and judicial interpretations thereof, each as available and in effect as of the date of this prospectus. These sources may change, possibly with retroactive effect, and are open to differing interpretations. This description does not discuss all aspects of US federal income taxation that may be applicable to investors in light of their particular circumstances or to investors who are subject to special treatment under US federal income tax law, including: 

 

insurance companies; 

 

dealers or traders in stocks, securities or currencies; 

 

financial institutions and financial services entities; 

 

real estate investment trusts; 

 

regulated investment companies; 

 

grantor trusts; 

 

persons that receive ordinary shares as compensation for the performance of services; 

 

tax-exempt organizations; 

 

persons that hold ordinary shares as a position in a straddle or as part of a hedging, conversion or other integrated instrument; 

 

individual retirement and other tax-deferred accounts; 

 

expatriates of the United States; 

 

persons having a functional currency that is not the dollar; or 

 

direct, indirect or constructive owners of 10% or more, by voting power or value, of our ordinary shares. 

This description also does not consider the US federal gift or estate tax or alternative minimum tax consequences of the acquisition, ownership and disposition of our ordinary shares. 

 

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United States tax considerations 

If a partnership (or any other entity treated as a partnership for US federal income tax purposes) holds our ordinary shares, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner should consult its tax advisor as to its tax consequences. 

We urge you to consult with your own tax advisor regarding the tax consequences of acquiring, owning or disposing of our ordinary shares, including the effects of US federal, state, local and foreign and other tax laws. This summary does not constitute, and should not be construed as, legal or tax advice to holders of our shares. 

DISTRIBUTIONS PAID ON THE ORDINARY SHARES 

On January 29, 2004, we adopted a dividend policy providing for an annual dividend distribution in an amount equal to 25% of our net profits, which is calculated based on the financial statements for the period ending on December 31 of the fiscal year for which the dividend is paid. 

Subject to the discussion below under "Passive Foreign Investment Company Considerations", if you are a US Holder, for US federal income tax purposes, you generally will be required to include in your gross income as ordinary dividend income the amount of any distributions made to you in cash or property (other than certain distributions, if any, of our ordinary shares distributed pro rata to all our shareholders), with respect to your ordinary shares, before reduction for any Israeli taxes withheld (without regard to whether any portion of such tax may be refunded to you by the Israeli tax authorities), to the extent that those distributions are paid out of our current or accumulated earnings and profits as determined for US federal income tax purposes. Subject to the discussion below under "Passive Foreign Investment Company Considerations", distributions in excess of our current and accumulated earnings and profits as determined under US federal income tax principles will be applied first against, and will reduce your tax basis in, your ordinary shares and, to the extent they exceed that tax basis, will then be treated as capital gain. We do not maintain calculations of our earnings and profits under US federal income tax principles. Our dividends will not qualify for the dividends-received deduction generally available to corporate US Holders. 

If you are a US Holder, and we pay a dividend in NIS, any such dividend, including the amount of any Israeli taxes withheld, will be includible in your income in a US dollar amount calculated by reference to the currency exchange rate in effect on the day the distribution is includible in your income, regardless of whether the NIS are converted into dollars. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend is includible in your income to the date that payment is converted into dollars generally will be treated as ordinary income or loss. 

A non-corporate US Holder's "qualified dividend income" currently is subject to tax at reduced rates not exceeding 15%. This reduced rate applicable to "qualified dividend income" does not apply to tax years beginning after December 31, 2008. For purposes of determining whether US Holders will have "qualified dividend income," "qualified dividend income" generally includes dividends paid by a foreign corporation if either: 

 

the stock of that corporation with respect to which the dividends are paid is readily tradable on an established securities market in the US, or 

 

that corporation is eligible for benefits of a comprehensive income tax treaty with the US that includes an information exchange program and is determined to be satisfactory by the US Secretary of the Treasury. The Internal Revenue Service has determined that the US-Israel Tax Treaty is satisfactory for this purpose. 

In addition, under current law, if you are a US Holder, you must generally hold your ordinary shares for more than 60 days during the 120-day period beginning 60 days prior to the ex-dividend date in order for the dividend to qualify as "qualified dividend income." 

Dividends paid by a foreign corporation will not be treated as "qualified dividend income", however, if such corporation is treated, for the tax year in which the dividend is paid or the preceding tax year, as a "passive foreign investment company" for US federal income tax purposes. We do not believe that we will be classified as a "passive foreign investment company" for US federal income tax purposes for our current taxable year. However, see the discussion under "—Passive foreign investment company considerations" below. 

 

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United States tax considerations 

Subject to the discussion below under "Information reporting and back-up withholding", a Non-US Holder generally will not be subject to US federal income or withholding tax on dividends received on ordinary shares unless that income is effectively connected with the conduct by that Non-US Holder of a trade or business in the US. 

FOREIGN TAX CREDIT 

If you are a US Holder, any dividends paid by us to you with respect to our ordinary shares generally will be treated as foreign source passive income for US foreign tax credit purposes. Subject to the foreign tax credit limitations, if you are a US Holder you may elect to credit any Israeli income taxes withheld from dividends paid on our ordinary shares against your US federal income tax liability (provided, inter alia , you satisfy certain holding requirements with respect to our ordinary shares). Amounts withheld in excess of the Treaty tax rate, however, will not be creditable against your US federal income tax liability. As an alternative to claiming a foreign tax credit, you may instead claim a deduction for any withheld Israeli income taxes, but only for a year in which you elect to do so with respect to all foreign income taxes. 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 shareholder. Accordingly, you should consult your own tax advisor to determine whether your income with respect to your ordinary shares would be foreign source income and whether and to what extent you would be entitled to the credit. 

DISPOSITION OF ORDINARY SHARES 

Upon the sale or other disposition of ordinary shares, subject to the discussion below under "Passive foreign investment company considerations", if you are a US Holder, you generally will recognize capital gain or loss equal to the difference between the amount realized on the disposition and your adjusted tax basis in the ordinary shares, which is usually the cost of such shares, in dollars. US Holders should consult their own advisors with respect to the tax consequences of the receipt of a currency other than dollars upon such sale or other disposition. 

Gain or loss upon the disposition of the ordinary shares will be treated as long-term if, at the time of the disposition, the ordinary shares were held for more than one year. Long-term capital gains realized by non-corporate US Holders generally are subject to a lower maximum marginal US federal income tax rate than the maximum marginal US federal income tax rate applicable to ordinary income, other than qualified dividend income, as defined above. The deductibility of capital losses by a US Holder is subject to limitations. In general, any gain or loss recognized by a US Holder on the sale or other disposition of ordinary shares will be US source income or loss for US foreign tax credit purposes. US Holders should consult their own tax advisors concerning the source of income for US foreign tax credit purposes and the effect of the US-Israel Tax Treaty on the source of income. 

If you are a Non-US Holder, subject to the discussion below under "Information Reporting and Back-up Withholding", you generally will not be subject to US federal income or withholding tax on any gain realized on the sale or exchange of ordinary shares unless: 

 

such gain is effectively connected with your conduct of a trade or business in the US, or 

 

if you are an individual, you have been present in the US for 183 days or more in the taxable year of the sale or exchange, and certain other conditions are met. 

PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS 

Special US federal income tax rules apply to US Holders owning shares of a "passive foreign investment company", or a PFIC, for US federal income tax purposes. A non-US corporation will be considered a PFIC for any taxable year in which, after applying look-through rules, either 

 

75% or more of its gross income consists of specified types of passive income, or 

 

50% or more of the average value of its assets consists of passive assets, which generally means assets that generate, or are held for the production of, "passive income." 

 

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United States tax considerations 

 

Passive income for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and securities transactions and includes amounts derived by reason of the temporary investment of funds. If we were classified as a PFIC, and you are a US Holder, you could be subject to increased tax liability upon the sale or other disposition of ordinary shares or upon the receipt of amounts treated as "excess distributions" (generally, your ratable portion of distributions in any year which are greater than 125% of the average annual distribution received by you either in the shorter of the three preceding years or your holding period). Under these rules, the excess distribution and any gain would be allocated ratably over your holding period for the ordinary shares, and the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a PFIC would be taxed as ordinary income. The amount allocated to each of the other taxable years would be subject to tax at the highest marginal rate in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed on the resulting tax allocated to such other taxable years. In addition, holders of stock in a PFIC may not receive a "step-up" in basis on shares acquired from a decedent. If you are a US Holder who holds ordinary shares during a period when we are a PFIC, you will be subject to the foregoing rules even if we cease to be a PFIC. 

We believe that we will not be classified as a PFIC for US federal income tax purposes for our current taxable year and we anticipate that we will not become a PFIC in any future taxable year based on our financial statements, our current expectations regarding the value and nature of our assets, and the sources and nature of our income. This conclusion, however, is a factual determination that must be made annually based on income and assets for the entire taxable year and thus may be subject to change. It is not possible to determine whether we will be a PFIC for the current taxable year until after the close of the year and our status in future years depends on our income, assets and activities in those years. In addition, because the market price of our ordinary shares is likely to fluctuate after this offering and the market price of the shares of technology companies has been especially volatilte, and because that market price may affect the determination of whether we will be considered a PFIC, we cannot assure that we will not be considered a PFIC for any taxable year. 

If we were a PFIC, you could avoid certain tax consequences referred to above by making an election to treat us as a qualified electing fund or by electing to mark the ordinary shares to market. A US Holder may make a qualified electing fund election only if we furnish the US Holder with certain tax information and we do not presently intend to prepare or provide this information. Alternatively, a US Holder of PFIC stock that is publicly traded may elect to mark the stock to market annually and recognize 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 stock and the US Holder's adjusted tax basis in the PFIC stock. Losses would be allowed only to the extent of net mark-to-market gain previously included by the US Holder under the election for prior taxable years. This election is available for as long as our ordinary shares constitute "marketable stock," which includes stock that is "regularly traded" on a "qualified exchange or other market." We believe that the Nasdaq National Market will constitute a qualified exchange or other market for this purpose. However, no assurances can be provided that our ordinary shares will continue to trade on the Nasdaq National Market or that the shares will be regularly traded for this purpose. 

The rules applicable to owning shares of a PFIC are complex, and you should consult with your own tax advisor regarding the tax consequences that would arise if we were treated as a PFIC. 

INFORMATION REPORTING AND BACK-UP WITHHOLDING 

Dividend payments with respect to ordinary shares and proceeds from the sale or disposition of ordinary shares made within the United States or by a US payor or US middleman may be subject to information reporting to the Internal Revenue Service and possible US backup withholding at a current rate of 28%. Certain exempt recipients (such as corporations) are not subject to these information reporting requirements. Backup withholding also will not apply to a US Holder who furnishes a correct taxpayer identification number and makes any other required certification or otherwise is exempt from US backup withholding requirements. US Holders who are required to establish their exempt status must provide such certification on Internal Revenue Service Form W-9. US Holders should consult their tax advisors regarding the application of the US information reporting and backup withholding rules. 

 

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United States tax considerations 

Non-US Holders generally are not subject to information reporting or back-up withholding with respect to dividends paid on, or upon the disposition of, ordinary shares, provided that such non-US Holder certifies to its foreign status, or otherwise establishes an exemption. 

Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a US Holder's US federal income tax liability and a US Holder may obtain a refund of any excess amounts withheld by filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information in a timely manner. 

The above description is not intended to constitute a complete analysis of all tax consequences relating to acquisition, ownership and disposition of our ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation.  

 

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Israeli taxation 

The following is a summary of the current material Israeli tax laws applicable to companies in Israel with special reference to its effect on us. This section also contains a discussion of certain Israeli government programs from which we may benefit and some Israeli tax consequences to persons acquiring ordinary shares in this offering. This summary does not discuss all the acts of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel, traders in securities or persons that own, directly or indirectly, 5% or more of our outstanding capital, all of whom are subject to special tax regimes not covered in this discussion. Some parts of this discussion are based on new tax legislation that has not been subject to judicial or administrative interpretation. Accordingly, we cannot assure you that the views expressed in the discussion will be accepted by the tax authorities in question. The discussion is not intended and should not be construed as legal or professional tax advice and does not cover all possible tax considerations. 

Potential investors are urged to consult their own tax advisors as to the Israeli or other tax consequences of the purchase, ownership and disposition of our ordinary shares, including, in particular, the effect of any foreign, state or local taxes. 

GENERAL CORPORATE TAX STRUCTURE IN ISRAEL 

Israeli companies are generally subject to corporate tax on their taxable income at a rate that is 34% for the 2005 tax year. This rate was 35% in the 2004 tax year and will be 31% in the 2006 tax year, 29% for the 2007 tax year, 27% for the 2008 tax year, 26% for the 2009 tax year and 25% thereafter. However, as discussed below, the rate is effectively reduced for income derived from an "approved enterprise." 

SPECIAL PROVISIONS RELATING TO TAXATION UNDER INFLATIONARY CONDITIONS 

The Income Tax Law (Inflationary Adjustments), 1985, generally referred to as the Inflationary Adjustments Law, represents an attempt to overcome the problems presented to a traditional tax system by an economy undergoing rapid inflation. The Inflationary Adjustments Law is highly complex. The provisions that are material to us, are summarized as follows: 

 

Where a company's equity, as calculated under the Inflationary Adjustments Law, exceeds the depreciated cost of its fixed assets (as defined in the Inflationary Adjustments Law), a deduction from taxable income is permitted equal to the above excess multiplied by the applicable annual rate of inflation. The maximum deduction permitted in any single tax year is 70% of taxable income, with the unused portion permitted to be carried forward, linked to the Israeli consumer price index. 

 

Where a company's depreciated cost of fixed assets exceeds its equity, then the excess multiplied by the applicable annual rate of inflation is added to taxable income. 

 

Subject to specified limitations, depreciation deductions on fixed assets and losses carried forward are adjusted for inflation based on the change in the consumer price index. 

Under the Inflationary Adjustments Law, results for tax purposes are measured in real terms, in accordance with changes in the Israeli consumer price index. We are taxed under this law. The difference between the change in the Israeli consumer price index and the exchange rate of Israeli currency in relation to the dollar may in future periods cause significant differences between taxable income and the income measured in dollars as reflected in our consolidated financial statements. 

LAW FOR THE ENCOURAGEMENT OF CAPITAL INVESTMENTS, 1959 

The Law for Encouragement of Capital Investments, 1959, which we refer to as the Investment Law, provides certain incentives for capital investments in a production facility (or other eligible assets). Generally, an investment program that is implemented in accordance with the provisions of the Investment Law, referred to as an "Approved Enterprise", is entitled to benefits, including cash grants from the Israeli government and tax benefits, based upon, among other things, the location of the facility into which the investment is made and/or the election of the grantee. 

 

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Israeli taxation 

In April 2005, a comprehensive amendment to the Investment Law came into effect. Our current tax benefits are subject to the provisions of the Investment Law prior to its revision, while new benefits that will be received in the future, if any, will be subject to the provisions of the Investment Law, as amended. Accordingly, the following discussion is a summary of the Investment Law prior to its amendment as well as the relevant changes contained in the new legislation. 

According to the Investment Law prior to its amendment, in order to obtain benefits, an approval from the Investment Center of the Israeli Ministry of Industry and Trade had to be obtained. 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 asset. 

An Approved Enterprise may elect to forego any entitlement to the grants otherwise available under the Investment Law and, in lieu of the foregoing, 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 and the type of Approved Enterprise. Upon expiration of the exemption period, the Approved Enterprise would be eligible for the otherwise applicable reduced tax rates under the Investment Law for the remainder, if any, of the otherwise applicable benefits period. If a company has more than one Approved Enterprise program or if only a portion of its capital investments are approved, its effective tax rate is the result of a weighted combination of the applicable rates. The tax benefits from any certificate of approval relate only to taxable profits attributable to the specific Approved Enterprise. Income derived from activity that is not integral to the activity of the Approved Enterprise should not be divided between the different Approved Enterprises and would therefore not enjoy tax benefits. 

Income derived from an Approved Enterprise is generally subject to a tax rate of 25% for a period of seven years. However, further reductions in tax rates depending on the percentage of the non-Israeli investment in a company's share capital (conferring rights to profits, voting and appointment of directors) and the percentage of its combined share and loan capital owned by non-Israeli residents, would apply. The tax rate is 20% if the non-Israeli investment level is 49% or more but less than 74%, 15% if the non-Israeli investment level is 74% or more but less than 90%, and 10% if the non-Israeli investment level 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 with respect to a company whose foreign investment level exceeds 25% during the first year in which the Approved Enterprise has taxable income after utilizing its net operating losses. The period of benefits may in no event, however, exceed the lesser of (a) 12 years from the year in which the program was activated and (b) 14 years from the year of receipt of Approved Enterprise status. 

One of Telematics Wireless' facilities has been granted "Approved Enterprise" status. We have elected to participate in the alternative benefits program. Under the terms of our Approved Enterprise program, our income from that Approved Enterprise will be tax-exempt for a period of two years, commencing with the year in which we first generate taxable income from the relevant Approved Enterprise, and is subject to a reduced tax rate for an additional period of up to a total of five years from when the tax exemption began. We cannot assure you that the current benefit program will continue to be available or that we will continue to qualify for its 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 (generally 10% to 25%). The dividend recipient is taxed at the reduced withholding tax rate of 15%, applicable to dividends from the Approved Enterprises if the dividend is distributed within 12 years after the benefits period or other rate provided under a treaty. The withholding tax rate will be 25% after such period or a lower rate as provided by a relevant treaty. In the case of a company with a foreign investment level (as defined by the Investment Law) of 25% or more, the 12-year limitation on reduced withholding tax on dividends does not apply. 

 

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The Investment Law also provides that an Approved Enterprise is entitled to accelerated tax depreciation on property and equipment included in an approved investment program. 

The benefits available to an Approved Enterprise are conditional upon our fulfilling certain conditions stipulated in the Investment Law and its regulations and the criteria set forth in the specific certificate of approval. If we were to violate those conditions, in whole or in part, we would be required to refund the amount of tax benefits, plus an amount linked to the Israeli consumer price index, plus interest and penalties. We believe that our Approved Enterprise operates in substantial compliance with all of these conditions and criteria. 

Pursuant to the recent amendment to the Investment Law, only Approved Enterprises receiving cash grants require the approval of the Investment Center. Approved Enterprises that do not receive benefits in the form of governmental cash grants, such as benefits in the form of tax benefits, are no longer required to obtain this approval. In lieu of such approval, these Approved Enterprises are required to make certain investments as specified in the law. Such Approved Enterprises may, at their discretion, elect to apply for a pre-ruling from the Israeli tax authorities confirming that they are in compliance with the provisions of the law. 

The amended Investment Law specifies certain conditions that an Approved Enterprise has to comply with in order to be entitled to benefits. These conditions include: 

 

that the Approved Enterprise's revenues from any single country not exceed 75% of the Approved Enterprise's total revenues; or 

 

that 25% of the Approved Enterprise's revenues during the benefits period be derived from sales into a single country with a population of at least 12 million. 

In addition, the amendment addresses benefits that are being granted to Approved Enterprises and the length of the benefits period. For example, under the alternative program, an Approved Enterprise located in certain areas that used to be tax-exempt is now entitled to elect to pay an 11.5% tax rate instead, and, in such case, upon the distribution of its profits, no additional corporate tax will be paid. In addition, if an Approved Enterprise elects to pay the 11.5% tax rate, dividends that may be distributed to foreign residents will be subject only to a 4% withholding tax. 

There can be no assurance that we or our subsidiaries will comply with the above conditions in the future or that we will be entitled to any additional benefits under the investment law. In addition, we cannot assure you that we will designate the profits that are being distributed in a way that would reduce shareholders' tax liability. 

LAW FOR THE ENCOURAGEMENT OF INDUSTRY (TAXES), 1969 

We believe that our subsidiary, Telematics Wireless, which is part of our consolidated operations, currently qualifies as an "Industrial Company" within the meaning of the Law for the Encouragement of Industry (Taxes), 1969, which we refer to as the Industry Encouragement Law. The Industry Encouragement Law defines an Industrial Company as a company resident in Israel, of which 90% or more of its income in any tax year, other than of income from defense loans, capital gains, interest and dividends, is derived from an Industrial Enterprise owned by it. An Industrial Enterprise is defined as an enterprise whose major activity in a given tax year is industrial production. 

The following corporate tax benefits, among others, are available to Industrial Companies: 

 

amortization of the cost of purchased know-how and patents over an eight-year period for tax purposes; 

 

accelerated depreciation rates on equipment and buildings; 

 

under specified conditions, an election to file consolidated tax returns with additional related Israeli Industrial Companies; and 

 

expenses related to a public offering are deductible in equal amounts over three years. 

Telematics Wireless' status as an industrial company is not contingent upon the receipt of prior approval from any government authority. However, entitlement to certain benefits under the law is conditioned upon receipt of  

 

107

 

Israeli taxation 

approval from Israeli tax authorities. Also, the Israeli tax authorities may determine that Telematics Wireless does not qualify as an industrial company, which would entail the loss of the benefits that relate to this status. In addition, Telematics Wireless might not continue to qualify for industrial company status in the future, in which case the benefits described above might not be available to it in the future. 

TAX BENEFITS FOR RESEARCH AND DEVELOPMENT 

Israeli tax law allows a tax deduction in the year incurred for expenditures, including capital expenditures, in scientific research and development projects, if the expenditures are approved by the relevant Israeli government ministry and the research and development are for the promotion of the enterprise. Expenditures not so approved are deductible over a three-year period. 

CAPITAL GAINS TAX ON SALES OF OUR ORDINARY SHARES 

Non-residents of Israel will be exempt from capital gains tax in relation to the sale of our ordinary shares for as long as (a) our ordinary shares are listed for trading on a stock exchange in a jurisdiction with which Israel has a treaty, (b) the capital gains are not accrued or derived by the non-resident shareholder's permanent enterprise in Israel, (c) the ordinary shares in relation to which the capital gains are accrued or derived were acquired by the non-resident shareholder after the initial listing of the ordinary shares on a stock exchange outside of Israel and (d) neither the shareholder nor the particular capital gain is otherwise subject to certain sections of the Israeli Income Tax Ordinance. 

According to Section 68A of the Israeli Tax Ordinance, the exemption will not apply to non-resident corporations controlled directly or indirectly by Israeli shareholders or in a scenario in which Israeli shareholders (directly and indirectly) have the right to receive 25% or more of the non-resident company's income. For this purpose "control is basically defined as holding 25% or more in rights of the foreign company. 

In addition, pursuant to the Income Tax Treaty between Israel and the United States, which we refer to as the Tax Treaty, gains derived from the sale, exchange or disposition of our ordinary shares by a person who qualifies as a resident of the United States within the meaning of the Tax Treaty and who is entitled to claim the benefits afforded to US residents under the Tax Treaty, referred to as a Treaty US Resident, would not be subject to Israeli capital gains tax, unless such Treaty US Resident owned, directly or indirectly, shares representing 10% or more of the voting power of our company at any time during the 12-month period preceding such sale, exchange or disposition. 

WITHHOLDING ON DIVIDENDS PAID TO NON-RESIDENTS OF ISRAEL 

Non-residents of Israel are subject to income tax on income derived from sources in Israel. On distributions of dividends, other than bonus shares (stock dividends), tax at the rate of 25% generally will be withheld, unless a different rate is provided in a treaty between Israel and the shareholder's country of residence. However, as of the 2006 tax year, the tax rate on dividends will be reduced to 20% and the withholding rate may be reduced as well. Under the Tax Treaty, the maximum Israeli withholding tax on dividends paid to a holder of shares who is a Treaty US Resident is 25%. However, as mentioned above under "—Law for the Encouragement of Capital Investments, 1959", dividends of an Israeli company paid out of income derived from an Approved Enterprise during the benefit period will still be subject to a reduced tax rate of 15%. 

The Tax Treaty further provides that a 12.5% Israeli withholding tax would apply to dividends paid to a US corporation owning 10% or more of an Israeli company's voting stock during, in general, the current and preceding tax years of the Israeli company. The lower 12.5% rate applies only to dividends from income not derived from an Approved Enterprise in the applicable period and does not apply if the company has certain amounts of passive income. 

A non-resident of Israel who receives dividends from which tax was withheld generally is exempt from the duty to file returns in Israel in respect of such income, provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income in Israel. 

 

108

 

Underwriting 

We and the selling shareholders are offering the ordinary shares described in this prospectus through the underwriters named below. UBS Securities LLC is the representative of the underwriters and is the sole book running manager of this offering. We and the selling shareholders have entered into an underwriting agreement with the representative. Subject to the terms and conditions of the underwriting agreement, each of the underwriters has severally agreed to purchase the number of ordinary shares listed next to its name in the following table: 

Underwriters Number of
shares
UBS Securities LLC
J.P. Morgan Securities Inc.
William Blair & Company, L.L.C.
C.E. Unterberg, Towbin, LLC
Total 4,800,000

The underwriting agreement provides that the underwriters must buy all of the shares if they buy any of them. However, the underwriters are not required to take or pay for the shares covered by the underwriters' over-allotment option described below. 

Our ordinary shares and the ordinary shares of the selling shareholders are offered subject to a number of conditions, including: 

 

receipt and acceptance of our ordinary shares by the underwriters, and 

 

the underwriters' right to reject orders in whole or in part. 

We have been advised by the representative that the underwriters intend to make a market in our ordinary shares, but that they are not obligated to do so and may discontinue making a market at any time without notice. 

In connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses electronically. 

OVER-ALLOTMENT OPTION 

We and the selling shareholders have granted the underwriters an option to buy up to 720,000 additional ordinary shares. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with this offering. The underwriters have 30 days from the date of this prospectus to exercise this option. If the underwriters exercise this option, they will each purchase additional ordinary shares approximately in proportion to the amounts specified in the table above. 

COMMISSIONS AND DISCOUNTS 

Shares sold by the underwriters to the public will initially be offered at the initial offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $     per share from the initial public offering price. Any of these securities dealers may resell any shares purchased from the underwriters to other brokers or dealers at a discount of up to $     per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representative may change the offering price and the other selling terms. Sales of shares made outside of the United States may be made by affiliates of the underwriters. Upon execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon the terms stated therein, and, as a result, will thereafter bear any risk associated with changing the offering price to the public or other selling terms. 

 

109

 

Underwriting 

The following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters assuming both no exercise and full exercise of the underwriters' option to purchase up to an additional  shares. 

Paid by us Paid by Selling Shareholders Total
No exercise Full exercise No exercise Full exercise No exercise Full exercise
Per Share $ $ $ $ $ $
Total $ $ $ $ $ $

We estimate that the total expenses of this offering payable by us, not including the underwriting discounts and commissions, will be approximately $       million. 

NO SALES OF SIMILAR SECURITIES 

We, our executive officers and directors listed in "Business—Management" and the beneficial owners of 5% or more of our ordinary shares, other than Bank Hapoalim Ltd., and, if such shareholder is a corporation, its shareholders and the natural persons having voting and investment control over it, who following the consummation of this offering will beneficially own an aggregate of 8,317,643 ordinary shares, have entered into lock-up agreements with the underwriters. Under these agreements, we and each of these persons may not, without the prior written approval of UBS Securities LLC, offer, sell, contract to sell or otherwise dispose of or hedge our ordinary shares or securities convertible into or exchangeable for our ordinary shares. These restrictions will be in effect for a period of 180 days after the date of this prospectus. At any time and without public notice, UBS Securities LLC may in their sole discretion, release all or some of the securities from these lock-up agreements. The 180-day lock-up period may be extended if (1) we issue an earnings release, or material news or a material event relating to us occurs, during the period that begins on the date that is 15 calendar days plus three business days before the end of the lock-up period, or (2) prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16 calendar-day period beginning on the last day of the lock-up period. In either case, the lock-up period may be extended for 15 calendar days plus three business days after the date on which the issuance of the earnings release or the material news or material event occurs. 

NASDAQ NATIONAL MARKET QUOTATION 

We expect the shares to be approved for quotation on the Nasdaq National Market, subject to notice of issuance, under the symbol "ITRN." Our shares are listed on the Tel Aviv Stock Exchange under the symbol "ITRN." 

PRICE STABILIZATION, SHORT POSITIONS 

In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our ordinary shares including: 

 

stabilizing transactions; 

 

short sales; 

 

purchases to cover positions created by short sales; 

 

imposition of penalty bids; and 

 

syndicate covering transactions. 

Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our ordinary shares while this offering is in progress. These transactions may also include making short sales of our ordinary shares, which involves the sale by the underwriters of a greater number of ordinary shares than they are required to purchase in this offering, and purchasing ordinary shares on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' over-allotment option referred to above, or may be "naked" shorts, which are short positions in excess of that amount. 

 

110

 

Underwriting 

The underwriters may close out any covered short position by either exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which they may purchase shares through the over-allotment option. 

Naked short sales are in excess of the over-allotment option. The underwriters must close out any naked short position, by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the ordinary shares in the open market that could adversely affect investors who purchased in this offering. 

The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representative has repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions. 

As a result of these activities, the price of our ordinary shares may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. The underwriters may carry out these transactions on the Nasdaq National Market, in the over-the-counter market or otherwise. The underwriters will not carry out these transactions on the Tel Aviv Stock Exchange. 

The underwriters and their affiliates have provided, and may provide, certain commercial banking, financial advisory and investment banking services for us for which they receive customary fees. The underwriters and their affiliates may from time to time in the future engage in transactions with us and perform services for us in the ordinary course of their business. 

DETERMINATION OF OFFERING PRICE 

Prior to this offering, there has been no public market in the United States for our ordinary shares in the United States. The initial public offering price will be determined by negotiation by us and the representative of the underwriters. The principal factors to be considered in determining the initial public offering price include: 

 

the information set forth in this prospectus and otherwise available to representatives; 

 

our history and prospects, and the history and prospects of the industry in which we compete; 

 

our past and present financial performance and an assessment of our management; 

 

our prospects for future earnings, the present state of our development; 

 

the general condition of the securities markets at the time of this offering; 

 

the recent market prices of, and demand for, public traded ordinary shares of generally comparable companies; 

 

the recent market price of our ordinary shares on the Tel Aviv Stock Exchange; and 

 

other factors deemed relevant by the underwriters and us. 

ELECTRONIC DISTRIBUTION 

A prospectus in electronic format is being made available on Internet websites maintained by one or more of the lead underwriters of this offering and may be made available on websites maintained by other underwriters. Other than the prospectus in electronic format, the information on any underwriter's website and any information contained in any other website maintained by an underwriter is not part of the prospectus or the registration statement of which the prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter and should not be relied upon by investors. 

 

111

 

Legal matters 

The validity of the ordinary shares offered by this prospectus and other legal matters concerning this offering relating to Israeli law will be passed upon for us by Yoram L. Cohen, Ashlagi, Fisher, Ramat-Gan, Israel. Certain legal matters concerning this offering related to United States law will be passed upon for us by Proskauer Rose LLP, New York, New York. 

In connection with this offering, Herzog, Fox & Neeman, Tel Aviv, Israel, has advised the underwriters with respect to certain Israeli law matters, and White & Case LLP, New York, New York, has advised the underwriters with respect to certain United States law matters. 

Experts 

Fahn Kanne & Co., a member firm of Grant Thornton International, have audited our consolidated financial statements at December 31, 2003 and 2004 and for each of the three years in the period ended December 31, 2004, as set forth in their report. The financial statements of Ituran Cellular Communication Ltd. were audited by Ziv Haft, a network member of BDO International, and their report is included in this prospectus. We have included our consolidated financial statements in this prospectus and in this registration statement in reliance on Fahn Kanne & Co.'s and Ziv Haft's reports given on their authority as experts in accounting and auditing. 

 

112

 

Enforceability of civil liabilities 

We are incorporated in Israel and some of our directors and officers and the Israeli experts named in this prospectus reside outside of the United States. Service of process upon such persons may be difficult to effect within the United States. Furthermore, because substantially all of our assets, and those of our non-US directors and officers and the Israeli experts named herein, are located outside of the United States, any judgment obtained in the United States, including a judgment based upon the civil liability provisions of US federal securities laws, against us or any of such persons may not be collectible within the United States. 

In addition, there is doubt as to the enforceability of civil liabilities under the Securities Act or the Securities Exchange Act of 1934 pursuant to original actions instituted in Israel. It may be difficult for an investor, or any other person or entity, to assert US securities laws claims in original actions instituted in Israel. However, subject to certain time limitations, a foreign civil judgment, including a US court judgment based upon the civil liability provisions of US federal securities laws, may be enforced by an Israeli court, provided that: 

 

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

 

the judgment was obtained after due process before a court of competent jurisdiction that recognizes and enforces similar judgments of Israeli courts, and the court had authority according to the rules of private international law currently prevailing in Israel; 

 

adequate service of process was effected and the defendant had a reasonable opportunity to be heard; 

 

the judgment is not contrary to the law, public policy, security or sovereignty of Israel and its enforcement is not contrary to the laws governing enforcement of judgments; 

 

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

 

the judgment is no longer appealable; 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 Ituran U.S.A. Inc. as our agent to receive service of process in any action against us in any US federal court or the courts of the State of New York arising out of this offering or any purchase or sale of ordinary shares in connection therewith. 

Foreign judgments enforced by Israeli courts generally will be payable in NIS. 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 for the foreign currency published on the day before date of payment. Current Israeli exchange control regulations also permit a judgment debtor to make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily may be linked to Israel's consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at that time. Judgment creditors must bear the risk of unfavorable exchange rates. 

 

113

 

Where you can find more information 

We have filed with the Securities and Exchange Commission a registration statement on Form F-1 under the Securities Act of 1933, as amended, relating to this offering. This prospectus does not contain all of the information contained in the registration statement. The rules and regulations of the Securities and Exchange Commission allow us to omit some information from this prospectus that is included in the registration statement. Statements made in this prospectus concerning the contents of any contract, agreement or other document are summaries of all material information about the documents summarized, but are not complete descriptions of all terms of such documents. Where we have filed documents as exhibits to the registration statement, you should read the complete document itself for a complete description of its terms. 

As a foreign private issuer, we will file with the Securities and Exchange Commission our annual report on Form 20-F and will submit under cover of a Form 6-K any material interim reports, press releases or other documents published or required to be published in Israel. As a foreign private issuer, we will not be subject to the proxy rules of Section 14 of the Securities Exchange Act of 1934, as amended, and our officers, directors and principal shareholders will not be subject to the short-swing insider disclosure and profit recovery provisions of Section 16 of the Securities Exchange Act. 

You may read and copy the registration statement, including the related exhibits and schedules, and any document we file with the Securities and Exchange Commission without charge at the Securities and Exchange Commission's public reference room at 100 F Street, N.E., Washington, D.C. 20549. Copies of such documents are also available at the SEC's website, http://www.sec.gov. Copies of the material may be obtained by mail from the public reference branch of the Securities and Exchange Commission at the address noted above at rates specified by the Securities and Exchange Commission. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference room. 

We maintain a corporate website at www.ituran.com and certain of our subsidiaries maintain websites at www.ituranusa.com, www.ituran.com.br, www.ituran.com.ar and www.telematics-wireless.com. Information contained on or derived from or through these websites is not a part of this prospectus, and you should not consider it to be a part of this prospectus. 

This prospectus includes statistical data obtained from industry publications. These industry publications generally indicate that the authors of these publications have obtained information from sources believed to be reliable but do not guarantee the accuracy and completeness of their information. While we believe these industry publications to be reliable, we have not independently verified their data. 

 

114

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES
 

Index to Financial Statements 

Page
Independent Auditors' Report F-2
Consolidated financial statements as of December 31, 2003 and 2004 and for each of the three years in the period ended December 31, 2004 including unaudited consolidated financial statements as of June 30, 2005 and for the six month periods ended June 30, 2004 and June 30, 2005 F-3
Balance Sheets F-3
Statements of income F-5
Statements of changes in shareholders' equity F-6
Statements of cash flows F-8
Notes to the consolidated financial statements F-11

 

F-1

 

Certified Public Accountants 

/s/ Grant Thornton
Grant Thornton [LOGO]
Fahn Kanne & Co. 

Report of Independent Registered Public Accounting Firm 

To the Shareholders of
Ituran Location and Control Ltd. and its Subsidiaries 

After the effect of the share split discussed in Note 1, the undersigned would be able to render the following audit report. 

/s/   Fahn Kanne & Co. 

Fahn Kanne & Co.
Certified Public Accountants (Isr.) 

Tel-Aviv, Israel
August 12, 2005 

We have audited the accompanying consolidated balance sheets of Ituran Location and Control Ltd. (the "Company") and its subsidiaries as of December 31, 2003 and 2004, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Board of Directors and management of the Company. Our responsibility is to express an opinion on these financial statements based on our audits. 

We did not audit the financial statements of a certain subsidiary, whose assets included in the consolidation constituted approximately 7% and 6.5% of total consolidated assets as of December 31, 2003 and 2004, respectively, and whose revenues included in the consolidation constituted approximately 21%, 13%, and 10% of total consolidated revenues for the years ended December 31, 2002, 2003 and 2004, respectively. The financial statements of this subsidiary were audited by other independent auditors, whose report has been furnished to us. Our opinion, insofar as it relates to the amounts included in respect of this company, is based solely on the report of the other independent auditors. 

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance as to whether the financial statements are free of material misstatements. An audit includes consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal controls over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other independent auditors provide a reasonable basis for our opinion. 

In our opinion, based on our audit and the report of the other independent auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, 2003 and 2004, and the consolidated results of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States. 

Head Office:
Levinstein Tower
23 Menachem Begin Road
Tel-Aviv, 66184 ISRAEL
P.O.B. 36172, 61361
Tel. 972-3-7106666
Fax 972-3-7106660
info@gtfk.co.il
www.gtfk.co.il 

 

F-2

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES
 

Consolidated Balance Sheets 

US dollars
December 31, June 30,
(in thousands) 2003 2004 2005
(unaudited)
Current assets
Cash and cash equivalents 3,918 4,604 4,815
Accounts receivable (net of allowance for doubtful accounts) 16,732 19,993 22,197
Other current assets (Note 2) 1,732 1,614 2,449
Contracts in process, net (Note 3) 378 30 —
Inventories (Note 4) 4,725 6,416 6,502
27,485 32,657 35,963
Long-term investments and debit balances
Investments in affiliated companies (Note 5) 1,189 870 975
Deposit 1,320 1,393 1,318
Deferred income taxes (Note 16) 6,240 5,507 5,771
Funds in respect of employee rights upon retirement 2,448 2,854 2,830
Minority share of shareholders' deficit of
subsidiaries 		767 — —
11,964 10,624 10,894
Property and equipment, net (Note 6) 9,427 9,204 9,503
Intangible assets, net (Note 7) 4,404 3,676 3,771
Goodwill (Note 8) 1,451 2,862 2,920
Total assets 54,731 59,023 63,051

The accompanying notes are an integral part of the consolidated financial statements.  

 

F-3

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES
 

Consolidated Balance Sheets (cont.) 

US dollars
December 31, June 30,
(in thousands) 2003 2004 2005
(unaudited)
Current liabilities
Credit from banking institutions (Note 9) 13,805 6,586 5,975
Accounts payable 7,926 10,574 12,580
Deferred revenues 2,889 3,824 3,479
Other current liabilities (Note 10) 6,489 9,165 10,556
31,109 30,149 32,590
Long-term liabilities
Long-term loans from banking institutions
(Note 11) 		10,169 3,615 664
Liability for employee rights upon retirement 3,770 4,256 4,216
Deferred income taxes (Note 16) — — 329
13,939 7,871 5,209
Contingent liabilities, liens and guarantees (Note 12)
Minority interest — 108 217
Capital Notes (Note 13) 5,894 5,894 5,894
Shareholders' equity (Note 14)
Share capital – ordinary shares of NIS 0.33⅓ par value: 1,622 1,626 1,640
Authorized – December 31, 2003, 2004 and June 30, 2005 – 22,575,000 shares
Issued and outstanding – December 31, 2003 – 18,541,335 shares, December 31, 2004 – 18,595,197 shares and June 30, 2005 – 18,776,652 shares
Additional paid-in capital 24,671 23,876 23,876
Deferred compensation (129 ) — —
Accumulated other comprehensive loss (2,258 ) (2,487 ) (2,748 )
Cost of Company shares held by subsidiaries – December 31, 2003, 2004 and June 30, 2005 – 841,611 shares, 20,736 shares and 20,736 shares (2,595 ) (384 ) (384 )
Accumulated deficit (17,522 ) (7,630 ) (3,243 )
Total shareholders' equity 3,789 15,001 19,141
Total liabilities and shareholders' equity 54,731 59,023 63,051

The accompanying notes are an integral part of the consolidated financial statements.  

 

F-4

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES
 

Consolidated Statements of Income 

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands except per share data) 2002 2003 2004 2004 2005
(unaudited)
Revenues:
Location-based services 24,053 32,088 36,549 17,857 20,565
Wireless communications products 17,782 23,527 33,461 14,432 20,958
Other 7,856 8,456 7,916 3,790 2,162
49,691 64,071 77,926 36,079 43,685
Cost of revenues:
Location-based services 12,159 12,258 12,944 6,366 7,620
Wireless communications products 12,928 19,071 23,224 9,596 14,459
Other 5,746 6,119 5,720 2,663 1,573
30,833 37,448 41,888 18,625 23,652
Gross profit 18,858 26,623 36,038 17,454 20,033
Research and development expenses 1,717 1,692 2,020 979 1,600
Selling and marketing expenses 2,365 2,888 4,074 2,128 2,206
General and administrative expenses 9,757 11,443 11,693 5,488 6,823
Other expenses (income), net 740 314 (12 ) (11 ) (5 )
Operating income 4,279 10,286 18,263 8,870 9,409
Financing expenses, net (Note 15) 6,039 616 2,059 1,391 41
Other non-operating expenses, net 528 — — — —
Income (loss) before taxes on income (2,288 ) 9,670 16,204 7,479 9,368
Taxes on income (Note 16) 2,955 (3,417 ) (4,423 ) (2,420 ) (2,133 )
667 6,253 11,781 5,059 7,235
Share in losses of affiliated companies, net (529 ) (235 ) (324 ) (167 ) (88 )
Minority interests in (income) loss of subsidiaries 731 (173 ) (238 ) (15 ) (62 )
Net income for the period 869 5,845 11,219 4,877 7,085
Earnings per share (Note 17):
Basic 0.05 0.32 0.60 0.26 0.38
Diluted 0.05 0.31 0.58 0.25 0.36
Weighted average number of shares outstanding (in thousands):
Basic 17,634 18,273 18,585 18,577 18,614
Diluted 18,264 19,086 19,192 19,188 19,140

The accompanying notes are an integral part of the consolidated financial statements.  

 

F-5

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Statements of Changes in Shareholders' Equity 

(in thousands)
Ordinary shares Receipts
on account
of shares 		Additional
paid in
capital 		Accumulated
other
comprehensive
(loss) income 		Accumulated
deficit 		Cost of
Company
shares
held by
subsidiaries 		Deferred
compensation 		Total
Number
of shares 		Amount
of shares
US dollars
Balance as of January 1, 2002 16,125 1,430 — 20,156 (780 ) (24,236 ) (2,595 ) (1,817 ) (7,842 )
Changes during 2002:
Net income — — — — — 869 — — 869
Gains in respect of derivative instruments designated for cash flow hedge, net of related taxes — — — — 278 — — — 278
Translation losses of non-Israeli currency financial statements of subsidiaries and from the translation of the functional currency to the reporting currency — — — — (2,210 ) — — — (2,210 )
Total comprehensive loss (1,063 )
Amortization of deferred compensation related to employee stock option plans — — — — — — — 1,255 1,255
Receipts on account of shares — — 1,320 — — — — — 1,320
Conversion of capital notes into shares 1,701 142 — 3,267 — — — — 3,409
Balance as of December 31, 2002 17,826 1,572 1,320 23,423 (2,712 ) (23,367 ) (2,595 ) (562 ) (2,921 )
Changes during 2003:
Net income — — — — — 5,845 — — 5,845
Gains in respect of derivative instruments designated for cash flow hedge, net of related taxes — — — — 366 — — — 366
Translation gains of non-Israeli currency financial statements of subsidiaries and from the translation of the functional currency to the reporting currency — — — — 88 — — — 88
Total comprehensive income 6,299
Amortization of deferred compensation related to employee stock option plans — — (41 ) — 433 392
Issuance of share capital 715 50 (1,320 ) 1,289 — — — — 19
Balance as of December 31, 2003 18,541 1,622 — 24,671 (2,258 ) (17,522 ) (2,595 ) (129 ) 3,789

The accompanying notes are an integral part of the consolidated financial statements.  

 

F-6

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Statements of Changes in Shareholders' Equity (cont.) 

(in thousands)
Ordinary shares Receipts
on account
of shares 		Additional
paid in
capital 		Accumulated
other
comprehensive
(loss) income 		Accumu-
lated
deficit 		Cost of
Company shares
held by
subsidiaries 		Deferred
compensation 		Total
Number
of shares 		Amount
of shares
US dollars
Balance as of January 1, 2004 18,541 1,622 — 24,671 (2,258 ) (17,522 ) (2,595 ) (129 ) 3,789
Changes during 2004:
Net income — — — — — 11,219 — — 11,219
Losses in respect of derivative instruments designated for cash flow hedge, net of related taxes — — — — (644 ) — — — (644 )
Translation losses of non-Israeli currency financial statements of subsidiaries and from the translation of the functional currency to the reporting currency — — — — 415 — — — 415
Total comprehensive income 10,990
Amortization of deferred compensation related to employee stock option plans — — — — — — — 129 129
Issuance of share capital 54 4 — — — — — — 4
Sale of Company shares held by subsidiary — — — (795 ) — — 2,211 — 1,416
Dividend paid — — — — — (1,327 ) — — (1,327 )
Balance as of December 31, 2004 18,595 1,626 — 23,876 (2,487 ) (7,630 ) (384 ) — 15,001
(unaudited)
Changes during 2005:
Net income — — — — — 7,085 — — 7,085
Translation losses of non-Israeli currency financial statements of subsidiaries and from the translation of the functional currency to the reporting currency — — — — (261 ) — — — (261 )
Total comprehensive income 6,824
Issuance of share capital 182 14 — — — — — — 14
Dividend paid — — — — — (2,698 ) — — (2,698 )
Balance as of June 30, 2005 (unaudited) 18,777 1,640 — 23,876 (2,748 ) (3,243 ) (384 ) — 19,141

The accompanying notes are an integral part of the consolidated financial statements.  

 

F-7

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES
 

Consolidated Statements of Cash Flows 

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Cash flows from operating activities
Net income for the period 869 5,845 11,219 4,877 7,085
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 3,900 3,482 3,536 1,627 1,812
Exchange differences on principal of deposit and loan, net 719 (804 ) 373 520 (224 )
Increase (decrease) in liability for employee rights upon retirement 865 (302 ) 424 554 208
Increase (decrease) in liability for vacation pay (76 ) (118 ) 55 77 169
Share in losses of affiliated companies, net 529 235 324 167 88
Deferred income taxes (3,376 ) 2,193 1,183 30 196
Amortization of deferred compensation related to employee stock option plans, net 1,255 392 129 71 —
Capital losses (gains) on sale of property and equipment, net 2 (72 ) (40 ) (26 ) —
Minority interests in profits (losses) of subsidiaries, net (731 ) 173 238 15 62
Increase in accounts receivable (2,955 ) (627 ) (3,002 ) (3,603 ) (3,530 )
Decrease (increase) in other current assets 776 344 (1,003 ) 104 (801 )
Decrease (increase) in inventories and contracts in process, net 363 3,633 (1,259 ) (1,215 ) (431 )
Increase (decrease) in accounts payable 2,692 (822 ) 2,582 2,279 2,667
Increase (decrease) in deferred revenues 87 267 1,033 62 (260 )
Increase (decrease) in other current liabilities (1,691 ) 1,968 1,882 1,233 2,424
Net cash provided by operating activities 3,228 15,787 17,674 6,772 9,465
Cash flows from investing activities
Decrease (increase) in funds in respect of employee rights upon retirement, net of withdrawals (200 ) 83 (366 ) (153 ) (142 )
Capital expenditures (2,205 ) (2,339 ) (2,374 ) (1,034 ) (1,654 )
Proceeds from sale of property and equipment 240 109 125 42 —
Purchase of intangible assets and minority interest (625 ) (67 ) (295 ) — (941 )
Loan granted to affiliated company (37 ) — — — (231 )
Acquisitions of subsidiaries (Appendix A) 9 — — — —
Net cash used in investment activities (2,818 ) (2,214 ) (2,910 ) (1,145 ) (2,968 )
Cash flows from financing activities
Short-term credit from banking institutions, net (718 ) (12,642 ) (8,560 ) (3,436 ) (22 )
Receipt of long-term loans 6,357 5,119 9,360 9,440 —
Repayment of long-term loans (5,667 ) (3,586 ) (15,035 ) (12,121 ) (3,326 )
Dividend paid — — (1,327 ) (1,327 ) (2,684 )
Proceeds from sale of Company shares held by a subsidiary — — 1,416 1,416 —
Proceeds from exercise of options by employees — 19 4 4 14
Net cash used in financing activities (28 ) (11,090 ) (14,142 ) (6,024 ) (6,018 )
Effect of exchange rate changes on cash and cash equivalents (69 ) 108 64 (103 ) (268 )
Net increase (decrease) in cash and cash equivalents 313 2,591 686 (500 ) 211
Balance of cash and cash equivalents at beginning of period 1,014 1,327 3,918 3,918 4,604
Balance of cash and cash equivalents at end of period 1,327 3,918 4,604 3,418 4,815

The accompanying notes are an integral part of the consolidated financial statements.  

 

F-8

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES
 

Consolidated Statements of Cash Flows (cont.) 

Appendix A — Acquisitions of subsidiaries 

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Working capital (excluding cash and cash equivalents), net 1,839 — — — —
Long-term deferred income taxes (166 ) — — — —
Property and equipment, net (265 ) — — — —
Other intangible assets (206 ) — — — —
Investment in an affiliated company (417 ) — — — —
Long-term bank loans 371 — — — —
Minority shareholders in subsidiary 62 — — — —
Minority interest (1,209 ) — — — —
9 — — — —

Appendix B — Companies no longer consolidated 

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Working capital (excluding cash and cash equivalents), net (898 ) — — — —
Investment in an affiliated company 217 — — — —
Property and equipment, net 229 — — — —
Other intangible assets 97 — — — —
Long-term bank loans (280 ) — — — —
Minority shareholders in subsidiary (122 ) — — — —
Minority interest 757 — — — —
— — — — —

Supplementary information on investing activities not involving cash flows 

At December 31, 2004, trade payables included US$ 62,000 in respect of the acquisition of property and equipment. 

At December 31, 2002, capital notes in an amount of US$ 3.4 million (US$ 3.2 in respect of principal and US$ 0.2 in respect of interest thereon) were converted into 567,519 ordinary shares of the Company. 

In December 2002, the Company signed an agreement with three executives of Telematics Wireless, whereby the Company agreed to issue ordinary shares to the executives, against the transfer of their entire holdings in the shares of Telematics Wireless (recorded as a receipt on account of shares, in an amount of US$ 1.3 million). In 2003, the Company issued the respective shares. 

At December 31, 2004 and June 30, 2005, the balances of accounts payable include amounts of US$ 527,000 and US$ 189,000, respectively, in respect of the acquisition of the minority interest in subsidiaries. 

As of June 2004 and 2005, accounts payable includes unpaid dividends in amounts of US$ 55,000 and US$ 14,000, respectively and purchases of other and fixed assets on credit in amounts of US$ 73,000 and US$ 30,000 respectively. 

The accompanying notes are an integral part of the consolidated financial statements.  

 

F-9

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES
 

Consolidated Statements of Cash Flows (cont.) 

Supplementary disclosure of cash flow information 

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Interest paid 1,577 1,010 1,198 619 440
Income taxes paid 640 587 754 215 710

The accompanying notes are an integral part of the consolidated financial statements.  

 

F-10

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES  

A.    General  

1.    Operations  

Ituran Location and Control Ltd. (the "Company") commenced operations in 1994. The Company and its subsidiaries (the "Group") are engaged in the provision of location-based services and machine-to-machine wireless communications products for use in stolen vehicle recovery, fleet management and other applications. 

2.    Share split  

Prior to the consummation of the Company's public offering, the Company will effect a share split pursuant to which each of its ordinary shares will be converted into 3 ordinary shares. Unless otherwise noted, all share and per share amounts for all periods presented have been retroactively restated to give effect to this share split. 

3.    Functional currency and translation to the reporting currency  

The functional currency of the Company and its subsidiaries located in Israel is the New Israeli Shekel ("NIS"), which is the local currency in which those entities operate. The functional currency of the foreign subsidiaries of the Group is their representative local currency. 

The consolidated financial statements of the Company and all of its subsidiaries were translated into U.S. dollars in accordance with the principles set forth in Statement of Financial Accounting Standards ("FAS") No. 52 of the U.S. Financial Accounting Standards Board ("FASB"). Accordingly, assets and liabilities were translated from local currencies to U.S. dollars using year-end exchange rates, and income and expense items were translated at average exchange rates during the year. 

Gains or losses resulting from translation adjustments (which result from translating an entity's financial statements into U.S. dollars if its functional currency is different than the U.S. dollar) are reflected in shareholders' equity, under "accumulated other comprehensive income (loss)". 

Balances denominated in, or linked to foreign currency are stated on the basis of the exchange rates prevailing at the balance sheet date. For foreign currency transactions included in the statement of income, the exchange rates applicable on the relevant transaction dates are used. Transaction gains or losses arising from changes in the exchange rates used in the translation of such balances are carried to financing income or expenses. 

 

F-11

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (cont.)  

A.    General (cont.)  

3.    Functional currency and translation to the reporting currency (cont.)  

Following is the data regarding the dollar exchange rate and the Israeli CPI: 

Exchange rate
of one US dollar 		Israeli CPI (*)
At June 30,
2005 NIS   4.574 114.88 points
2004 NIS   4.497 114.54 points
Increase during the six month period
ended June 30,:
2005 6.17% 0.49%
2004 2.70% 1.41%
At December 31,
2004 NIS   4.308 114.32 points
2003 NIS   4.379 112.95 points
2002 NIS   4.737 115.13 points
2001 NIS   4.416 108.1   points
Increase (decrease) during the year:
2004 (1.62%) 1.21%
2003 (7.56%) (1.89%)
2002 7.27% 6.50%

(*) 

Based on the Index for the month ending on each balance sheet date, on the basis of 1998 average = 100. 

4.    Accounting principles  

The consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). 

5.    Use of estimates in the preparation of financial statements  

The preparation of financial statements in conformity with US GAAP 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 periods. Actual results could differ from those estimates. 

6.    Unaudited Interim Financial Statements  

The accompanying unaudited financial statements as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 were prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, the unaudited financial statements presented herein include all adjustments necessary for a fair presentation of the Company's financial position at June 30, 2005 and the results of its operations and its cash flows for the six month periods ended June 30, 2004 and 2005. All such adjustments are of a normal recurring nature. Interim financial statements are prepared on a basis consistent with the Company's annual financial statements. Results of operations for the six month period ended June 30, 2005 are not necessarily indicative of the operating results that may be expected for the entire year ending December 31, 2005. 

 

F-12

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (cont.)  

B.    Principles of consolidation  

The consolidated financial statements include the accounts of the Company and all of its subsidiaries. In these financial statements, the term "subsidiary" refers to a company over which the Company exerts control (ownership interest of more than 50%), and the financial statements of which are consolidated with those of the Company. Significant intercompany transactions and balances were eliminated upon consolidation; profits from intercompany sales, not yet realized outside of the Group, were also eliminated. 

C.    Cash and cash equivalents  

The Group considers all highly liquid investments, which include short-term bank deposits that are not restricted as to withdrawal or use, and short-term debentures, with original periods to maturity not exceeding three months, to be cash equivalents. 

D.    Company shares held by subsidiaries  

Company shares held by subsidiaries are presented as a reduction of shareholders' equity, at their cost to the subsidiaries, under the caption "Cost of Company shares held by subsidiaries". Gains on sale of these shares, net of related income taxes, are recorded as additional paid-in capital.
Losses on the sale of such shares, net of related income taxes, are recorded as deductions from additional paid-in capital to the extent that previous net gains from sales are included therein, otherwise in retained earnings. 

E.    Allowance for doubtful accounts  

The allowance for doubtful accounts is determined with respect to amounts the Company has determined to be doubtful of collection. In determining the allowance for doubtful accounts, the Company considers, among other things, its past experience with such customers and the information available on such customers. 

The allowance in respect of trade receivables at December 31, 2003, 2004 and June 30, 2005 was US$ 98,000, US$ 195,000 and US$ 405,000, respectively. 

F.    Contracts in process  

The contracts in process are presented at cost, less customer advances, less a portion of the costs expensed in prior periods (concurrent with the applicable revenue based on percentage of completion), and less the entire expected loss on projects, if any. 

Cost includes direct costs of materials, labor, subcontractors, and other direct costs. 

G.    Inventories  

Inventories are stated at the lower of cost or market. Cost is determined as follows: raw materials and finished products – mainly on the basis of average cost; work in progress – on the basis of direct production costs including materials, labor and subcontractors, plus the allocated portion of indirect production costs, on an average basis. 

H.    Investment in affiliated companies  

Investments in companies in which the Group has significant influence (ownership interest of between 20% and 50%) but less than a controlling interest, which are not subsidiaries ("affiliated companies"), are accounted for by the equity method. Income on intercompany sales, not yet realized outside of the Group, was eliminated. 

 

F-13

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (cont.)  

I.    Investment in other companies  

Non-marketable investments in other companies in which the Company does not have a controlling interest or significant influence are accounted for at cost, net of write down for any permanent decrease in value. 

For investments in start up companies (companies that are engaged in the field of research and development), the Company assesses the recoverability of its investment, from time to time, and includes, when necessary, a write down for decrease in value which is not temporary. 

J.    Derivatives  

The Company carries out transactions involving foreign exchange derivative financial instruments (mainly forward exchange contracts) which are designed to hedge the cash flows expected to be received from forecasted revenues resulting from subscription fees, denominated in currencies other than the functional currency of the Company. Such transactions were designated as hedging instruments on the date that the Company entered into such derivative contracts, and qualify as cash flow hedges under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities , as amended. For such derivatives, the critical terms are matched to those of the hedged transaction with respect to currency, amount and period, in accordance with the risk management policy of the Company. As a result, subsequent fluctuations of foreign exchange rates have no effect on the correlation between those contracts and hedged transactions. Therefore, the hedging relationship of such derivative and hedged transaction is considered highly effective and there is no ineffectiveness to be recognized in earnings, as long as the critical terms of the hedging relationship are maintained. 

As a result, the changes in fair value of the derivative are reported as "other comprehensive income" under "gains in respect of derivative instruments designated for cash flow hedge, net of related taxes", and are recognized in the statements of income when the hedged transaction affects earnings. 

All other derivatives which do not qualify for hedge accounting under FAS No. 133, or which have not been designated as hedging instruments, are recognized in the balance sheet at their fair value, with changes in the fair value carried to the statements of income and included in financing expenses, net. 

K.    Property and equipment  

1.    Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated on the straight-line method over the shorter of the estimated useful life of the property or the life of the lease. 

2.    Rates of depreciation: 

%
Operating equipment (mainly 20%) 7.5-33
Office furniture and equipment 7.5-10
Vehicles 15
Leasehold improvements Duration of lease which is
less or equal to useful life

 

F-14

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (cont.)  

L.    Impairment of long-lived assets  

The Group's long-lived assets are reviewed for impairment in accordance with FAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets , whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. The Company has not recorded any impairment losses in the reported periods. 

M.    Deferred income taxes  

The Group accounts for income taxes in accordance with FAS No. 109, Accounting for Income Taxes . According to FAS No. 109, deferred income taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the tax rates expected to be in effect at the time when these differences reverse. Valuation allowances in respect of the deferred tax assets are provided for if, based upon the weight of available evidence, it is more likely than not that all or a portion of the deferred income tax assets will not be realized. 

N.    Goodwill and intangible assets  

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in business combinations accounted for as purchases. Commencing on January  1, 2002, pursuant to the adoption of FAS No. 142, Goodwill and Other Intangible Assets , goodwill is no longer amortized but rather tested for impairment at least annually. As of December  31, 2002, 2003 and 2004, the Company has determined that there is no impairment with respect to Goodwill. Prior to the adoption of FAS No. 142, goodwill was amortized in equal annual installments over a period of 10 years. 

Intangible assets are amortized using the straight-line basis over their useful lives, to reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up, in accordance with FAS No. 142, as follows: technology usage rights and others – 10 years; licenses and patents – 7 years. 

O.    Issuance costs of convertible capital notes  

Costs incurred in respect of the issuance of convertible capital notes are deferred and expensed as financing expenses over the contractual life of the capital notes. 

P.    Liability for employee rights upon retirement  

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

 

F-15

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (cont.)  

P.    Liability for employee rights upon retirement (cont.)  

The deposited funds include profits accumulated up to the balance sheet date. The deposited funds may be withdrawn upon the fulfillment of the obligation pursuant to Israeli severance pay laws or labor agreements. The value of the deposited funds is based on the cash surrender value of these policies, and includes immaterial profits. 

The liability for employee rights upon retirement in respect of the employees of the non-Israeli subsidiaries of the Company, is calculated on the basis of the labor laws of the country in which the subsidiary is located and is covered by an appropriate accrual. 

Severance expenses for the years ended December 31, 2002, 2003, 2004 and for the six month periods ended June 30, 2004 and 2005, amounted to US$  457,000, US$ 452,000, US$ 375,000, US$ 212,000 and US$ 224,000, respectively. 

Q.    Revenue recognition  

Revenues are recognized in accordance with Staff Accounting Bulletin No. 104 Revenue Recognition when delivery has occurred and, where applicable, after installation has been completed, there is persuasive evidence of an agreement, the fee is fixed or determinable and collection of the related receivable is reasonably assured and no further obligations exist. In cases where delivery has occurred but the required installation has not been performed, the Company does not recognize the revenues until the installation is completed. 

The Company's revenues are recognized as follows: 

1.    Revenues from sales are recognized when title and risk of loss of the product pass to the customer (usually upon delivery). 

2.    Revenues from installation services are recognized when the installation is completed. 

3.    Revenues from subscription fees are recognized over the duration of the subscription period. 

4.    The Company recognizes revenues as gross or net in accordance with EITF 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent" ("EITF 99-19"). In most arrangements, the Company contracts directly with its end-user customers, it is the primary obligor and it carries all collectibility risk. Revenues under these arrangements are recorded on a gross basis. 

In some cases, the Company is not considered as the primary obligor according to the criteria established in EITF 99-19, and serves only as distributors of products or services of other parties to end-user customers. In those instances, in accordance with EITF 99-19, the Company reports the revenues on a net basis. 

5.    Revenues from certain long-term contracts: 

The Company recognizes certain long-term contract revenues, in accordance with Statement of Position ("SOP") 81-1, Accounting for Performance of Construction-Type and Certain Production Type Contracts . 

Pursuant to SOP 81-1, revenue is recognized under the percentage of completion method. The Company measures the percentage of completion based on output criteria, such as the number of units delivered or the progress of the engineering process (in contracts that require network buildup before end units are sold). 

 

F-16

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (cont.)  

Q.    Revenue recognition (cont.)  

5.    Revenues from certain long-term contracts: (cont.)  

Provisions for estimated losses on uncompleted contracts are made during the period in which such losses are first identified, in the amount of the estimated loss on the entire contract. 

The Company believes that the use of the percentage of completion method is appropriate, as the Company has the ability to make reasonably dependable estimates of the extent of progress towards completion, contract revenues and contract costs. In addition, contracts executed include provisions that clearly specify the enforceable rights of the parties to the contract, the consideration to be exchanged and the manner and terms of settlement. In all cases, the Company expects to perform its contractual obligations and the parties are expected to satisfy their obligations under the contract. 

In contracts that do not meet all the abovementioned conditions, the Company utilizes zero estimates of profit; equal amounts of revenue and cost are recognized until results can be estimated with sufficient certainty. 

Revenues and costs recognized pursuant to SOP 81-1 on contracts in process are subject to management estimates. Actual results could differ from these estimates. 

6.    Deferred revenues includes unearned amounts received from customers but not yet recognized as revenues.  

7.    Sale and leaseback transactions  

The Company accounts for sale and leaseback transactions in accordance with the provisions of FAS No. 13, Accounting for Leases as amended by FAS No. 28, Accounting for Sales with Leasebacks . 

Accordingly, with respect of a certain leaseback transaction that was determined to be an operating lease and involving the use of more than a minor part but less than substantially all of the asset sold, the entire profit on the sale was deferred and amortized in proportion to rental payments over the term of the lease. There was no recognition of any profit at the date of the sale since the present value of the minimum lease payments exceeded the amount of the profit. 

R.    Warranty costs  

The Company provides a warranty for its products to end-users at no extra charge. The Company estimates the costs that may be incurred under its warranty obligation and records a liability at the time the related revenues are recognized. 

Among the factors affecting the warranty liability are the number of installed units and historical percentages of warranty claims. The Company periodically assesses the adequacy of the recorded warranty liability and adjusts the amount to the extent necessary. To date, warranty costs and the related liabilities have not been material. 

S.    Research and development costs  

1.    Research and development costs (other than computer software-related expenses) are expensed as incurred. Grants received from the Government of Israel for development of approved projects are recognized as a reduction of expenses when the related costs are incurred. 

 

F-17

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (cont.)  

S.    Research and development costs (cont.)  

2.    Software Development Costs  

FAS No. 86 Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed , requires capitalization of certain software development costs subsequent to the establishment of technological feasibility. Research and development costs incurred in the process of developing product improvements or new products, are generally expensed as incurred, net of grants received from the Government of Israel for development of approved projects. Costs incurred by the Company between the establishment of technological feasibility and the point at which the product is ready for general release are insignificant. 

3.    Purchased In-Process Research and Development  

Purchased In-Process Research and Development ("IPR&D") represents the value assigned in a purchase business combination to research and development projects of the acquired business that had commenced but had not yet been completed at the date of acquisition and which have no alternative use. In accordance with FAS No. 2 Accounting for Research and Development Costs , as clarified by FASB Interpretation No. 4, amounts assigned to IPR&D are expensed as part of the allocation of the purchase price of the business combination. 

T.    Advertising costs  

Advertising costs are expensed as incurred. 

U.    Issuance of shares by affiliated companies  

Capital gains arising from the issuance of shares by affiliated companies to third parties are carried to income on a current basis. Capital gains arising from the issuance of shares by an affiliated company to the extent that the issuing company is a newly formed company are carried to additional paid in capital. 

V.    Earnings per share  

Basic earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the year, net of Company shares held by subsidiaries. 

In computing diluted earnings per share, basic earnings per share are adjusted to reflect the potential dilution that could occur upon the exercise of options granted under employee stock option plans, using the treasury stock method, and the conversion of the convertible capital notes, using the if-converted method. The assumed conversion of such convertible capital notes that have not been converted during the period, was based on the average quoted share prices prior to each balance date (see also Note 17 regarding the conversion mechanism). 

W.    Stock based compensation  

The Group accounts for its employee stock option plans using the fair value based method of accounting prescribed by FAS No.  123, Accounting for Stock-Based Compensation as amended by FAS No. 148. 

According to FAS No. 123, the fair value of stock options granted to employees is estimated on the date of grant using the Black-Scholes option-pricing model. The compensation cost is charged on the date of grant of such options, to shareholders' equity, under deferred compensation, and is thereafter amortized over the vesting period using the graded method, an accelerated method which results in charging a greater portion of the value of options granted in the earlier years of their vesting period. 

 

F-18

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (cont.)  

W.    Stock based compensation (cont.)  

The Company applied FAS No. 123 and Emerging Issue Task Force ("EITF") No.  96-18 Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services with respect to options issued to non-employees. 

X.    Comprehensive income (loss)  

Comprehensive income, presented in shareholders' equity, includes, in addition to net income: 

(a) gains (losses) in respect of derivative instruments designated for cash flow hedge, net of related taxes, and (b) translation gains (losses) of non-Israeli currency financial statements of subsidiaries and affiliated companies and translation gains and losses from the translation of the functional currency to the reporting currency. 

Y.    Financial instruments with characteristics of both liabilities and equity  

In May 2003, the FASB issued FAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity . FAS No. 150 establishes standards governing how an issuer classifies and measures certain financial instruments having characteristics of both liabilities and equity. FAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and (except for certain instruments) is otherwise effective at the commencement of the first interim period beginning after June 15, 2003. The Company adopted FAS No. 150 effective July 1, 2003. The adoption of FAS No. 150 did not have a material effect on the Company's financial position or results of operations. 

Z.    Recently issued accounting pronouncements  

1)    In November  2004, the FASB issued FAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4 . FAS No. 151 clarified the accounting for abnormal amounts of idle facility expenses, freight, handling costs and wasted material (spoilage). FAS No. 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal". In addition, it requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. FAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted. The Company believes that FAS No. 151, when adopted, will not have a significant impact on its financial position or results of operations. 

2)    In December 2004, the FASB issued FAS No. 123R, Share-Based Payment , a revision of FAS No. 123, Accounting for Stock Based Compensation . Among other items, FAS No. 123R eliminates the use of APB  25 and the intrinsic value method of accounting and requires companies to recognize in their financial statements, the cost of employee services received in exchange for awards of equity instruments, based on the fair value at the grant date of those awards. The effective date of FAS No. 123R, as amended by SEC rule, is the first reporting fiscal year beginning after June 15, 2005, which is the first quarter of 2006 for calendar year companies. Early adoption of FAS No. 123R is encouraged. FAS No. 123R permits companies to adopt its requirements using either a "modified prospective" method, or a "modified retrospective" method. Under the "modified prospective" method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of FAS No. 123R for all share-based payments granted after that date, and based on the requirements of FAS No. 123 for all unvested awards granted prior to the effective date of FAS No. 123R. 

 

F-19

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Finanial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (cont.)  

Z.    Recently issued accounting pronouncements (cont.)  

Under the "modified retrospective" method, the requirements are the same as under the "modified prospective" method, but it also permits entities to restate financial statements previously based on pro forma disclosures made in accordance with FAS No. 123. 

The Company utilizes the fair value method of accounting in respect to stock options granted to its employees pursuant to FAS No. 123. Therefore, the Company does not expect the adoption of FAS No. 123R on January 1, 2006, to have a material impact on the amount of earnings it reports in future periods. 

 

F-20

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 2 — OTHER CURRENT ASSETS  

Composition:  

US dollars
December 31, June 30,
(in thousands) 2003 2004 2005
(unaudited)
Prepaid expenses 633 527 677
Government institutions 460 456 902
Deferred taxes 307 153 272
Minority shareholders in subsidiaries 25 226 —
Advances to suppliers 96 111 505
Employees 2 20 49
Related parties 69 2 1
Others 140 119 43
1,732 1,614 2,449

NOTE 3 — CONTRACTS IN PROCESS, NET  

Composition:  

US dollars
December 31, June 30,
(in thousands) 2003 2004 2005
(unaudited)
Cost of work 9,352 300 731
Less – portion expensed in prior periods (8,782 ) (268 ) (731 )
570 32 —
Less – advances from customers (192 ) (2 ) —
378 30 —

As of June 30, 2005, accounts receivable include an amount of US$ 1.9 million in respect of long-term contracts. 

NOTE 4 — INVENTORIES  

Composition:  

US dollars
December 31, June 30,
(in thousands) 2003 2004 2005
(unaudited)
Finished products 3,453 3,472 3,879
Raw materials 1,187 1,732 1,527
Work in progress 85 1,212 1,096
4,725 6,416 6,502

 

F-21

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 5 — INVESTMENTS IN AFFILIATED COMPANIES  

A.  

Locationet Systems Ltd. ("Locationet")  

The Company holds 21.28% of the shares of Locationet. 

The balance of the Company's investment in Locationet as of December 31, 2003, 2004 and June 30, 2005 was US$ 1.0 million, US$ 688,000 and US$ 600,000, respectively. 

B.  

Icomtrade Ltd. ("Icomtrade")  

The Company holds 50% of the shares of Icomtrade. 

The balance of the Company's investment in Icomtrade as of December  31, 2003, 2004 and June 30, 2005 was US$ 180,000, US$ 182,000 and US$ 168,000, respectively. As of December 31, 2003, 2004 and June 30, 2005, these balances included a loan in the amounts of US$ 173,000, US$  178,000 and US$ 168,000, respectively. 

The loan is linked to the Israeli Consumer Price Index. 

C.  

MatysOnBoard Ltd. ("Matys")  

The Company holds 25% of the shares of Matys. 

The balance of the Company's investment in Matys as of June 30, 2005 was US$ 204,000. As of June 30, 2005, this balance included a loan in an amount of US$ 231,000. 

NOTE 6 — PROPERTY AND EQUIPMENT, NET  

Composition:  

US dollars
December 31, June 30,
(in thousands) 2003 2004 2005
(unaudited)
Operating equipment 12,901 14,603 16,294
Office furniture, equipment and computers 3,599 4,211 4,489
Vehicles 379 591 592
Leasehold improvements 655 764 753
17,534 20,169 22,128
Less – accumulated depreciation and amortization (8,107 ) (10,965 ) (12,625 )
9,427 9,204 9,503

In the years ended December 31, 2002, 2003, 2004 and for the six month periods ended June 30, 2004 and 2005, depreciation and amortization expense was US$ 2.1 million, US$ 2.5 million, US$  2.8 million, US$ 1.2 million and US$ 1.5 million, respectively and additional equipment was purchased in an amount of US$ 2.2 million, US$ 2.2 million, US$ 2.3 million, US$ 1.0 million and US$ 1.7 million, respectively. 

 

F-22

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 7 — INTANGIBLE ASSETS, NET  

Intangible assets, net, consisted of the following:  

US dollars
December 31, June 30,
(in thousands) 2003 2004 2005
Unamortized
balance 		Original
amount 		Accumulated
amortization 		Unamortized
balance
(unaudited)
Technology usage rights 1,712 1,204 3,592 (2,564 ) 1,028
Purchase of licenses and patent registration 1,746 1,620 2,466 (910 ) 1,556
Others 946 852 4,535 (3,348 ) 1,187
4,404 3,676 10,593 (6,822 ) 3,771

Amortization of intangible assets amounted to US$  1.3 million, US$ 1.0 million, US$ 774,000, US$  382,000 and US$ 287,000 for the years ended December 31, 2002, 2003, 2004 and for the six month periods ended June 30, 2004 and 2005, respectively. As of December 31, 2004, the estimated aggregate amortization of intangible assets for the next five years is as follows: 2005 – US$ 610,000; 2006 – US$ 554,000; 2007 – US$ 554,000; 2008 – US$ 554,000; 2009 – US$ 262,000. 

NOTE 8 — GOODWILL  

The changes in the carrying amount of goodwill for the years ended December 31, 2003, 2004 and the period ended June 30, 2005, are as follows: 

US dollars
Wireless
communications
products 		Location
based
services 		Cellular
communications
services 		Total
(in thousands)
Balance as of January 1, 2003 347 777 289 1,413
Changes during 2003:
Translation differences 29 (15 ) 24 38
Balance as of December 31, 2003 376 762 313 1,451
Changes during 2004:
Goodwill acquired during the year(*) 689 716 — 1,405
Translation differences 6 (5 ) 5 6
Balance as of December 31, 2004 1,071 1,473 318 2,862
(unaudited)
Changes during 2005:
Goodwill acquired during the period (**) — 189 — 189
Translation differences (62 ) (51 ) (18 ) (131 )
Balance as of June 30, 2005 (unaudited) 1,009 1,611 300 2,920

(*)  

Derives from the acquisition of shares of the Brazilian subsidiaries from the minority interests therein.  

(**)  

Derives from the acquisition of an additional 1% of shares of the Argentine subsidiary from the minority interests therein.  

 

F-23

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 9 — CREDIT FROM BANKING INSTITUTIONS  

A.  

Composition:  

Interest rates as of US dollars
December 31, June 30, December 31, June 30,
(in thousands) 2004 2005 2003 2004 2005
% % (unaudited)
Revolving credit – in NIS 6 6 1 32 31
Revolving credit – in US dollars 2 — 15 24 —
Short-term US dollar-linked loan — — 8,500 — —
Current maturities of long-term loans 5,289 6,530 5,944
13,805 6,586 5,975

B.  

Lines of credit  

Unutilized short-term credit lines of the Group as of June 30, 2005, aggregated to US$ 1.4 million. 

C.  

Liens – see Note 12B.  

NOTE 10 — OTHER CURRENT LIABILITIES  

Composition:  

US dollars
December 31, June 30,
(in thousands) 2003 2004 2005
(unaudited)
Accrued expenses 3,047 2,570 1,936
Employees and institutions in respect thereof 1,366 1,629 1,734
Government institutions 1,692 3,959 5,510
Related party — 750 337
Advances from customers — — 723
Deferred tax 302 — —
Others 82 257 316
6,489 9,165 10,556

NOTE 11 — LONG-TERM LOANS FROM BANKING INSTITUTIONS  

A.  

Composition:  

Weighted average
interest rate 		US dollars
December 31, June 30, December 31, June 30,
(in thousands) 2004 2005 2003 2004 2005
% % (unaudited)
US dollar linked Libor + 2% Libor + 2% 13,795 1,666 1,339
Unlinked 6.4 6.4 1,663 8,479 5,269
Less – current maturities (5,289 ) (6,530 ) (5,944 )
10,169 3,615 664

 

F-24

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 11 — LONG-TERM LOANS FROM BANKING INSTITUTIONS (cont.)  

B.  

Maturity dates  

US dollars
(in thousands) December 31,
2004
Second year 3,281
Third year 334
3,615

C.  

Liens – see Note 12B. 

NOTE 12 — CONTINGENT LIABILITIES, LIENS AND GUARANTEES  

A.  

Claims  

1. 

The Company is involved in a litigation with Leonardo L.P., a United States based hedge fund, arising out of a financial transaction entered into between the Company and Leonardo in February 2000. Pursuant to the terms of this financial transaction, the Company received a cash investment of US$ 12 million in exchange for certain capital notes that were convertible into the Company's ordinary shares according to a pre-determined formula. Pursuant to the formula, the conversion price of the capital notes was the lower of NIS 67.33 (US$ 14.72) or an average of the lowest 10 prices of the Company's shares during the 60 trading-day period prior to conversion. The conversion price is used to determine the number of shares into which the capital notes may be converted, by dividing the notional principal amount of the capital notes, initially US$ 12 million, by the conversion price. On the date the capital notes were issued, March 2, 2000, the capital notes were convertible into approximately 720,000 of the Company's ordinary shares. As part of the terms of this financial transaction, and, as required by the rules of the Tel-Aviv Stock Exchange ("TASE") where the Company's ordinary shares are currently traded, the Company was required to seek the approval from the TASE for the issuance of the ordinary shares underlying the capital notes. The TASE approved the issuance of 2,250,000 of the Company's ordinary shares as the number of registered shares that could be issued under the capital notes. The Company understood the terms of the financial transaction with Leonardo to provide that, except in certain limited circumstances, the amounts advanced to the Company, together with accrued interest on these advances at the annual rate of 3.5%, would be repaid and satisfied solely through the delivery of ordinary shares and that under no circumstance would the Company be required to deliver more than 2,250,000 of its ordinary shares. 

The Company believes that Leonardo also recognized that there was a limit on the number of shares issuable under the capital notes, and in fact, at no time on or prior to the maturity date of the capital notes did Leonardo seek to convert the capital notes for more than 2,250,000 of the Company's ordinary shares. Prior to the maturity date of the capital notes, Leonardo converted approximately US$ 6.7 million of the notional principal amount of the capital notes into an aggregate of 2,241,594 of the Company's ordinary shares. The Company believes that the holders of the capital notes are therefore only entitled to convert the balance of their capital notes into 8,406 shares, although in the pending litigation Leonardo has indicated that it does not believe that the capital notes were subject to any limit on the number of shares that could be issued to them on conversion and is seeking to recover damages based on this allegation. 

 

F-25

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 12 — CONTINGENT LIABILITIES, LIENS AND GUARANTEES (cont.)  

A.  

Claims (cont.)  

1.  (cont.) 

The terms of the documents and agreements that comprise the financial transaction with Leonardo contain provisions regarding the repayment and conversion of the capital notes, which may be regarded as conflicting or subject to different interpretations. Accordingly, the Company believes that the matter may only be resolved through litigation in which the parties present evidence as to the proper meaning and operation of the repayment and conversion provisions of documents and agreements comprising the financing transaction with Leonardo. 

The parties are currently in early stages of pleading the case before a district court in Israel and are in the process of undertaking discovery. In its pleadings, Leonardo is seeking alternative remedies and relief, including (a) the repayment in cash of the balance of the capital notes in the amount of approximately US$ 6.2 million (plus accrued interest and expenses), (b) the delivery to Leonardo of the maximum number of the Company's ordinary shares into which the capital notes could have been converted on the maturity date without regard to the 2,250,000 share limitation, or 3,516,462 ordinary shares, plus additional monetary damages, or (c) the payment of a cash amount equal to the amount obtained by multiplying the 3,516,462 shares mentioned in the preceding clause by the highest trading price of the Company's ordinary shares between the maturity date and the date of the Court's decision, plus interest or expenses. 

Although there can be no assurances as to the final outcome of this litigation, the Company believes that the maximum liability that it could have in this matter, assuming that a court rejects the Company's interpretation of the agreements or determines that it has otherwise defaulted on the capital notes, is approximately US$ 5.9 million. In addition, on January 27, 2005, Leonardo moved to have its complaint amended to add an additional cause of action, claiming that on January  29, 2002 the Company also breached the financial transaction because Moked Ituran Ltd. (shareholder of Ituran) distributed some of the Company's ordinary shares to its shareholders, in violation of the covenant that requires Moked Ituran Ltd. to maintain at least 70% of the number of the Company's ordinary shares that it held at the time the Company entered into the financial transaction with Leonardo. Based on such alleged breach, Leonardo is seeking an additional alternative remedy of US$ 9.6 million, plus interest and expenses. 

The Company intends to vigorously defend itself in this litigation and the Company believes that it has meritorious defenses to the claims of Leonardo based on the language of the documents and agreements comprising the financial transaction and the additional evidence the Company has reflecting the intentions of the parties. 

During 2005, further to the suggestion of the court, the Company entered into a non-binding mediation process with Leonardo L.P. The mediation process has no time limit and may be terminated at any time at the discretion of each party. Only one meeting has been held up to the date of this filing. 

 

F-26

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 12 — CONTINGENT LIABILITIES, LIENS AND GUARANTEES (cont.)  

A.  

Claims (cont.)  

2. 

On March 17, 2005, a suit was filed against the Company in an amount of NIS 4.7 million (US$ 1.0 million). The suit was filed by an attorney and a collection company managed by the attorney. The two plaintiffs acted on behalf of the Company in collecting customer debts. According to the plaintiffs, the Company owes them amounts in respect of expenses and fees, as well as for damage to their reputations. Immediately prior to the filing of this suit, the Company filed a suit and attachment in an amount of NIS 1.4 million (US$ 306,000) against the plaintiffs in respect of checks cancelled by the plaintiffs and receipts received by the plaintiffs on behalf of the Company for which the Company never received money. In respect of the request for seizure, the plaintiffs filed a petition to have the seizure cancelled. On March 21, 2005, the parties reached an agreement whereby the seizure will remain in place, except for the cancellation of the seizure of the bank accounts of the insurance companies in which the debtors have no activity and, therefore, there is no significance to the attachment. In addition, the seizure will be cancelled on credit card companies whose customers are not debtors of the Company. In return, the Company was granted a second-degree lien on a car valued at NIS 300,000 (US$ 66,000). In the opinion of the Company's legal counsel, the plaintiffs' case is without merit. 

In August 2005, an agreement was signed between the Company and the plaintiffs, pursuant to which the attorney and the collection company repudiate their claim and accept the position of the Company in full. The Company is currently waiting for court approval of this agreement. 

3. 

A number of legal claims regarding vehicles were filed against the Company for which the Company has insurance coverage. Such claims were turned over to the respective insurance companies for processing. 

There are a number of other claims in immaterial amounts that are in various stages of disposition. At present, the Company is unable to estimate the outcome of such claims. 

4. 

On July 8, 2005 a class action was filed against a subsidiary of the Company, Ituran Florida Corporation, in the First Judicial District Court in Philadelphia, Pennsylvania. The lawsuit claims that Ituran Florida sent fax advertisements to the named plaintiff and the other members of the class allegedly in violation of the Telephone Consumer Protection Act of 1991. The maximum potential amount of damages that the Company estimates our subsidiary may be liable for pursuant to the provisions of the Telephone Consumer Protection Act if the plaintiffs prevail is approximately $1.5 million in the aggregate for all class plaintiffs, plus punitive damages and expenses. The Company does not believe that the plaintiffs will prevail and, even if they do prevail, the Company does not believe that the resolution of this claim will have a material effect on its revenues, operations or liquidity. 

 

F-27

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 12 — CONTINGENT LIABILITIES, LIENS AND GUARANTEES (cont.)  

B.  

Liens  

To guarantee the liabilities of the Group to banks, the Company has registered the following pledges: 

1. 

On monies due and/or due in the future from the bank clearing house, as well as a first degree floating lien on all of the property and assets of the Company and on the insurance rights thereto. 

2. 

On the ordinary shares of Telematics Wireless. 

C.  

The Company was declared a monopoly under the Israeli Restrictive Trade Practices Law, 1988, in the market for the provision of systems for the location of vehicles in Israel. Under Israeli law, a monopoly is prohibited from taking certain actions, such as predatory pricing and the provision of loyalty discounts, which prohibitions do not apply to other companies. The Israeli antitrust authority may further declare that the Company has abused its position in the market. Any such declaration in any suit in which it is claimed that the Company engages in anti-competitive conduct may serve as prima facie evidence that the Company is either a monopoly or that it has engaged in anti-competitive behavior. Furthermore, it may be ordered to take or refrain from taking certain actions, such as setting maximum prices, in order to protect against unfair competition. 

D.  

Commitments  

As of December 31, 2004, minimum future rentals under operating leases of buildings for periods in excess of one year were as follows: 2005 – US$ 1.0 million; 2006 – US$ 0.9 million; 2007 – US$ 0.8 million; 2008 – US$ 0.5 million; 2009 and thereafter – US$ 0.7 million. 

The leasing fees expensed in each of the years ended December 31, 2002, 2003, 2004 and for the six month periods ended June 30, 2004 and 2005 were US$ 2.0 million, US$ 2.1 million, US$ 2.0 million, US$ 0.8 million and US$ 1.1 million, respectively. 

NOTE 13 — CAPITAL NOTES  

1. 

On February 7, 2000, the Company entered into an agreement with Leonardo L. P., a foreign company ("Leonardo") for a private placement of capital notes in return for an amount of US$ 12 million. 

The capital notes are convertible into Company shares until the end of the three-year period following their date of issue. The capital notes entitle their holders (until such time as they are converted into shares) to interest of 3.5% per annum, to be paid in cash or to be added to the principal, at the discretion of the Company. 

The capital notes are convertible into ordinary shares of the Company, par value NIS 0.33 each. During the first 90-day period following the issuance of the capital notes, the conversion rate was NIS 67.3 (US$ 14.72) per share. Subsequently, the conversion rate was set as the lower of an amount of NIS 67.3 (US$ 14.72) per share or an amount equal to the average of the lowest 10 prices of the share during the 60 trading-day period prior to the date of the conversion of the capital notes. 

 

F-28

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 13 — CAPITAL NOTES (cont.)  

1.  (cont.) 

In 2000, 2001 and 2002, capital notes in an amount of US$ 2.5 million were converted into 241,392 Company shares, US$ 985,000 into 297,645 Company shares and US$ 3.2 million into 1,702,557 Company shares, respectively. As of December 31, 2003, 2004 and June 30, 2005, the outstanding balance of capital notes could be converted into 8,406 Company shares. 

Since the inception of the agreement with Leonardo, through March 2003 (the contractual term of the capital notes), the Company accrued interest in respect of the capital notes. The interest charge for the years ended December 31, 2002 and 2003 amounted to US$ 207,000 and US$ 134,000, respectively. 

The Company elected not to pay the interest in cash. The effect of the accrued interest was reflected in the number of shares issued. 

2. 

See Note 12(A)(1) for a discussion regarding a pending legal action in connection with the notes. 

NOTE 14 — SHAREHOLDERS' EQUITY  

A.  

Share capital  

1. 

Composition: 

December 31, 2003 2003 2004 2004
Registered Issued and
fully paid 		Registered Issued and
fully paid
Ordinary shares of NIS  0.33⅓ each – listed for trade on the Tel Aviv Stock Exchange 22,575,000 18,541,335 22,575,000 18,595,197

June 30 (unaudited), 2005 2005
Registered Issued and
fully paid
Ordinary shares of NIS 0.33⅓ each – listed for trade on the Tel Aviv Stock Exchange 22,575,000 18,776,652

2. 

The Ordinary shares of the Company confer upon their holders the right to receive notice to participate and vote in general meetings of the Company and the right to receive dividends, if and when, declared. 

3. 

Shares held by the subsidiaries of the Company have no voting rights. 

4. 

During 2004, a subsidiary sold 820,875 of such shares for an amount of US$ 2.2 million. 

5. 

As of the balance sheet date, subsidiaries hold 0.11% of the share capital of the Company. 

B.  

Stock option plans of the Company  

1. 

During May 1998, the Company's Board of Directors approved an employee stock option plan (the "1998 Plan") for the grant, without consideration, of up to 120,182 options, 

 

F-29

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 14 — SHAREHOLDERS' EQUITY (cont.)  

B.  

Stock option plans of the Company (cont.)  

exercisable into 360,546 ordinary shares of NIS 0.33 par value of the Company to employees, officers and directors of the Company. The exercise price of each option is NIS 0.33⅓. The options vest over a period of 2-4 years based on the employment status of each grantee. Any option not exercised within 180 days after the date such option vests will expire. Through June 30, 2005, all the options under the 1998 Plan were granted and exercised. 

Compensation expense in respect of the 1998 Plan for the year ended December 31, 2002 amounted to US$ 19,000. 

2. 

On August 23, 2001, the Company's Board of Directors approved an employee stock option plan (the "2001 Plan") for the grant, without consideration, of up to 282,244 options, exercisable into 846,732 ordinary shares of NIS 0.33⅓ par value of the Company to certain employees and senior executives of the Company and its subsidiaries. The exercise price of each option is NIS  0.33⅓. 32,324 options were fully vested on the date of grant and the remaining options under the plan vest over a period of 1-3 years (mainly 3) based on the employment status of each grantee. Any option not exercised within 3 years after the date such option vests will expire. Through June 30, 2005, all options under the 2001 Plan were granted and fully vested and 145,762 options were exercised. 

Compensation expense in respect of the 2001 Plan for the years ended December 31, 2002, 2003 and 2004 amounted to US$ 972,000, US$ 358,000 and US$  90,000 respectively. 

3. 

Following is a summary of the status of the option plans as of December 31, 2002, 2003, 2004 and changes during the years ended on those dates, and as of June 30, 2004 and 2005 and changes during the six month periods ended on those dates: 

Number Weighted
average
exercise
price 		Number Weighted
average
exercise
price 		Number Weighted
average
exercise
price
Year ended December 31, 2002 2003 2004
Balance outstanding at beginning
of year 		300,740 NIS 1 300,740 NIS 1 214,920 NIS  1
Exercised — — (85,820 ) NIS 1 (17,953 ) NIS 1
Expired (*) — — — — (16,932 ) NIS  1
Balance outstanding at end of year 300,740 NIS 1 214,920 NIS 1 180,035 NIS  1
Balance exercisable at end of year 236,873 NIS 1 201,975 NIS 1 180,035 NIS  1

(*) 

On July 18, 2005, the relevant institutions of the Company, as required under the Israeli Companies Law, approved the issuance of fully vested options to replace those options that expired, at a per-share exercise price of NIS  1. The options shall be exercisable for one year. 

The total benefit deriving from this issuance is US$ 230,000 and will be reflected in the income statement in the 3rd quarter of 2005. 

 

F-30

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 14 — SHAREHOLDERS' EQUITY (cont.)  

B.  

Stock option plans of the Company (cont.)  

Number Weighted
average
exercise
price 		Number Weighted
average
exercise
price
Six month period ended June 30, (unaudited) 2004 2005
Balance outstanding at beginning of year 214,920 NIS 1 180,035 NIS  1
Exercised (17,953 ) NIS 1 (60,485 ) NIS 1
Balance outstanding at end of period 196,967 NIS 1 119,550 NIS 1
Balance exercisable at end of period 184,022 NIS 1 119,550 NIS  1

The following table summarizes information about options outstanding at June 30, 2005: 

Options outstanding
Exercise price Number
outstanding at
December 31,
2004 		Weighted
average
remaining
contractual
life (years) 		Weighted
average
exercise
price 		Number
exercisable at
December 31,
2004 		Weighted
average
exercise
price
NIS  1 180,035 1.5 NIS 1 180,035 NIS  1

4. 

During February 2000, in return for services rendered in connection with a transaction with a foreign company, the foreign company was offered 50,000 non-negotiable option warrants, exercisable into 150,000 ordinary shares of the Company, par value NIS  0.33 each, at a price of NIS 61.1 per share (US$ 13.36). The options were fully vested on the date of grant and exercisable at any time after their allotment, but no later than May 7, 2005. As of the balance sheet date, no options were exercised and the options expired. 

The fair value of these options was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 10%, dividend yield of 0%, volatility factors of the expected market price of the Company's ordinary shares of 30%, and contractual life of the options of 2 years. The Company recorded deferred issuance costs in an amount of US$  440,000, which were amortized over the life of the capital notes. 

5. 

During December 2000, in return for services rendered in connection with a transaction with a foreign company, the foreign company was offered 11,111 non-negotiable option warrants, exercisable into 33,333 ordinary shares of the Company, par value NIS 0.33 each, at a price of NIS 51.85 per share (US$ 11.34). The options were fully vested on the date of grant and exercisable at any time after their allotment, but no later than December 31, 2005. As of December, 31 2004, no options under the transaction were exercised. 

The fair value of these options was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 10%, dividend yield of 0%, volatility factors of the expected market price of the Company's ordinary shares of 30%, and contractual life of the options of 3.5 years. The Company recorded deferred issuance costs in an amount of US$  162,000, which were amortized over the life of the capital notes. 

6. 

The rights to the shares issued upon exercise of the options will be identical to those of the ordinary shares of the company. 

C.  

Stock option plans of Telematics Wireless  

1. 

Telematics Wireless, a subsidiary of the Company, approved several employee stock option plans (the "Subsidiary Plans") for the grant to its employees, without consideration, of options exercisable into ordinary shares of Telematics Wireless and for a grant of restricted shares (options with no exercise price) to three senior executives of Telematics Wireless. 

 

F-31

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 14 — SHAREHOLDERS' EQUITY (cont.)  

C.  

Stock option plans of Telematics Wireless (cont.)  

1.  (cont.) 

 

The vesting period of such options and restricted stock of Telematics Wireless is generally 3-4 years (33% after the first two years, 33% after three years and 33% after four years) from the date of grant and the rights of the ordinary shares obtained upon exercise of the options will be identical to those of the other ordinary shares of Telematics Wireless. The exercise period of the options granted is mainly five years from the date of grant. 

Compensation expenses attributable to the "subsidiary plans" for the years ended December 31, 2002, 2003 and 2004 amounted to US$ 239,000, US$ 63,000 and US$ 19,000 respectively. 

2. 

During 2002, after the restricted shares granted to the senior executives of Telematics Wireless became fully vested, the Company purchased the subsidiary shares held by the senior executives. Company shares with an aggregate value of US$ 1.3 million were issued as the consideration for the acquisition (the actual issuance took place in February 2003). 

D.  

Retained earning  

1. 

In determining the amount of retained earnings available for distribution as a dividend, the Israeli Companies Law stipulates that the cost of the Company's shares acquired by subsidiaries of the Company (that are presented as a separate item in the statement of changes in shareholders' equity) must be deducted from the amount of retained earnings. 

2. 

On January 2004, the board of directors of the Company approved its dividend distribution policy whereby the Company would distribute annually 25% of its net income on the basis of the results of the Company each year, on condition that such distribution would not prevent the Company from meeting its existing and future commitments when they come due. 

3. 

Dividends are declared and paid in NIS. Dividends paid to shareholders outside Israel may be converted into dollars on the basis of the exchange rate prevailing at the date of conversion. 

4. 

In April 2005, the Company distributed a dividend of approximately US$ 2.6 million (NIS 11.8 million), on the basis of the results of the Company for the year ended December 31, 2004. 

NOTE 15 — FINANCING EXPENSES, NET  

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Interest expenses in respect of long-term loans 342 399 531 189 237
Short-term interest expenses 1,196 678 705 209 17
Losses (gains) from derivative financial instruments 633 2,300 693 136 (90 )
Amortization of deferred charges and accretion of interest in respect of capital note 510 89 — — —
Exchange differences and others, net 3,358 (2,850 ) 130 857 (123 )
6,039 616 2,059 1,391 41

 

F-32

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 16 — TAXES ON INCOME  

A.  

Taxes on income included in the statements of income:  

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Income taxes (tax benefit):
Current taxes:
In Israel 471 1,360 2,892 2,248 1,124
Outside Israel — 133 274 142 1,189
471 1,493 3,166 2,390 2,313
Deferred taxes:
In Israel (177 ) 895 30 9 81
Outside Israel (3,199 ) 1,298 1,153 21 115
(3,376 ) 2,193 1,183 30 196
Taxes in respect of prior years:
In Israel (50 ) (269 ) 74 — (376 )
(2,955 ) 3,417 4,423 2,420 2,133

B.  

Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985 (the "Inflationary Adjustment Law")  

The Company and its Israeli subsidiaries report income for tax purposes in accordance with the provisions of the Inflationary Adjustments Law, whereby taxable income is measured in NIS, adjusted for changes in the Israeli Consumer Price Index. 

C.  

The Law for the Encouragement of Capital Investments, 1959 (the "Investment Law")  

A certain Israeli subsidiary of the Company has been granted "Approved Enterprise" status according to the Investment Law, under several different investment programs. The subsidiary is entitled to tax benefits deriving from the execution of programs for investments in assets, in accordance with the certificates of approval granted in respect of these investment programs. 

Taxable income derived from the "Approved Enterprise" is tax exempt for a period of two to four years commencing in the first year in which the subsidiary earns taxable income from the approved enterprise and is liable to a reduced corporate tax rate of up to 25% for an additional period of three to five years (up to a total of seven years for each investment program). The benefit period for each of the programs is limited to the earlier of twelve years from the year that the investment plan was implemented, or fourteen years from the year in which the approval was granted. 

In the event of distribution of cash dividends out of income which was tax exempt as above, the companies would have to pay the 25% tax in respect of the amount distributed. 

 

F-33

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 16 — TAXES ON INCOME (cont.)  

C.  

The Law for the Encouragement of Capital Investments, 1959 (the "Investment Law") (cont.)  

The entitlement to the above benefits is conditional upon the subsidiary fulfilling the conditions stipulated by the Investment Law, regulations published thereunder and the instruments of approval for the specific investments in Approved Enterprises. In the event of failure to comply with these conditions, the benefits may be cancelled and the subsidiary may be required to refund the amount of the benefits, in whole or in part, with the addition of linkage differences to the Israeli CPI and interest. Management of the subsidiary believes that the subsidiary was in compliance with the abovementioned conditions through June  30, 2005. 

D.  

Reduction in corporate tax rates  

On June 29, 2004, the Israeli Parliament passed Amendment to the Income Tax Ordinance (No. 140 and Temporary Order) – 2004, gradually reducing the tax rate applicable to the Company, commencing on January 1, 2004, from 35% in 2004 to 30% in 2007. 

The implementation of the Amendment did not have a material effect on the financial position or results of operations of the Company for the year ended December 31, 2004. 

During August 2005, the Israeli Parliament passed another Amendment to the Income Tax Ordinance (No. 147 and Temporary Order) – 2005, gradually reducing the tax rate applicable to the Company, commencing on January 1, 2006, from 31% in 2006 to 25% in 2010. 

The implementation of the Amendment, which will affect the financial statements of the Company for the third quarter of fiscal 2005, is not expected to have a material effect on the financial position or results of operations of the Company for that period. 

E.  

Non-Israeli subsidiaries  

Non-Israeli subsidiaries are taxed according to the tax laws and rates in their country of residence. 

F.  

Tax assessments  

The Company has received final tax assessments through the 2002 tax year. Two Israeli subsidiaries have received final tax assessments through the 2000 and 2002 tax years, respectively. The other subsidiaries have not been assessed since incorporation. 

G.  

Carryforward tax losses  

Carryforward tax losses of an Israeli subsidiary as of December 31, 2004 amount to US$ 261,000. 

Carryforward tax losses in Israel may be utilized indefinitely. 

The Company's non-Israeli subsidiaries in Brazil and the United States have available estimated carryforward tax losses of approximately US$ 5.1 million and US$ 9.6 million, respectively. 

 

F-34

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 16 — TAXES ON INCOME (cont.)  

H.  

The following is a reconciliation between the theoretical tax on pre-tax income, at the applicable Israeli tax rate, and the tax expense reported in the financial statements: 

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Pretax income (2,288 ) 9,670 16,204 7,479 9,365
Tax rate 36 % 36 % 35 % 35 % 34 %
Tax computed at the ordinary tax rate (824 ) 3,481 5,671 2,618 3,184
Non-deductible expenses 290 226 266 137 92
Provision for decline in value of an investment 190 — — — —
Tax in respect of approved enterprises and translation differences (191 ) 508 (1,045 ) (461 ) (744 )
Losses in respect of which no deferred taxes were generated 1,106 272 192 119 96
Utilization of losses of prior years in respect of which no deferred taxes were generated (1,508 ) (1,155 ) (1,423 ) (545 ) (1,228 )
Deductible financial expenses recorded to additional paid-in capital (1,767 ) (194 ) (156 ) (93 ) 969
Taxes in respect of prior years (50 ) (269 ) 74 — (376 )
Taxes in respect of withholding at the source from royalties — — 697 549 —
Tax exempt income (355 ) — — — —
Others 154 548 147 96 140
(2,955 ) 3,417 4,423 2,420 2,133

 

F-35

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 16 — TAXES ON INCOME (cont.)  

I.  

Summary of deferred taxes  

Composition:  

US dollars
Year ended
December 31, 		Six month period
ended June 30,
(in thousands) 2003 2004 2004 2005
(unaudited)
Deferred taxes included in other current assets and other current liabilities, in respect of:
Provision for employee-related obligations 133 44 49 70
Carryforward tax losses 121 41 485 25
Other timing differences (249 ) 68 (45 ) 177
5 153 489 272
Valuation allowance — — — —
5 153 489 272
Long-term deferred taxes included in long-term investments and other receivables:
Provision for employee related obligations 331 468 446 482
Carryforward tax losses 8,573 6,647 6,912 6,644
Other timing differences 129 176 147 (321 )
9,033 7,291 7,505 6,805
Valuation allowance (2,793 ) (1,784 ) (1,777 ) (1,363 )
6,240 5,507 5,728 5,442

J.  

Income before income taxes is composed as follows:  

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
The Company and its Israeli subsidiaries 10,370 5,204 12,323 6,734 6,940
Non-Israeli subsidiaries (12,658 ) 4,466 3,881 745 2,428
(2,288 ) 9,670 16,204 7,479 9,368

 

F-36

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 17 — EARNINGS PER SHARE  

The net income and the weighted average number of shares used in computing basic and diluted earnings per share for the years ended December 31, 2002, 2003, 2004 and for the six month periods ended June 30, 2004 and 2005, are as follows: 

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Net income used for the computation of basic earnings per share 869 5,845 11,219 4,877 7,085
Interest expense on capital notes (*) — 34 — — —
The effect of inclusion of the earning of subsidiary based on its diluted earning per share, net — (13 ) (122 ) (56 ) (105 )
Net income used for the computation diluted earning per share 869 5,866 11,097 4,821 6,980

Number of shares
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Weighted average number of shares used in the computation of basic income per share 17,634 18,273 18,585 18,577 18,614
Add:
Additional shares from the assumed exercise of employee stock options, net 630 804 598 602 517
Weighted average number of additional shares issued upon the assumed conversion of capital notes (*) — 9 9 9 9
Weighted average number of shares used in the computation of diluted income per share(**) 18,264 19,086 19,192 19,188 19,140

(*) 

The effect of the inclusion of the capital notes for the year 2002 is anti-dilutive. 

(**) 

The effect of the inclusion of the option warrants for all of the reported periods is anti-dilutive. 

NOTE 18 — RELATED PARTIES  

A.  

During 2002, a lease agreement was signed between a subsidiary and a related party. The lease period expires on November 30, 2006. 

The expected annual lease payments are US$ 180,000. 

B.  

The Tzivtit Insurance Ltd. ("Tzivtit Insurance"), owned by directors of the Company, serves as the Company's insurance agent and provides the Company with elementary insurance and managers insurance. 

In respect of these insurance services, Tzivtit Insurance is entitled to receive commissions at various rates, paid by the insurance company. 

 

F-37

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 18 — RELATED PARTIES (cont.)  

C.  

In February 2003, an agreement was signed between the Company and A. Sheratzky Holdings Ltd., a wholly owned and controlled company belonging to Mr.  Izzy Sheratzky, Chairman of the Company's Board of Directors. The agreement includes, among other things, the cost of Mr. Izzy Sheratsky's monthly employment in an amount of NIS 74,000 (US$ 16,177) (linked to the Israeli CPI), entertainment expenses, car maintenance expenses, cellular phone, and entitlement to participate in the profits of the Company in an amount equal to 5% of the pretax income of the Company, plus the share of the Company in the income or losses of affiliated companies, on the basis of the audited consolidated financial statements. 

The agreement is for a two-year period, with automatic two-year extensions, unless either of the parties gives 180-day advance notice of its intention to terminate the agreement. 

D.  

In January 2004, changes in the employment terms of the two Co-CEOs of the Company were approved, whereby each would be entitled to an annual bonus equal to 1% of the pretax income of the Company, plus the share of the Company in the income or losses of affiliated companies, on the basis of the audited consolidated financial statements. 

E.  

In March 1998, an agreement was approved with an interested party, Prof. Yehuda Kahane, for financial consulting, whereby the Company would pay the consultant monthly consulting fees of NIS  4,000 (US$ 875), linked to the Israeli Consumer Price Index in respect of January 1998. In May 2003, the Company approved an increase in the consideration paid, to a total cost of NIS 15,000 (US$ 3,279) a month, linked to the Israeli Consumer Price Index. 

NOTE 19 — SEGMENT REPORTING  

A.  

General information:  

The operations of the Company are conducted through two different core activities: Location-Based Services and Wireless Communications Products. These activities also represent the reportable segments of the Company. 

The reportable segments are viewed and evaluated separately by Company management, since the marketing strategies, processes and expected long term financial performances of the segments are different. 

Commencing in 1999 and ending in March 2005, the Company, through its subsidiary, Ituran Cellular Communications Ltd., was engaged in the installation of hands-free equipment in cars, and the sale of cellular lines and equipment under an exclusivity agreement with Partner Communications Co. Ltd. In view of the fact that, as of April 1, 2005, this activity is no longer material, it ceased being a reportable segment and is presented below as "Other". 

Location-based services:  

The location-based services segment consists predominantly of regionally-based stolen vehicle recovery (SVR) services, fleet management services and value-added services comprised of personal advanced locater services and concierge services. 

The Company provides location-based services in Israel, Brazil, Argentina and the United States. 

 

F-38

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 19 — SEGMENT REPORTING (cont.)  

A.  

General information: (cont.)  

Wireless communications products:  

The wireless communications product segment consists of short and medium range two-way machine-to-machine wireless communications products that are used for various applications, including automatic vehicle location, automated meter reading and automatic vehicle identification. The Company sells products to customers in Israel, Argentina, Brazil and the United States. 

B.  

Information about reported segment profit or loss and assets:  

US dollars
(in thousands) Location-
based
services 		Wireless
communications
products 		Other Total
Year ended December 31, 2002
Revenues 24,053 17,782 7,856 49,691
Operating income 3,474 20 785 4,279
Assets 2,285 15,491 5,159 22,935
Goodwill 777 347 289 1,413
Expenditures for assets 570 266 118 954
Depreciation and amortization 459 310 217 986
Year ended December 31, 2003
Revenues 32,088 23,527 8,456 64,071
Operating income (loss) 9,927 (566 ) 925 10,286
Assets 2,816 11,371 5,064 19,251
Goodwill 762 376 313 1,451
Expenditures for assets 301 90 154 545
Depreciation and amortization 489 341 357 1,187
Year ended December 31, 2004
Revenues 36,549 33,461 7,916 77,926
Operating income 11,025 6,045 1,193 18,263
Assets 3,636 18,878 4,719 27,233
Goodwill 1,472 1,072 318 2,862
Expenditures for assets 1,277 1,113 9 2,399
Depreciation and amortization 569 345 185 1,099

 

F-39

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 19 — SEGMENT REPORTING (cont.)  

B.  

Information about reported segment profit or loss and assets: (cont.)  

US dollars
(in thousands) Location-
based
services 		Wireless
communications
products 		Other Total
        (unaudited)
Six month period ended June 30, 2004 (unaudited)
Revenues 17,857 14,432 3,790 36,079
Operating income 5,632 2,605 633 8,870
Assets 2,781 16,172 4,871 23,824
Goodwill 755 366 305 1,426
Expenditures for assets 245 79 9 333
Depreciation and amortization 228 110 88 426
Six month period ended June 30, 2005 (unaudited)
Revenues 20,565 20,958 2,162 43,685
Operating income 6,060 3,023 326 9,409
Assets 5,099 23,490 927 29,516
Goodwill 1,611 1,009 300 2,920
Expenditures for assets 840 398 — 1,238
Depreciation and amortization 292 146 45 483

C.  

Information about reported segment profit or loss and assets:  

– 

The evaluation of performance is based on income from operations of each of the reportable segments. 

– 

Accounting policies of the segments are the same as those described in the accounting policies applied in the financial statements. 

– 

Due to the nature of the reportable segments, there have been no inter-segment sales or transfers during the reported periods. 

– 

Financing expenses, net, other expenses, net, taxes on income, minority interests and the share of the Company in losses of affiliated companies were not allocated to the reportable segments, since these items are carried and evaluated on the enterprise level. 

 

F-40

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 19 — SEGMENT REPORTING (cont.)  

D.  

Reconciliations of reportable segment revenues, profit or loss, and assets, to the enterprise's consolidated totals:  

US dollars
Year ended December 31, Six month period
ended June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Total revenues of reportable segment and consolidated revenues 49,691 64,071 77,926 36,079 43,685
Operating income
Total operating income for reportable segments 4,279 10,286 18,263 8,870 9,409
Unallocated amounts:
Financing expenses, net 6,039 616 2,059 1,391 41
Other expenses, net 528 — — — —
Consolidated income before income taxes and extraordinary items (2,288 ) 9,670 16,204 7,479 9,368
Assets
Total assets for reportable segments 24,348 20,702 30,095 25,250 32,436
Other unallocated amounts:
Current assets 13,705 16,871 14,174 15,763 16,326
Investments in affiliated companies 1,353 1,189 870 1,000 975
Property and equipment, net 5,866 7,183 6,613 6,897 6,308
Other assets 4,526 3,868 3,305 3,611 3,323
Other unallocated amounts 4,615 4,918 3,966 3,583 3,683
Consolidated total assets (at period end) 54,413 54,731 59,023 56,104 63,051
Other significant items
Total expenditures for assets of reportable segments 954 545 2,399 333 1,238
Unallocated amounts 2,134 1,698 1,371 727 558
Consolidated total expenditures for assets 3,088 2,243 3,770 1,060 1,796
Total depreciation and amortization for reportable segments 986 1,187 1,099 426 483
Unallocated amounts 2,914 2,295 2,437 1,201 1,329
Consolidated total depreciation and amortization 3,900 3,482 3,536 1,627 1,812

 

F-41

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 19 — SEGMENT REPORTING (cont.)  

E.  

Geographic information  

Revenues
December 31, June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Israel 38,279 43,843 47,714 22,719 21,144
United States 3,486 7,720 11,148 6,071 6,049
Brazil 7,568 7,740 13,004 5,230 9,569
Argentina 358 4,768 5,357 2,059 4,345
Other — — 703 — 2,578
Total 49,691 64,071 77,926 36,079 43,685

Property and equipment, net
December 31, June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Israel 3,814 3,286 3,452 3,158 3,369
United States 1,560 1,251 1,014 1,179 856
Brazil 2,411 1,871 1,866 1,499 2,437
Argentina 841 3,019 2,872 3,100 2,841
Total 8,626 9,427 9,204 8,936 9,503

– 

Revenues were attributed to countries based on customer location. 

– 

Property and equipment were classified based on major geographic areas in which the Company operates. 

F.  

Major customers  

During 2004, sales to a single customer amounted to 10.2% of the total revenues. Apart from this customer, there were no sales exceeding 10% of total revenues in all periods presented. 

NOTE 20 — FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT  

A.  

Concentrations of credit risks  

Most of the Group's cash and cash equivalents and short-term investments as of December 31, 2002, 2003, 2004 and as of June 30, 2004 and 2005,were deposited with major Israeli banks. The Company is of the opinion that the credit risk in respect of these balances is remote. 

Most of the Group's sales are made in Israel, South America and the United States, to a large number of customers. Accordingly, the Group's trade receivables do not represent a substantial concentration of credit risk. 

One of the subsidiaries of the Company performs under long-term contracts with several unrelated parties. At the time of initiation, the subsidiary checks the credit worthiness of the party to each contract, but generally does not require collateral. However, in certain circumstances, the Company may require a letter of credit, other collateral, or additional guarantees of advance payment. 

 

F-42

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 20 — FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT (cont.)  

B.  

Fair value of financial instruments  

The fair value of the financial instruments included in the working capital of the Group (cash and cash equivalents, accounts receivable and accounts payable) approximates their carrying value, due to the short-term maturity of such instruments. The fair value of the long-term deposit, long-term loans and other long-term liabilities also approximates the carrying value, since they bear interest at rates close to the prevailing market rates. 

The fair values of derivatives are: assets of US$ 770,000 and liabilities of US$ 1.8 million at December 31, 2003, and liabilities of US$ 1.4 million at December 31, 2004. The fair value of derivatives generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting dates. 

As the counterparties to the derivatives transactions are Israeli banks, the Company considers the inherent credit risks remote. 

The following table summarizes changes in other comprehensive income (loss) related to derivatives that are classified as cash flow hedges held by the Company during the period from January 1, 2002 through December 31, 2004: 

US dollars
December 31, June 30,
(in thousands) 2002 2003 2004 2004 2005
(unaudited)
Balance at beginning of year — 278 644 644 —
Changes in fair value of derivatives 435 1,007 — 438 —
Reclassification into earnings from other comprehensive income — (435 ) (1,007 ) (1,007 ) —
Net of tax effect (157 ) (206 ) 363 210 —
Balance at end of year 278 644 — 285 —

C.  

Foreign exchange risk management  

The Group operates internationally, which gives rise to exposure to market risks mainly from changes in exchange rates of foreign currencies in relation to the functional currency. 

The Company has entered into foreign currency forward transactions in order to protect itself against the risk that the eventual cash flows resulting from anticipated transactions (mainly from subscription fees to be received), denominated in currencies other than the functional currency, will be affected by changes in exchange rates. The Company has certain involvement with derivative financial instruments for trading purposes. 

As described in Note 19B, certain transactions were designated and accounted as hedging instruments under FAS No. 133. Other transactions do not qualify as hedging instruments (or have not been designated as such). 

 

F-43

 

ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES 

Notes to the Consolidated Financial Statements (cont.) 

(Information as of June 30, 2005 and for the six months ended June 30, 2004 and 2005 is unaudited)  

NOTE 20 — FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT (cont.)  

C.  

Foreign exchange risk management (cont.)  

The nominal amounts of foreign currency derivatives as of December 31, 2003, 2004 and as of June 30, 2005, are as follows: 

US dollars
December 31, June 30,
(In thousands) 2003 2004 2005
(unaudited)
Forward transactions – for the exchange of:
US dollars into NIS 6,500 — —
Yen into US dollars 3,500 — —
Euros into US dollars 25,271 — —
US dollars into Euros — 2,728 —
Yen into Euros — 27,283 —

 

F-44

 

Report of Independent Public Accounting Firm
To the Shareholders of
ITURAN CELLULAR COMMUNICATION LTD. 

We have audited the accompanying consolidated balance sheets of Ituran Cellular Communication Ltd. and its subsidiary ("the company") as of December 31, 2004 and 2003 and the related consolidated statements of operations, changes in shareholders' equity (deficiency) and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiary as of December 31, 2004 and 2003 and the related consolidated results of its operations and cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States. 

As discussed in Note 1A to the consolidated financial statements, the Company will terminate its communication agreement with Parmer Communication Ltd. On March 31, 2005. 

Ziv Haft
    
/s/ Ziv Haft
Certified Public Accountants (Isr.)
BDO Member Firm

Tel-Aviv, Israel
May 29, 2005 

 

F-45

 
 

 

 

PART II 

INFORMATION NOT REQUIRED IN PROSPECTUS 

Expenses of Issuance and Distribution 

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by Ituran in connection with the sale of our ordinary shares in this offering. All amounts are estimates except the SEC registration fee and the NASD filing fee. 

Amount to be Paid
SEC registration fee $
NASD filing fee
NASDAQ National Market application fee and expenses
Printing and engraving expenses
Legal fees and expenses
Accounting fees and expenses
Transfer agent and registrar fees
Miscellaneous
Total $

Item 6.    Indemnification of Directors and Officers. 

Section 258 of the Israeli Companies Law, 5759 – 1999 (the "Israeli Companies Law"), prohibits a company from exculpating an officer or director from liability for the breach of his duty of loyalty. The company may exculpate an officer or director from liability for the breach of his duty of care, may insure his liability for a breach of the duty of loyalty and the duty of care, or indemnify him for such breach, but only in accordance with the following sections: 

Section 259 of the Israeli Companies Law permits a company to provide in its articles of association that an officer or a director of the company may be exculpated, to the extent provided in the articles of association, from liability for the breach of his duty of care, except for a breach of the duty of care in case of a prohibited dividend distribution and other prohibited distributions. 

Section 260(a) of the Israeli Companies Law permits a company to provide in its articles of association that the company may indemnify an officer or a director in such capacity, for the following liabilities or expenses: 

 

monetary liability incurred pursuant to a judgment, including a settlement or arbitration decision approved by a court, in an action brought by a third party; 

 

reasonable legal expenses, including attorney fees, incurred pursuant to an investigation or a procedure commenced against the director or the officer by a competent authority, and that was terminated without any indictment being filed and without any monetary liability to the office holder in exchange for a criminal procedure, or that was terminated without any indictment being filed but with a monetary liability in exchange for a criminal procedure in an offence that does not require to proof criminal intent (mens rea). 

 

reasonable legal expenses, including attorney fees, incurred in an action brought against the director or officer by or on behalf of the company or others; and 

 

reasonable legal expenses, including attorney fees, incurred in defending criminal charges of which the director or officer was acquitted, or as a result of a criminal charge that does not require proving criminal intent of which the director or officer was convicted. 

Section 260(b) of the Israeli Companies Law specifies that a company may indemnify a director or officer in advance in respect of certain liabilities either in advance of an event or following an event provided that a provision authorizing such indemnification is inserted in its articles of association. Our articles of association contain such a provision. An undertaking by a company to indemnify a director or officer in  

 

II-1

 

advance for civil actions by third parties must be limited to foreseeable liabilities in light of the actual activities of the company when it provided the undertaking and reasonable amounts or criteria determined by the board of directors. 

Section 261 of the Israeli Companies Law permits a company to provide in its articles of association that the company may insure a director or an officer with regard to acts performed by him or her in their capacity as a director or an officer. This insurance may cover: 

 

liability for breach of the duty of care; 

 

liability for breach of the duty of loyalty, provided that the officer or director acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; or 

 

monetary liabilities imposed for the benefit of a third party. 

All of these provisions are specifically limited in their scope by the Israeli Companies Law, which provides that a company may not indemnify an officer or director nor enter into an insurance contract that would provide coverage for any monetary liability incurred as a result of any of the following: 

 

a breach by the officer or director of the duty of loyalty, unless the officer or director acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; 

 

an intentional or reckless breach by the officer or director of the duty of care, except for a breach that was made due to negligence; 

 

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

 

any fine levied against the director or officer. 

Our articles of association provide that, subject to the provisions of applicable law, we may procure insurance for or indemnify any person who is not an officer, including any of our employees, agents, consultants or contractors. In addition, we may procure insurance for or indemnify any officer to the fullest extent permitted under law for any liability resulting from a breach of a duty, provided he or she acted in good faith and within the scope of his or her duties. We may grant an undertaking in advance to indemnify an officer or director, provided that such undertaking is limited to types of events that our Board of Directors deems likely to occur and is limited to an amount determined by our Board of Directors to be reasonable under the circumstances. 

We have acquired directors' and officers' liability insurance covering our officers and directors and the officers and directors of our subsidiaries against certain claims. Immediately prior to the completion of this offering we will enter into indemnification agreements with each of our directors and officers and the directors and officers of our subsidiaries, providing them with indemnification for liabilities or expenses incurred as a result of acts done by them in their capacity as directors and officers of our company. 

Item 7.    Recent Sales of Unregistered Securities. 

During the past three years, we issued securities without registration under the Securities Act of 1933 as follows: 

 

In 2002, we issued an aggregate of 1,702,557 of our ordinary shares upon the exercise of convertible notes held by Leonardo L.P. 

 

During 2003, we issued 457,095 ordinary shares to three of the officers of our subsidiary, Telematics Wireless, in exchange for their holdings in Telematics Wireless, pursuant to a certain agreement dated December 30, 2002. 

 

During the years 2003, 2004 and 2005 we issued 257,460, 53,859 and 206,853 ordinary shares, respectively, upon exercise of options by our employees. 

We believe that the securities issued in the transactions described above were exempt from registration under the Securities Act in reliance upon Section 4(2) or Regulation S of the Securities Act. 

 

II-2

 

Item 8.    Exhibits and Financial Statement Schedules. 

Exhibit Number Description of Exhibit
1.1 Form of Underwriting Agreement.
3.1 Form of Articles of Association of Registrant.
3.2 Form of Memorandum of Association of Registrant (English translation).
4.1 Specimen of Certificate of ordinary shares.
5.1 Legal Opinion of Yoram L. Cohen, Ashlagi, Fisher.*
10.1 Shareholders Agreement, dated May 18, 1998, by and between Moked Ituran, Ltd., Moked Services, Information, Management, Investments, Yehuda Kahane Ltd., P.K. Generators and Equipment Ltd., Gideon Ezra, Ltd., Effi Sheratzky, and Yigal Shani (English translation).
10.2 Form of Amendment to Shareholders Agreement dated May 18, 1998, by and between Moked Ituran, Ltd., Moked Services, Information, Management and Investments, Yehuda Kahane Ltd., P.K. Generators and Equipment Ltd., Gideon Ezra, Ltd., Effi Sheratzky and/or T.S.D. Holdings Ltd., and Yigal Shani and/or G.N.S. Holdings Ltd. (English translation).
10.3 Radio Location System License Agreement, dated December 16, 1993, by and between Pactel Teletrac and Tadiran Ltd.
10.4 Assignment, Assumption, Consent and Amendment Agreement, dated April 30, 1996, by and between Teletrac, Inc, Airtouch Services, Tadiran Ltd. and the Registrant.
10.5 Amendment Agreement (to Assignment, Assumption, Consent and Amendment Agreement dated April 30, 1996), dated March 1, 1999, by and between Teletrac, Inc. and the Registrant.
10.6 Radio Location System License Agreement, dated July 13, 2004, by and between Teletrac, Inc., and Telematics Wireless Ltd.
10.7 Radio Location System License Agreement, dated July 13, 1999, made by and among Teletrac, Inc., Teletrac License, Inc. and Ituran U.S.A. Inc.
10.8 Amendment No. 1 to Radio Location System License Agreement, dated May 8, 2000, made by and among Teletrac, Inc., Teletrac License, Inc. and Ituran U.S.A. Inc.
10.9 Integrated Base Station Unit Development Agreement, dated December 13, 1996, by and between Teletrac, Inc., Tadiran Telematics Ltd.
10.10 License and Ownership Agreement, dated as of September 29, 1999, by and between Tadiran Telematics Ltd. and Teletrac, Inc.
10.11 Radio Location System License Agreement, dated March 1, 1999, by and between Teletrac, Inc. and Beheermaatschappij de Rooij B.V.
10.12 Radio Location System License Agreement, dated December 21, 1999, by and between Teletrac, Inc. and Greenport Enterprises A.V.V., and assignment thereof to Ituran NY Corporation dated January 1, 2002.
10.13 License and Supply Agreement for Radio Location System, dated August 31, 2004, by and between Vision Plant Inc. and Telematics Wireless Ltd. and ancillary Representation Agreement, dated June 2004.†
10.14 Amendment No. 1 to the License and Supply Agreement for Radio Location System between Korean Location Information and Communications Company Ltd. and Telematics Wireless Ltd., dated June 15, 2005.*

 

II-3

 
Exhibit Number Description of Exhibit
10.15 Agreement for the Supply of Ituran Ltd. Radio Location System in greater China, dated August 29, 2004, by and between Golden Net Communication Technology Ltd., Digitrack (China) Group Co. Ltd. and Telematics Wireless Ltd., and ancillary Cooperation and Annex I-2-Beijing Ituran System Deployment in Beijing Statement of Work, Prices, and Terms of Payment, dated March 23, 2005.†
10.16 Cooperation Agreement, dated December 3, 2000, made by and between Arad Technologies, Ltd. and Tadiran Telematics Ltd. (English translation).†
10.17 RMR Production Agreement, dated June 14, 2001, by and between Arad Technologies Ltd. and Tadiran Telematics Ltd.†
10.18 Appendix to the Cooperation Agreement and RMR Production Agreement, dated December 11, 2002, by and between Arad Technologies Ltd. and Telematics Wireless Ltd. (English translation).†
10.19 Second Appendix to the Cooperation Agreement and RMR Production Agreement, dated December 28, 2003, by and between Arad Technologies Ltd. and Telematics Wireless Ltd. (English translation).†
10.20 Third Appendix to the Cooperation Agreement and RMR Production Agreement, dated December 28, 2004, made by and between Arad Technologies Ltd. and Telematics Wireless Ltd. (English translation).†
10.21 CIH-Transponders Supply Agreement, dated December 3, 2000, by and between Derech Eretz Highways (1997) Ltd. and Tadiran Telematics Ltd.
10.22 Agreement with an Independent Contractor, dated February 1, 2003, by and between the Registrant, Izzy Sheratzky, and A. Sheratzky Holdings, Ltd. (English translation).
10.23 Agreement with an Independent Contractor, dated September 5, 2002, by and between the Registrant, Eyal Sheratzky, and A. Sheratzky Holdings, Ltd., addendum thereof, dated October 28, 2002, and resolution of the Registrant's shareholders dated February 24, 2004 (English translation).
10.24 Agreement with an Independent Contractor, dated September 5, 2002, by and between the Registrant, Nir Sheratzky, and A. Sheratzky Holdings, Ltd., addendum thereof, dated October 28, 2002 ,and resolution of the Registrant's shareholders dated February 24, 2004 (English translation).
10.25 Individual Employment Agreement, dated August 1, 1995, by and between Moked Ituran Partnership (1995) and Jacob Suet (English translation).
10.26 Individual Employment Agreement, dated August 20, 1995, by and between Moked Ituran Partnership (1995) and Harel Broida (English translation).
10.27 Individual Employment Agreement, dated July 15, 1998, by and between Moked Ituran Partnership (1995) and Shlomo Kaminsky (English translation).
10.28 Consulting Services Agreement, dated March 23, 1998, by and between the Registrant and Yehuda Kahane Ltd., including addendum thereof, as of May 25, 2003 (English translation).
10.29 Agreement, dated December 30, 2002, by and between the Registrant, Eddy Kafry, Avri Franko, Roman Sternberg and Telematics Wireless Ltd. (English translation).
10.30 Unprotected Lease Agreement, dated February 7, 2002, by and between Mofari Ltd. and the Registrant and addendum thereof, dated February 19, 2002 (English translation).

 

II-4

 
Exhibit Number Description of Exhibit
10.31 Lease Agreement, dated September 13, 1998, by and between Tadiran, Ltd. and Tadiran Telematics, Ltd., and addendum thereof, dated May 29, 2002 (English translation).
10.32 Lease Agreement, dated May 29, 2002, by and between Rinat Yogev Nadlan and Ituran Cellular Communication (English translation).
10.33 Deed of undertaking and indemnification, dated November 12, 2000, executed by the Registrant to the benefit of Bank Hapoalim, Ltd. on behalf of Ituran Localizacao e Controle (English translation).
10.34 Indenture, dated August 6, 2001, by the Registrant for the benefit of Bank Hapoalim, Ltd. (English translation).
10.35 Indenture, dated January 29, 2002, by the Registrant for the benefit of Bank Hapoalim, Ltd. (floating lien) (English translation).
10.36 Indenture, dated January 29, 2002, by the Registrant for the benefit of Bank Hapoalim, Ltd. (English translation).
10.37 Deed of undertaking for repayment of loan, dated May 20, 2004, made by the Registrant in favor of Bank Hapoalim, Ltd. (English translation).
10.38 Lease Agreement, dated March 16, 2000, by and between Teleran Localizacao e Controle Ltda. and T4U Holding B.V., and addendum thereof, dated May 31, 2000.
10.39 Lease Agreement, dated November 23, 2001, by and between Ituran de Argentina S.A. and El Sr. Mario Galuppo (English translation).
10.40 Lease Agreement, dated September 7, 2001, by and between Ituran de Argentina S.A. and El Sr. Gustavo Eduardo Bazan (English translation).
10.41 Form of Directors' Letter of Indemnity and Exemption (English translation).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Fahn Kanne & Co., member firm of Grant Thornton International.
23.2 Consent of Ziv Haft, a network member of BDO International.
23.3 Consent of Yoram L. Cohen, Ashlagi, Fisher (contained in Exhibit 5.1 to this registration statement).*
24 Power of Attorney (contained in the signature pages to this registration statement).

 

*  

To be filed by amendment.  

†  

Portions have been omitted pursuant to a request for confidential treatment. The omitted portions bave been separately filed with the Securities and Exchange Commission.  

Item 9.    Undertakings. 

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. 

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 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  

 

II-5

 

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 Act and will be governed by the final adjudication of such issue. 

The undersigned registrant hereby undertakes that: 

(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 of 1933, 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 the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 

 

II-6

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Azour, Israel, on the 1st day of September, 2005.

ITURAN LOCATION AND CONTROL LTD.
By:    /s/ Eyal Sheratzky                                                
        Name: Eyal Sheratzky
        Title: Co-Chief Executive Officer and Director

Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in their respective capacities and on the respective dates set forth opposite their names. Each person whose signature appears below hereby authorizes Eyal Sheratzky and Eli Kamer, and each of them, with full power of substitution, to execute in the name and on behalf of such person any amendment or any post-effective amendment to this registration statement and to file the same, with exhibits thereto, and other documents in connection therewith, making such changes in this registration statement as the registrant deems appropriate, and appoints Eyal Sheratzky and Eli Kamer, and each of them, with full power of substitution, attorneys-in-fact to sign any amendment and any post-effective amendment to this registration statement and to file the same, with exhibits thereto, and other documents in connection therewith.

Signature Capacity Date
/s/ Izzy Sheratzky Chairman of the Board of Directors and Director September 1, 2005
Izzy Sheratzky
/s/ Eyal Sheratzky Co-Chief Executive Officer and
Director 		September 1, 2005
Eyal Sheratzky
/s/ Nir Sheratzky Co-Chief Executive Officer and
Director 		September 1, 2005
Nir Sheratzky
/s/ Eli Kamer Executive Vice President,
Finance; Chief Financial Officer 		September 1, 2005
Eli Kamer
/s/ Udi Mizrahi Vice President, Finance September 1, 2005
Udi Mizrahi
/s/ Yehuda Kahane Director September 1, 2005
Yehuda Kahane
/s/ Ron Benjamin Director September 1, 2005
Ron Benjamin
/s/ Avner Kurz Director September 1, 2005
Avner Kurz
/s/ Amos Kurz Director September 1, 2005
Amos Kurz
/s/ Yigal Shani Director September 1, 2005
Yigal Shani
/s/ Gil Sheratzky Director September 1, 2005
Gil Sheratzky

II-7



Signature Capacity Date
/s/ Yoav Kahane Director September 1, 2005
Yoav Kahane
/s/ Orna Ophir Director September 1, 2005
Orna Ophir
/s/ Israel Baron Director September 1, 2005
Israel Baron

United States Representative:

ITURAN U.S.A, INC.

By: /s/ Ron Shamai                              
Name: Ron Shamai
Title: Chief Executive Officer

II-8 






                                                                     EXHIBIT 1.1



                              FORM OF UNDERWRITING
                                   AGREEMENT


                        ITURAN LOCATION AND CONTROL LTD.



                                   [ ] Shares


                                 Ordinary Shares
                             (NIS 33 1/3 Par Value)





[            ] [  ], 2005






                             UNDERWRITING AGREEMENT

                                                             [           ], 2005

UBS Securities LLC
as Managing Underwriter
c/o UBS Securities LLC
299 Park Avenue
New York, New York  10171-0026

Ladies and Gentlemen:


                  Ituran Location and Control Ltd., an Israeli corporation (the
"Company"), proposes to issue and sell, and the persons named in Schedule B
hereto (the "Selling Shareholders"), severally and not jointly, propose to sell,
to the underwriters named in Schedule A annexed hereto (the "Underwriters"), for
whom you are acting as representative (the "Representative"), an aggregate of
[     ] ordinary shares (the "Firm Shares"), NIS 33 1/3 par value, of the
Company (the "Ordinary Shares"), of which [ ] Ordinary Shares are to be issued
and sold by the Company and an aggregate of [ ] Ordinary Shares are to be sold
by the Selling Shareholders in the respective amounts set forth under the
caption "Firm Shares" in Schedule B annexed hereto. In addition, solely for the
purpose of covering over-allotments, the Company and the Selling Shareholders
propose to grant to the Underwriters the option to purchase from the Company and
the Selling Shareholders an additional [ ] Ordinary Shares (the "Additional
Shares") of which [ ] Ordinary Shares are to be issued and sold by the Company
and an aggregate of [ ] Ordinary Shares are to be sold by the Selling
Shareholders in the respective amounts set forth under the caption "Additional
Shares" in Schedule B annexed hereto. The Firm Shares and the Additional Shares
are hereinafter collectively sometimes referred to as the "Shares." The Shares
are described in the Prospectus which is referred to below.

                  The Company has filed, in accordance with the provisions of
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively, the "Act"), with the Securities and Exchange Commission (the
"Commission") a registration statement on Form F-1 (File No. 333-[    ])
including a prospectus, relating to the Shares. The Company has furnished to
you, for use by the Underwriters and by dealers, copies of one or more
preliminary prospectuses (each such preliminary prospectus, being herein called
a "Preliminary Prospectus") relating to the Shares. Except where the context
otherwise requires, the registration statement, as amended when it became or
becomes effective, including all documents filed as a part thereof, and
including any information contained in a prospectus subsequently filed with the
Commission pursuant to Rule 424(b) under the Act and deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430(A)
under the Act and also including any registration statement filed pursuant to
Rule 462(b) under the Act, is herein called the "Registration Statement," and
the prospectus, in the form filed by



                                      -2-

the Company with the Commission pursuant to Rule 424(b) under the Act on or
before the second business day after the date hereof (or such earlier time as
may be required under the Act) or, if no such filing is required, the form of
final prospectus included in the Registration Statement at the time it became
effective, is herein called the "Prospectus." Any reference herein to the
Registration Statement, a Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the copy of the Registration Statement,
Preliminary Prospectus or Prospectus, respectively, filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval System
("EDGAR"). As used herein, "business day" shall mean a day on which the National
Association of Securities Dealers Automated Quotation National Market System
("NASDAQ") is open for trading.

                  Each of the Company, the Underwriters and the Selling
Shareholders, severally and not jointly, agrees as follows:

         1.       Sale and Purchase. Upon the basis of the representations and
warranties and subject to the terms and conditions herein set forth, the Company
agrees to issue and sell, and each of the Selling Shareholders, severally and
not jointly, agrees to sell, to the respective Underwriters and each of the
Underwriters, severally and not jointly, agrees to purchase from the Company and
each Selling Shareholder the number of Firm Shares (subject to such adjustment
as UBS Securities LLC ("UBS") may determine to avoid fractional shares) set
forth opposite the name of such Underwriter in Schedule A attached hereto,
subject to adjustment in accordance with Section 11 hereof, in each case at a
purchase price of $[ ] per Share. The Company and each Selling Shareholder is
advised by you that the Underwriters intend (i) to make a public offering of
their respective portions of the Firm Shares as soon after the effective date of
the Registration Statement as in your judgment is advisable and (ii) initially
to offer the Firm Shares upon the terms set forth in the Prospectus. You may
from time to time increase or decrease the public offering price after the
initial public offering to such extent as you may determine.

                  In addition, the Company and each of the Selling Shareholders,
severally and not jointly, hereby grants to the several Underwriters the option
to purchase, and upon the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the Underwriters shall
have the right to purchase, severally and not jointly, from the Company and the
Selling Shareholders all or a portion of the Additional Shares, as may be
necessary to cover over-allotments made in connection with the offering of the
Firm Shares, at the same purchase price per share to be paid by the Underwriters
to the Company and the Selling Shareholders for the Firm Shares. To the extent
that the Underwriters exercise the option to purchase fewer than the total
number of Additional Shares offered hereunder, the Underwriters shall purchase
Additional Shares from the Company and each Selling Shareholder in the same
proportion that the number of Additional Shares offered by the Company and such
Selling Shareholder bears to the total number of Additional Shares offered by
the Company and the Selling Shareholders, subject, in each case, to such
adjustment as UBS may determine solely to eliminate fractional shares. This
option may be exercised by UBS on behalf of the several Underwriters at any time
and from time to time on or before the thirtieth day following the date of the
Prospectus, by written notice to the Company and the Custodian (as defined
below). Such notice shall set forth the aggregate number of Additional Shares as
to which



                                       -3-

the option is being exercised, and the date and time when the Additional Shares
are to be delivered (such date and time being herein referred to as the
"additional time of purchase"); provided, however, that the additional time of
purchase shall not be earlier than the time of purchase (as defined below) nor
earlier than the second business day after the date on which the option shall
have been exercised nor later than the tenth business day after the date on
which the option shall have been exercised. The number of Additional Shares to
be sold to each Underwriter shall be the number which bears the same proportion
to the aggregate number of Additional Shares being purchased as the number of
Firm Shares set forth opposite the name of such Underwriter on Schedule A hereto
bears to the total number of Firm Shares (subject, in each case, to such
adjustment as you may determine to eliminate fractional shares), subject to
adjustment in accordance with Section 11 hereof.

                  Pursuant to powers of attorney, which shall be reasonably
satisfactory to counsel for the Underwriters, granted by each Selling
Shareholder, [         ] and [      ] will act as representatives of the Selling
Shareholders. The foregoing representatives (the "Representatives of the Selling
Shareholders") are authorized, on behalf of each Selling Shareholder, to execute
any documents necessary or desirable in connection with the sale of the Shares
to be sold hereunder by each Selling Shareholder, to make delivery of the
certificates of such Shares, to receive the proceeds of the sale of such Shares,
to give receipts for such proceeds, to pay therefrom the expenses, if any, to be
borne by each Selling Shareholder in connection with the sale and public
offering of the Shares, to distribute the balance of such proceeds to each
Selling Shareholder in proportion to the number of Shares sold by each Selling
Shareholder, to receive notices on behalf of each Selling Shareholder and to
take such other action as may be necessary or desirable in connection with the
transactions contemplated by this Agreement.

         2.       Payment and Delivery.

                  (a) Payment of the purchase price for the Firm Shares shall be
made to the Company and the Selling Shareholders by wire transfer of immediately
available funds, against delivery of the certificates for the Firm Shares to you
through the facilities of The Depository Trust Company ("DTC") for the
respective accounts of the Underwriters. Such payment and delivery shall be made
at 10:00 A.M., New York City time, on [          ], 2005 (unless another time
shall be agreed to by you, the Company and the Representatives of the Selling
Shareholders or unless postponed in accordance with the provisions of Section 11
hereof). The time at which such payment and delivery are to be made is
hereinafter sometimes called "the time of purchase." Electronic transfer of the
Firm Shares shall be made to you at the time of purchase in such names and in
such denominations as you shall specify.

                  Payment of the purchase price for the Additional Shares shall
be made to the Company and to the Selling Shareholders at the additional time of
purchase in the same manner and at the same office as the payment for the Firm
Shares. Electronic transfer of the Additional Shares shall be made to you at the
additional time of purchase in such names and in such denominations as you shall
specify.



                                      -4-

                  Deliveries of the documents described in Section 9 hereof with
respect to the purchase of the Shares shall be made at the offices of White &
Case LLP, 1155 Avenue of the Americas, New York, New York 10036, at 9:00 A.M.,
New York City time, on the date of the closing of the purchase of the Firm
Shares or the Additional Shares, as the case may be.

                  (b) All payments to be made by the Company to the Underwriters
under this Agreement shall be made without withholding or deduction for or on
account of any present or future taxes, assessments, imposts, duties or other
governmental charges whatsoever ("Taxes") unless the Company is compelled by law
to deduct or withhold such taxes, assessments, imposts, duties or charges. To
the extent any such Taxes are so required to be deducted or withheld, the
Company shall pay to the Underwriters such additional amounts ("Additional
Amounts") as may be necessary in order that the net amounts received by such
Underwriters after such withholding or deduction (including any withholding or
deduction in respect of such Additional Amounts) shall equal the amounts that
would have been received if no withholding or deduction had been made.

         3.       Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters that, as of
the date hereof, the time of purchase and any additional time of purchase:

                  (a) The Registration Statement has been declared effective
         under the Act; no stop order of the Commission preventing or suspending
         the use of any Preliminary Prospectus or the effectiveness of the
         Registration Statement has been issued and no proceedings for such
         purpose have been instituted or, to the Company's knowledge, are
         threatened by the Commission; each Preliminary Prospectus, at the time
         of filing thereof, complied in all material respects with the
         applicable requirements of the Act and the last Preliminary Prospectus
         distributed in connection with the offering of the Shares did not, as
         of its date, and does not contain an untrue statement of a material
         fact or omit to state a material fact required to be stated therein or
         necessary to make the statements therein, in light of the circumstances
         under which they were made, not misleading; the Registration Statement
         complied when it became effective, complies and will comply, at the
         time of purchase and any additional time of purchase, in all material
         respects with the applicable requirements of the Act and the Prospectus
         will comply, as of its date and at the time of purchase and any
         additional times of purchase, in all material respects with the
         applicable requirements of the Act and any statutes, regulations,
         contracts or other documents that are required to be described in the
         Registration Statement or the Prospectus or to be filed as exhibits to
         the Registration Statement have been and will be so described or filed;
         the conditions to the use of Form F-1 have been satisfied; the
         Registration Statement did not when it became effective, does not and
         will not, at the time of purchase and any additional time of purchase,
         contain an untrue statement of a material fact or omit to state a
         material fact required to be stated therein or necessary to make the
         statements therein not misleading and the Prospectus will not, as of
         its date and at the time of purchase and any additional time of
         purchase, contain an untrue statement of a material fact or omit to
         state a material fact required to be stated therein or necessary to
         make the statements therein, in light of the circumstances under which
         they were made, not misleading;



                                      -5-

         provided, however, that the Company makes no warranty or representation
         with respect to any statement contained in any Preliminary Prospectus,
         the Registration Statement or the Prospectus made in reliance upon and
         in conformity with information concerning an Underwriter or the
         activities to be taken by any Underwriter and furnished in writing by
         or on behalf of such Underwriter through you to the Company expressly
         for use in any Preliminary Prospectus, the Registration Statement or
         the Prospectus; and the Company has not distributed and will not
         distribute any offering material in connection with the offering or
         sale of the Shares other than the Registration Statement, the then most
         recent Preliminary Prospectus and the Prospectus; provided, however,
         that if, at any time after the date hereof, the Company is obligated to
         prepare and furnish to the Underwriters an amendment or supplement to
         the Prospectus under Section 5(g) of this Agreement and so furnishes
         such amendment or supplement, then from and after the time that such
         Prospectus as amended or supplemented is furnished to the Underwriters
         in accordance with Section 5(g), the term "Prospectus" shall be deemed
         to mean the Prospectus as so amended or supplemented; provided,
         further, that nothing in the foregoing proviso shall relieve the
         Company of any liability for a breach of the representations contained
         in this Section 3 during any period between the occurrence of the event
         giving rise to the need to amend or supplement the Prospectus and the
         actual delivery of the Prospectus, as amended or supplemented, to the
         Underwriters in accordance with Section 5(b).

                  (b) as of the date of this Agreement, the Company has an
         authorized and outstanding capitalization as set forth in the section
         of the Prospectus entitled "Capitalization" and, as of the time of
         purchase and the additional time of purchase, as the case may be, the
         Company shall have an authorized and outstanding capitalization as set
         forth in the section of the Prospectus entitled "Capitalization"
         (subject, in each case, to the issuance of Ordinary Shares upon
         exercise of stock options and warrants disclosed as outstanding in the
         Prospectus, the shares disclosed as issuable to Leonardo L.P., and
         grant of options under existing stock option plans described in the
         Prospectus); all of the issued and outstanding share capital, including
         the Ordinary Shares, of the Company have been duly authorized and
         validly issued and are fully paid and non-assessable, have been issued
         in compliance with all Israeli and U.S. federal and state securities
         laws and were not issued in violation of any preemptive right, resale
         right, right of first refusal or similar right; the Shares are, or will
         be at the time of purchase, duly listed, admitted and authorized for
         trading on the NASDAQ and the Tel Aviv Stock Exchange (the "TASE");

                  (c) the Company has been duly incorporated and is validly
         existing as a company under the laws of the State of Israel, with the
         requisite corporate power and authority to own, lease and operate its
         properties and conduct its business as described in the Prospectus, to
         execute and deliver this Agreement and to issue, sell and deliver the
         Shares as contemplated herein;

                  (d) the Company is duly qualified to do business as a foreign
         corporation and is in good standing in each jurisdiction where the
         ownership or leasing of its properties or the




                                      -6-

         conduct of its business requires such qualification, except where the
         failure to be so qualified and in good standing would not, individually
         or in the aggregate, have a material adverse effect on (i) the
         business, properties, financial condition, results of operation or
         prospects of the Company and the Subsidiaries (as hereinafter defined)
         taken as a whole or on (ii) the ability of the Company and the Selling
         Shareholders to consummate the transactions contemplated by this
         Agreement (a "Material Adverse Effect");

                  (e) the Company has no material subsidiaries other than the
         subsidiaries listed on Schedule C hereto (collectively, the
         "Subsidiaries"); other than as set forth in the Prospectus, the Company
         owns all of the issued and outstanding capital stock of each of the
         Subsidiaries; other than the capital stock of the Subsidiaries, the
         Company does not own, directly or indirectly, any shares of stock or
         any other equity or long-term debt securities of any corporation or
         have any equity interest in any firm, partnership, joint venture,
         association or other entity that is, individually or together with any
         other firm, partnership, joint venture, association or other entity,
         material to the Company; complete and correct copies of the respective
         certificates of incorporation or memorandum and articles of association
         and the by-laws (or other relevant organizational document) of the
         Company and each of the Subsidiaries and all amendments thereto have
         been delivered to you, and except as set forth in the exhibits to the
         Registration Statement no changes therein will be made subsequent to
         the date hereof and prior to the time of purchase or, if later, the
         additional time of purchase; each Subsidiary has been duly incorporated
         and is validly existing as a corporation in good standing under the
         laws of the jurisdiction of its incorporation, with the requisite
         corporate power and authority to own, lease and operate its properties
         and to conduct its business as described in the Prospectus; each
         Subsidiary is duly qualified to do business as a foreign corporation
         and is in good standing in each jurisdiction where the ownership or
         leasing of its properties or the conduct of its business requires such
         qualification, except where the failure to be so qualified and in good
         standing would not, individually or in the aggregate, have a Material
         Adverse Effect; all of the outstanding shares of capital stock of each
         of the Subsidiaries have been duly authorized and validly issued, are
         fully paid and non-assessable and other than as set forth in the
         Prospectus, are owned by the Company; none of such outstanding shares
         of Capital Stock is subject to any security interest, other encumbrance
         or adverse claims; and, other than as set forth in the Prospectus, no
         options, warrants or other rights to purchase, agreements or other
         obligations to issue or other rights to convert any obligation into
         shares of capital stock or ownership interests in the Subsidiaries are
         outstanding;

                  (f) the Shares have been duly and validly authorized and, when
         issued and delivered against payment therefor as provided herein, will
         be duly and validly issued, fully paid and non-assessable and free of
         statutory and contractual preemptive rights, resale rights, rights of
         first refusal and similar rights and free of liens, encumbrances and
         adverse claims;

                  (g) the share capital of the Company, including the Shares,
         conforms in all material respects to the description thereof contained
         in the Registration Statement and the



                                      -7-

         Prospectus and the certificates evidencing the Shares are in due and
         proper form and the holders of the Shares will not be subject to
         personal liability by reason of being such holders;

                  (h) this Agreement has been duly authorized, executed and
         delivered by the Company;

                  (i) neither the Company nor any of the Subsidiaries is in
         breach or violation of or in default under (nor has any event occurred
         which with notice, lapse of time or both would result in any breach or
         violation of, constitute a default under or give the holder of any
         indebtedness (or a person acting on such holder's behalf) the right to
         require the repurchase, redemption or repayment of all or a part of
         such indebtedness under) (x) its respective memorandum of association,
         articles of association, charter or by-laws (or other relevant
         organizational document), or (y) any indenture, mortgage, deed of
         trust, bank loan or credit agreement or other evidence of indebtedness,
         or any license, lease, contract or other agreement or instrument to
         which the Company or any of the Subsidiaries is a party or by which any
         of them or any of their properties may be bound or affected, except in
         the case of sub-clause (y) above, and except as described in the
         Prospectus, for such breaches, violations or defaults that would not,
         individually or in the aggregate, result in a Material Adverse Effect;

                  (j) the execution, delivery and performance of this Agreement,
         the issuance and sale of the Shares and the consummation of the
         transactions contemplated hereby will not conflict with, result in any
         breach or violation of or constitute a default under (nor constitute
         any event which with notice, lapse of time or both would result in any
         breach or violation of or constitute a default under) (x) the
         respective memorandum of association, articles of association, charter
         or by-laws (or other relevant organizational document) of the Company
         or any of the Subsidiaries, or (y) any indenture, mortgage, deed of
         trust, bank loan or credit agreement or other evidence of indebtedness,
         or any license, lease, contract or other agreement or instrument to
         which the Company or any of the Subsidiaries is a party or by which any
         of them or any of their respective properties may be bound or affected,
         or any federal, state, local or foreign law, regulation or rule or any
         decree, judgment or order applicable to the Company or any of the
         Subsidiaries, except in the case of sub-clause (y) above for such
         breaches, violations or defaults that would not, individually or in the
         aggregate, result in a Material Adverse Effect;

                  (k) no approval, authorization, consent or order of or filing
         with any Israeli or U.S. federal, state, local or other foreign
         governmental or regulatory commission, board, body, authority or agency
         is required in connection with the issuance and sale of the Shares or
         the consummation by the Company of the transactions contemplated hereby
         other than registration of the offer and sale of the Shares under the
         Act and the registration of the Shares under the Securities Exchange
         Act of 1934, as amended, and the rules and regulations thereunder
         (collectively, the "Exchange Act"), which has been or will be effected,
         and any necessary qualification under the securities or blue sky laws
         of the various jurisdictions in which the Shares are being offered by
         the Underwriters or under the rules and regulations of



                                      -8-


         the NASD and the approval of the TASE and of the Israeli Ministry of
         Telecommunications, which approvals have been obtained as of the date
         hereof;

                  (l) except as set forth in the Prospectus, (i) no person has
         the right, contractual or otherwise, to cause the Company to issue or
         sell to it any Ordinary Shares or shares of any other share capital or
         other equity interests of the Company, (ii) no person has any
         preemptive rights, resale rights, rights of first refusal or other
         rights to purchase any Ordinary Shares or any other share capital or
         other equity interests of the Company, and (iii) no person has the
         right to act as an underwriter or as a financial advisor to the Company
         in connection with the offer and sale of the Shares, in the case of
         each of the foregoing clauses (i), (ii) and (iii), whether as a result
         of the filing or effectiveness of the Registration Statement or the
         sale of the Shares as contemplated thereby except as set forth in the
         Prospectus; no person has the right, contractual or otherwise, to cause
         the Company to register under the Act any Ordinary Shares or any other
         share capital or other equity interests of the Company, or to include
         any such shares or interests in the Registration Statement or the
         offering contemplated thereby, whether as a result of the filing or
         effectiveness of the Registration Statement or the sale of the Shares
         as contemplated thereby or otherwise;

                  (m) each of the Company and the Subsidiaries has all necessary
         licenses, authorizations, consents and approvals and has made all
         necessary filings required under any Israeli or U.S. federal, state,
         local or other foreign law, regulation or rule, and has obtained all
         necessary authorizations, consents and approvals from other persons, in
         each case, that are, either individually or in the aggregate, material
         to the to conduct its respective business; neither the Company nor any
         of the Subsidiaries is in violation of, or in default under, or has
         received notice of any proceedings relating to revocation or
         modification of, any such license, authorization, consent or approval
         or any Israeli or U.S. federal, state, local or other foreign law,
         regulation or rule or any decree, order or judgment applicable to the
         Company or any of the Subsidiaries, except where such violation,
         default, revocation or modification would not, individually or in the
         aggregate, have a Material Adverse Effect;

                  (n) all legal or governmental proceedings, affiliate
         transactions, off-balance sheet transactions, contracts, licenses,
         agreements, leases or documents of a character required to be described
         in the Prospectus or to be filed as an exhibit to the Registration
         Statement have been so described or filed as required;

                  (o) except as set forth in the Prospectus, there are no
         actions, suits, claims, investigations or proceedings pending or, to
         the Company's knowledge, threatened, to which the Company or any of the
         Subsidiaries or any of their respective directors or officers is or
         would be a party or of which any of their respective properties is or
         would be subject at law or in equity, before or by any Israeli or U.S.
         federal, state, local or other foreign governmental or regulatory
         commission, board, body, authority or agency, except any such action,
         suit, claim, investigation or proceeding which would not result in a
         judgment, decree or order having, individually or in the aggregate, a
         Material Adverse Effect or preventing consummation of the transactions
         contemplated hereby;



                                      -9-


                  (p) Fahn Kanne & Co., a member of Grant Thornton
         International, whose report on the consolidated financial statements of
         the Company and the Subsidiaries is filed with the Commission as part
         of the Registration Statement and the Prospectus, are independent
         public accountants as required by the Act;

                  (q) the audited consolidated financial statements of the
         Company included in the Prospectus, together with the related notes,
         present fairly, in all material respects, the consolidated financial
         position of the Company and the Subsidiaries as of the dates indicated
         and the consolidated results of operations and cash flows of the
         Company and the Subsidiaries for the periods specified and have been
         prepared in compliance with the requirements of the Act and in
         conformity with generally accepted accounting principles applied on a
         consistent basis during the periods involved; there are no financial
         statements (historical or pro forma) that are required to be included
         in the Registration Statement and the Prospectus that are not included
         as required; and the Company and the Subsidiaries do not have any
         material liabilities or obligations, direct or contingent (including
         any off-balance sheet obligations), not disclosed in the Registration
         Statement and the Prospectus;

                  (r) subsequent to the respective dates as of which information
         is given in the Registration Statement and the Prospectus, there has
         not been (i) any material adverse change, or any development involving
         a prospective material adverse change, in the business, properties,
         management, financial condition or results of operations of the Company
         and the Subsidiaries taken as a whole, (ii) any transaction which is
         material to the Company and the Subsidiaries taken as a whole, (iii)
         any obligation, direct or contingent (including any off-balance sheet
         obligations), incurred by the Company or the Subsidiaries, which is
         material to the Company and the Subsidiaries taken as a whole, (iv)
         except as described in or contemplated by the Prospectus, any change in
         the share capital or outstanding indebtedness of the Company or the
         Subsidiaries or (v) any dividend or distribution of any kind declared,
         paid or made on the share capital of the Company;

                  (s) the Company is not and, after giving effect to the
         offering and sale of the Shares, will not become (i) an "investment
         company" or an entity "controlled" by an "investment company," as such
         terms are defined in the Investment Company Act of 1940, as amended
         (the "Investment Company Act") or (ii) a "controlled foreign
         corporation" as defined in Section 957 of the Internal Revenue Code.
         Based upon the composition of its gross income and the composition and
         value of its gross assets, and applying the rules regarding "passive
         foreign investment companies" ("PFIC") as of the date hereof, the
         Company believes that it will not be a PFIC for the taxable year of
         2005 and the Company has no reason to believe that the composition of
         its gross income or the composition or value of its gross assets will
         change in a manner that would cause it to become a PFIC;

                  (t) the Company and each of the Subsidiaries has good and
         marketable title to all property (real and personal) described in the
         Prospectus as being owned by each of them, free and clear of all liens,
         claims, security interests or other encumbrances; other than as
         described in the Registration Statement or the Prospectus or such that
         do not materially affect the value

                                      -10-


         of such property and do not interfere with the use made or proposed to
         be made of such property by the Company; all the property described in
         the Prospectus as being held under lease by the Company or a Subsidiary
         is held thereby under valid, subsisting and enforceable leases with
         such exceptions as are not material and do not interfere with the use
         made or proposed to be made of such property by the Company;

                  (u) except as described in the Prospectus, the Company and the
         Subsidiaries own, or have obtained valid and enforceable licenses for,
         or other rights to use, the inventions, patent applications, patents,
         trademarks (both registered and unregistered), tradenames, copyrights,
         trade secrets and other proprietary information described in the
         Prospectus as being owned or licensed by them except where the failure
         to own, license or have such rights would not, individually or in the
         aggregate, have a Material Adverse Effect (collectively, "Intellectual
         Property"); (i) to the Company's knowledge, there are no third parties
         who have or will be able to establish rights to any Intellectual
         Property of the Company or its Subsidiaries, except for the ownership
         rights of the owners of the Intellectual Property which is licensed to
         the Company and its Subsidiaries and the rights of other licensees of
         Intellectual Property that are not licensed to any of the Company's
         Subsidiaries on an exclusive basis; (ii) to the Company's knowledge,
         there is no infringement by third parties of any Intellectual Property;
         (iii) there is no pending or threatened action, suit, proceeding or
         claim by others challenging the Company's rights in or to any
         Intellectual Property, and the Company is unaware of any facts which
         could form a reasonable basis for any such claim; (iv) there is no
         pending or threatened action, suit, proceeding or claim by others
         challenging the validity or scope of any Intellectual Property, and the
         Company is unaware of any facts which could form a reasonable basis for
         any such claim; (v) there is no pending or threatened action, suit,
         proceeding or claim by others that the Company infringes or otherwise
         violates any patent, trademark, copyright, trade secret or other
         proprietary rights of others, and the Company is unaware of any facts
         which could form a reasonable basis for any such claim; (vi) there is
         no patent or patent application that contains claims that interfere
         with the issued or pending claims of any of the Intellectual Property;
         and (vii) to the Company's knowledge, there is no prior art that may
         render any patent application owned by the Company of the Intellectual
         Property unpatentable that has not been disclosed to the U.S. Patent
         and Trademark Office and/or the Israeli Registrar of Patents, Designs
         and Trademarks, as applicable;

                  (v) neither the Company nor any of the Subsidiaries is engaged
         in any unfair labor practice; except for matters which would not,
         individually or in the aggregate, have a Material Adverse Effect, (i)
         there is (A) no unfair labor practice complaint pending or, to the
         Company's knowledge, threatened against the Company or any of the
         Subsidiaries before the National Labor Relations Board or any other
         comparable board or governmental body, and no grievance or arbitration
         proceeding arising out of or under collective bargaining agreements is
         pending or threatened, (B) no strike, labor dispute, slowdown or
         stoppage pending or, to the Company's knowledge after due inquiry,
         threatened against the Company or any of the Subsidiaries and (C) no
         union representation dispute currently existing concerning the
         employees of the Company or any of the Subsidiaries, and (ii) to the
         Company's knowledge,


                                      -11-


         (A) no union organizing activities are currently taking place
         concerning the employees of the Company or any of the Subsidiaries and
         (B) there has been no violation of any federal, state, local or foreign
         law relating to discrimination in the hiring, promotion or pay of
         employees, any applicable wage or hour laws or any provision of the
         Employee Retirement Income Security Act of 1974 ("ERISA") or the rules
         and regulations promulgated thereunder concerning the employees of the
         Company or any of the Subsidiaries; the Company is in compliance with
         the labor and employment laws and collective bargaining agreements
         applicable to its employees in Israel; no labor disturbance by the
         employees of the Company exists or, to the knowledge of the Company, is
         imminent;

                  (w) the Company and the Subsidiaries and their properties,
         assets and operations are in compliance with, and hold all permits,
         authorizations and approvals required under, Environmental Laws (as
         defined below), except to the extent that failure to so comply or to
         hold such permits, authorizations or approvals would not, individually
         or in the aggregate, have a Material Adverse Effect; there are no past,
         present or, to the Company's knowledge, reasonably anticipated future
         events, conditions, circumstances, activities, practices, actions,
         omissions or plans that would reasonably be expected to give rise to
         any material costs or liabilities to the Company or the Subsidiaries
         under, or to interfere with or prevent compliance by the Company or the
         Subsidiaries with, Environmental Laws; except as would not,
         individually or in the aggregate, have a Material Adverse Effect,
         neither the Company nor any of the Subsidiaries (i) is, to the
         Company's knowledge, the subject of any investigation, (ii) has
         received any notice or claim, (iii) is a party to or affected by any
         pending or threatened action, suit or proceeding, (iv) is bound by any
         judgment, decree or order or (v) has entered into any agreement, in
         each case relating to any alleged violation of any Environmental Law or
         any actual or alleged release or threatened release or cleanup at any
         location of any Hazardous Materials (as defined below) (as used herein,
         "Environmental Law" means any Israeli or U.S. federal, state, local or
         other foreign law, statute, ordinance, rule, regulation, order, decree,
         judgment, injunction, permit, license, authorization or other binding
         requirement, or common law, applicable to the Company that relates to
         health, safety or the protection, cleanup or restoration of the
         environment or natural resources, including those relating to the
         distribution, processing, generation, treatment, storage, disposal,
         transportation, other handling or release or threatened release of
         Hazardous Materials, and "Hazardous Materials" means any material
         (including, without limitation, pollutants, contaminants, hazardous or
         toxic substances or wastes) that is regulated by or may give rise to
         liability under any Environmental Law);

                  (x) all tax returns required to be filed by the Company and
         each of the Subsidiaries have been filed, and all taxes and other
         assessments of a similar nature (whether imposed directly or through
         withholding) including any interest, additions to tax or penalties
         applicable thereto due or claimed to be due from such entities have
         been paid, other than those being contested in good faith and for which
         adequate reserves have been provided except where the failure to file
         to such tax returns or to pay such taxes would not, individually or in
         the aggregate, have a Material Adverse Effect;



                                      -12-


                  (y) no stamp or other issuance or transfer taxes or duties and
         capital gains, income, withholding or other taxes are payable by or on
         behalf of the Underwriters to the United States, any state, or any
         political subdivision thereof, or any taxing authority in any
         jurisdiction, in connection with the sale or issuance of any Shares,
         except for any New York State stock transfer tax payable upon the sale
         and delivery of the Shares by the Selling Shareholders to the
         Underwriters (which will be paid by the Selling Shareholders at the
         time and to the extent required by, and in accordance with, New York
         State law);

                  (z) the Company and each of the Subsidiaries maintains
         insurance covering its properties, operations, personnel and businesses
         as the Company deems adequate; such insurance insures against such
         losses and risks to an extent which is adequate in accordance with
         customary industry practice to protect the Company and the Subsidiaries
         and their businesses; the Company has not received any notice from any
         insurance carrier of the cancellation or revocation of any of its
         policies; all such insurance is fully in force on the date hereof and
         will be fully in force at the time of purchase and any additional time
         of purchase;

                  (aa) neither the Company nor any of the Subsidiaries has
         sustained since the date of the last audited financial statements
         included in the Registration Statement and the Prospectus any loss or
         interference with its respective business from fire, explosion, flood
         or other calamity, whether or not covered by insurance, or from any
         labor dispute or court or governmental action, order or decree;

                  (bb) except as described in the Prospectus, the Company has
         not sent or received any communication regarding termination of, or
         intent not to renew, any of the contracts or agreements referred to or
         described in, or filed as an exhibit to, the Registration Statement,
         and no such termination or non-renewal has been threatened by the
         Company or, to the Company's knowledge, any other party to any such
         contract or agreement;

                  (cc) the Company and each of the Subsidiaries maintains a
         system of internal accounting controls sufficient to provide reasonable
         assurance that (i) transactions are executed in accordance with
         management's general or specific authorization; (ii) transactions are
         recorded as necessary to permit preparation of financial statements in
         conformity with generally accepted accounting principles and to
         maintain accountability for assets; (iii) access to assets is permitted
         only in accordance with management's general or specific authorization;
         and (iv) the recorded accountability for assets is compared with
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences;

                  (dd) the Company has established and maintains disclosure
         controls and procedures (as such term is defined in Rule 13a-15 and
         15d-15 under the Exchange Act; such disclosure controls and procedures
         are designed to ensure that material information relating to the
         Company, including its consolidated subsidiaries, is made known to the
         Company's Chief Executive Officer and its Chief Financial Officer by
         others within those entities, and such disclosure controls and
         procedures are effective to perform the functions for which they were
         established; the Company's auditors and the Audit Committee of the
         Board of Directors have




                                      -13-


         been advised of: (i) any significant deficiencies in the design or
         operation of internal controls which could adversely affect the
         Company's ability to record, process, summarize, and report financial
         data; and (ii) any fraud, whether or not material, that involves
         management or other employees who have a role in the Company's internal
         controls; any material weaknesses in internal controls have been
         identified for the Company's auditors; and since the date of the most
         recent evaluation of such disclosure controls and procedures, there
         have been no significant changes in internal controls or in other
         factors that could significantly affect internal controls, including
         any corrective actions with regard to significant deficiencies and
         material weaknesses;

                  (ee) the Company has provided you true, correct, and complete
         copies of all documentation pertaining to any extension of credit in
         the form of a personal loan made, directly or indirectly, by the
         Company to any director or executive officer of the Company, or to any
         family member or affiliate of any director or executive officer of the
         Company; and since July 30, 2002, the Company has not, directly or
         indirectly, including through any Subsidiary: (i) extended credit,
         arranged to extend credit, or renewed any extension of credit, in the
         form of a personal loan, to or for any director or executive officer of
         the Company, or to or for any family member or affiliate of any
         director or executive officer of the Company; or (ii) made any material
         modification, including any renewal thereof, to any term of any
         personal loan to any director or executive officer of the Company, or
         any family member or affiliate of any director or executive officer,
         which loan was outstanding on July 30, 2002;

                  (ff) any statistical and market-related data included in the
         Registration Statement and the Prospectus are based on or derived from
         sources that the Company believes to be reliable and accurate, and the
         Company has obtained the written consent to the use of such data from
         such sources to the extent required;

                  (gg) neither the Company nor any of the Subsidiaries nor, to
         the Company's knowledge, any employee or agent of the Company or the
         Subsidiaries has made any payment of funds of the Company or the
         Subsidiaries or received or retained any funds in violation of any law,
         rule or regulation, which payment, receipt or retention of funds is of
         a character required to be disclosed in the Registration Statement or
         the Prospectus;

                  (hh) neither the Company nor any of the Subsidiaries nor any
         of their respective directors, officers, affiliates or controlling
         persons has taken, directly or indirectly, any action designed, or
         which has constituted or would reasonably be expected to cause or
         result in, under the Exchange Act, the Israel Securities Law of 1968,
         as amended (the "ISL") or otherwise, the stabilization or manipulation
         of the price of any security of the Company to facilitate the sale or
         resale of the Shares;

                  (ii) to the Company's knowledge after due inquiry, there are
         no affiliations or associations between any member of the NASD and any
         of the Company's officers, directors or 5% or greater securityholders,
         or any of the Selling Shareholders, except as set forth in the
         Registration Statement and the Prospectus;

                                      -14-


                  (jj) there is no and has been no failure on the part of the
         Company or any of the Company's directors or officers, in their
         capacities as such, to comply, in any material respect, with any
         provision of the rules of the TASE;

                  (kk) neither the Company nor any of the Subsidiaries nor, to
         the knowledge after due inquiry of the Company, any director, officer,
         agent or employee of the Company or any of the Subsidiaries is aware of
         any action taken or has taken any action, directly or indirectly for or
         on behalf of the Company or any Subsidiary, that would result in a
         violation by such persons of the Foreign Corrupt Practices Act of 1977,
         as amended, and the rules and regulations thereunder ("FCPA"),
         including, without limitation, making use of the mails or any means or
         instrumentality of interstate commerce corruptly in furtherance of an
         offer, payment, promise to pay or authorization of the payment of any
         money, or other property, gift, promise to give, or authorization of
         the giving of anything of value to any "foreign official" (as such term
         is defined in the FCPA) or any foreign political party or official
         thereof or any candidate for foreign political office, in contravention
         of the FCPA and the Company and its Subsidiaries have conducted their
         businesses in compliance with the FCPA and have instituted and maintain
         policies and procedures designed to ensure, and which are reasonably
         expected to continue to ensure, continued compliance therewith;

                  (ll) the operations of the Company and the Subsidiaries are
         and have been conducted at all times in compliance in all material
         respects with applicable financial recordkeeping and reporting
         requirements, to the extent applicable, of the Currency and Foreign
         Transactions Reporting Act of 1970, as amended, the money laundering
         statutes of all jurisdictions, the rules and regulations thereunder and
         any related or similar rules, regulations or guidelines, issued,
         administered or enforced by any governmental agency (collectively, the
         "Money Laundering Laws") and no action, suit or proceeding by or before
         any court or governmental agency, authority or body or any arbitrator
         involving the Company or any of its Subsidiaries (or any director,
         officer, agent or employee of any such entity) with respect to the
         Money Laundering Laws is pending or threatened that could have a
         Material Adverse Effect;

                  (mm) neither the Company nor any of its Subsidiaries nor, to
         the knowledge of the Company, any director, officer, agent or employee
         of the Company or any of its Subsidiaries is currently subject to any
         U.S. sanctions administered by the Office of Foreign Assets Control of
         the U.S. Treasury Department ("OFAC") in connection with his or her
         actions for or on behalf of the Company; and the Company will not
         directly or indirectly use the proceeds of the sale of the Shares, or
         lend, contribute or otherwise make available such proceeds to any
         Subsidiary, joint venture partner or other person or entity, for the
         purpose of financing the activities of any person currently subject to
         any U.S. sanctions administered by OFAC;

                  (nn) the Company is in compliance with all conditions and
         requirements stipulated by the instruments of approval entitling it or
         any of its operations to the status of "Approved Enterprise" under
         Israeli law and by Israeli laws and regulations relating to such
         Approved Enterprise status, except for any noncompliance that would
         not, individually or in the aggregate, result in a Material Adverse
         Effect. All information supplied by the Company with


                                      -15-


         respect to such applications was true, correct and complete in all
         material respects when supplied to the appropriate authorities;

                  (oo) neither the Company nor any of its Subsidiaries nor any
         of its or their properties or assets has any immunity from the
         jurisdiction of any court or from any legal process (whether through
         service or notice, attachment prior to judgment, attachment in aid of
         execution or otherwise) under the laws of the State of Israel or any
         other jurisdiction;

                  (pp) the Company believes that its subsidiary, Telematics
         Wireless Ltd., qualified for 2004 as an "Industrial Company" within the
         definition of the Israeli Law for the Encouragement of Industry
         (Taxes), 1969; and absent a change in such law, the Company believes
         that such subsidiary it will to continue to so qualify for 2005;

                  (qq) Assuming the Underwriters are not otherwise subject to
         Israeli taxation by the conduct of their general business activities,
         (A) the sale and delivery to the Underwriters of the Shares as
         contemplated in this Agreement and the sale and delivery of the Shares
         by the Underwriters to subsequent purchasers as contemplated by this
         Agreement, are not subject to any tax imposed by Israel or any
         political subdivision or taxing authority thereof or therein or any
         stamp or other issuance or transfer tax, duty, capital gain tax or
         withholding tax imposed by federal law, the laws of any state, or any
         political subdivision thereof, or any taxing authority in any
         jurisdiction, except for any Israeli stamp taxes applicable to this
         Agreement (which will be paid by the Company on a timely basis after
         the time for payment, to the extent required by, and in accordance
         with, Israeli law) and to the issuance of the Shares to be sold by the
         Company under this Agreement (which will be paid by the Company at the
         time for payment, or promptly and on a timely basis after the time for
         payment, to the extent required by, and in accordance with, Israeli
         law) and (B) except as disclosed in the Registration Statement or
         Prospectus, (1) payments with respect to the Shares will not be subject
         to withholding taxes imposed under the laws of Israel or any political
         subdivision or taxing authority thereof or therein and (2) the proceeds
         from any sale or other disposition of securities will not be subject to
         any capital gains, withholding or other taxes imposed by Israel or any
         political subdivision or taxing authority thereof or therein.

                  (rr) the Company has validly and irrevocably appointed Ituran
         USA, Inc. as its authorized agent for service of process pursuant to
         this Agreement and in connection with the Registration Statement;

                  (ss) subject to the conditions and qualifications set forth in
         the Registration Statement and the Prospectus, a final and conclusive
         judgment against the Company for a definitive sum of money entered by
         any court in the United States would be enforced by an Israeli court;

                  (tt) as of the date hereof, to the Company's knowledge, each
         of the Selling Shareholders is the holder and legal and beneficial
         owner of at least that number of Shares of the Company opposite such
         Selling Shareholder's name as set forth on Schedule B hereto;


                                      -16-


         and, to the Company's knowledge, as of date of the closing of the
         purchase of the Additional Shares, each of the Selling Shareholders
         will be the holder and legal and beneficial owner of at least that
         number of Shares opposite such Shareholder's name as set forth on
         Schedule B hereto; the Company is not aware of, and has not received
         any notice of, any adverse claim relating to any Shares. No adverse
         claim has been recorded against any share capital of the Company in the
         Company's share registry; all recordations in the Company's share
         registry have been made in compliance with applicable law;

                  (uu) for a period of twelve months prior to and including the
         date of the sale of the Firm Shares, the Company has not offered or
         sold any of its securities in Israel, except for (i) options issued to
         its employees and directors in Israel and (ii) other securities that
         may be offered in Israel, in each case which issuance of options or
         sale of securities was made pursuant to an exemption from the
         prospectus delivery requirements under Israeli Securities Law 5728-1968
         and the regulations promulgated thereunder;

                  (vv) the Company has taken all necessary actions to ensure
         that, upon and at all times after the effectiveness of the Registration
         Statement, the Company and the Subsidiaries and their respective
         officers and directors, in their capacities as such, will be in
         compliance in all material respects with the provisions of the
         Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated
         thereunder, it being understood that the Company may rely on certain
         available exceptions from such requirements due to its status as a
         foreign private issuer.

                  In addition, any certificate signed by any officer of the
Company or any of the Subsidiaries and delivered to the Underwriters or counsel
for the Underwriters in connection with the offering of the Shares shall be
deemed to be a representation and warranty by the Company or such Subsidiary, as
the case may be, as to matters covered thereby, to each Underwriter.

         4.       Representations and Warranties of the Selling Shareholders.
Each of the Selling Shareholders, severally and not jointly, represents and
warrants to and agrees with each of the Underwriters that, as of the date
hereof, the time of purchase and any additional time of purchase:

                  (a) such Selling Shareholder now is and, at the time of
         delivery of such Shares (whether the time of purchase or any additional
         time of purchase, as the case may be), will be the beneficial owner of
         the number of Shares to be sold by such Selling Shareholder pursuant to
         this Agreement and has and, at the time of delivery thereof, will have
         valid and marketable title to such Shares, and upon delivery of and
         payment for such Shares (whether at the time of purchase or any
         additional time of purchase, as the case may be), the Underwriters will
         acquire valid and marketable title to such Shares free and clear of any
         claim, lien, encumbrance, security interest, community property right,
         restriction on transfer or other defect in title;

                  (b) such Selling Shareholder has and, at the time of delivery
         of the Shares to be sold by such Selling Shareholder pursuant to this
         Agreement (whether the time of purchase or



                                      -17-

         any additional time of purchase, as the case may be), will have the
         legal right, power and capacity, and all authorizations and approvals
         required by law (other than those imposed by the Act and state
         securities or blue sky laws), to (i) enter into this Agreement and the
         Custody Agreement (as defined below) and to execute the Power of
         Attorney (as defined below), (ii) sell, assign, transfer and deliver
         the Shares to be sold by such Selling Shareholder pursuant to this
         Agreement in the manner provided in this Agreement and (iii) make the
         representations, warranties and agreements made by such Selling
         Shareholder herein;

                  (c) this Agreement and the custody agreement (the "Custody
         Agreement"), dated [a recent date before the trade date], between
         [    ], as custodian (the "Custodian"), and the Selling Shareholders
         and the power of attorney signed in connection with the Custody
         Agreement (the "Power of Attorney") have each been duly executed and
         delivered by such Selling Shareholder, and each is a legal, valid and
         binding agreement of such Selling Shareholder enforceable in accordance
         with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
         reorganization, moratorium and similar laws of general applicability
         relating to or affecting creditors' rights and to general equity
         principles;

                  (d) each Preliminary Prospectus distributed in connection with
         the offering of the Shares, as such Preliminary Prospectus relates to
         such Selling Shareholder, did not, as of its date, and does not contain
         an untrue statement of a material fact or omit to state a material fact
         required to be stated therein or necessary to make the statements
         therein, in light of the circumstances under which they were made, not
         misleading; the Registration Statement, as it relates to such Selling
         Shareholder, did not when it became effective, does not and, at the
         time of purchase and any additional time of purchase and any time at
         which any sales with respect to which the Prospectus is delivered, will
         not contain an untrue statement of a material fact or omit to state a
         material fact required to be stated therein or necessary to make the
         statements therein not misleading; and the Prospectus, as it relates to
         such Selling Shareholder, will not, as of its date and at the time of
         purchase and any additional time of purchase and any time at which any
         sales with respect to which the Prospectus is delivered, contain an
         untrue statement of a material fact or omit to state a material fact
         required to be stated therein or necessary to make the statements
         therein, in light of the circumstances under which they were made, not
         misleading; provided that, with respect to each of the non-executive
         selling shareholders named in Schedule B (each, a "Non-Executive
         Selling Shareholder"), this subclause (d) shall apply solely with
         respect to statements or omissions from the Registration Statement,
         any Preliminary Prospectus, the Prospectus or any amendment or
         supplement thereto of which such Non-Executive Selling Shareholder
         has knowledge or made in reliance upon written information furnished to
         the Company by such Non-Executive Selling Shareholder expressly for use
         therein;

                  (e) all information with respect to such Selling Shareholder
         included in the Registration Statement or the Prospectus complied and
         will comply with all applicable provisions of the Act;

                                      -18-


                  (f) such Selling Shareholder has duly and irrevocably
         authorized the Representatives of the Selling Shareholders, on behalf
         of such Selling Shareholder, to execute and deliver this Agreement and
         any other documents necessary or desirable in connection with the
         transactions contemplated hereby or thereby and to deliver the Shares
         to be sold by such Selling Shareholder pursuant to this Agreement and
         receive payment therefore pursuant hereto;

                  (g) the sale of the Shares to be sold by such Selling
         Shareholder pursuant to this Agreement is not prompted by any
         information concerning the Company or any Subsidiary which is not set
         forth in the Prospectus;

                  (h) neither such Selling Shareholder nor any of its affiliates
         has taken, directly or indirectly, any action designed to, or which has
         constituted or might reasonably be expected to cause or result in,
         under the Exchange Act, the ISL or otherwise, the stabilization or
         manipulation of the price of any security of the Company to facilitate
         the sale or resale of the Shares;

                  (i) there are no affiliations or associations between any
         member of the NASD and such Selling Shareholder, except as set forth in
         the Registration Statement and the Prospectus; none of the proceeds
         received by such Selling Shareholder from the sale of the Shares to be
         sold by such Selling Shareholder pursuant to this Agreement will be
         paid to a member of the NASD or any affiliate of such member;

                  (j) at the time of purchase and each additional time of
         purchase, all stock transfer or other taxes (other than income taxes),
         if any, that are required to be paid in connection with the sale and
         transfer of the Shares to be sold by such Selling Shareholder to the
         several Underwriters hereunder shall have been fully paid or provided
         for by such Selling Shareholder, and all laws imposing such taxes shall
         have been fully complied with;

                  (k) no approval, authorization, consent or order of or filing
         with any Israeli or United States federal, state, local or foreign
         governmental or regulatory commission, court, board, body, authority or
         agency, or of or with any self-regulatory organization or other
         non-governmental regulatory authority (including, without limitation,
         the NASDAQ), is required by such Selling Shareholder in connection with
         the sale of the Shares to be sold by such Selling Shareholder pursuant
         to this Agreement or the consummation by such Selling Shareholder of
         the transactions contemplated hereby, by the Custody Agreement or by
         the Power of Attorney other than registration of such Shares under the
         Act, which has been effected, and any necessary qualification under the
         ISL, the securities or blue sky laws of the various jurisdictions in
         which such Shares are being offered by the Underwriters or under the
         rules and regulations of the NASD, which approvals have been obtained
         as of the date hereof;

                  (l) such Selling Shareholder has not, prior to the execution
         of this Agreement, distributed any "prospectus" (within the meaning of
         the Act) or offering material in connection with the offering or sale
         of the Shares other than the Registration Statement and


                                      -19-


         the then most recent Preliminary Prospectus and will not, at any time
         on or after the execution of this Agreement, distribute any
         "prospectus" (within the meaning of the Act) or offering material in
         connection with the offering or sale of the Shares other than the
         Registration Statement and the then most recent Prospectus;

                  (m) share certificates accompanied by duly executed share
         transfer deeds with respect to the Shares to be sold by the Selling
         Shareholders have been placed in custody, for delivery pursuant to the
         terms of this Agreement, under the Custody Agreement and Power of
         Attorney duly authorized (if applicable), executed and delivered by
         such Selling Shareholder, in the form heretofore furnished to you with
         the Company, as Custodian (the "Custodian") and the Attorneys-in-Fact
         appointed therein; the Ordinary Shares represented by the certificates
         so held in custody for each Selling Shareholder are subject to the
         interests hereunder of the Underwriters; the arrangements for custody
         and delivery of such certificates, made by such Selling Shareholder
         hereunder and under the Custody Agreement, are not subject to
         termination by any acts of such Selling Shareholder, or by operation of
         law, whether by the death or incapacity of such Selling Shareholder or
         the occurrence of any other event; and if any such death, incapacity
         or, if the Selling Shareholder is a corporate entity, by dissolution or
         other termination of corporate existence, or any other such event shall
         occur before the delivery of such Shares hereunder, such certificates
         will be delivered by the Custodian in accordance with the terms and
         conditions of this Agreement and the Custody Agreement and Power of
         Attorney as if such death, incapacity or, if the Selling Shareholder is
         a corporate entity, such dissolution or other termination of corporate
         existence, or other event had not occurred, regardless of whether or
         not the Custodian shall have received notice of such death, incapacity,
         dissolution or other termination of corporate existence or other event;

                  (n) neither the execution, delivery and performance of this
         Agreement, the Custody Agreement or the Power of Attorney nor the sale
         by such Selling Shareholder of the Shares to be sold by such Selling
         Shareholder pursuant to this Agreement nor the consummation of the
         transactions contemplated hereby or thereby will conflict with, result
         in any breach or violation of or constitute a default under (or
         constitute any event which with notice, lapse of time or both would
         result in any breach or violation of or constitute a default under) (i)
         the memorandum of association, articles of association, charter or
         by-laws or other relevant organizational documents or (ii) any
         indenture, mortgage, deed of trust, bank loan or credit agreement or
         other evidence of indebtedness, or any license, lease, contract or
         other agreement or instrument to which such Selling Shareholder is a
         party or by which such Selling Shareholder or any of its properties may
         be bound or affected, or (iii) any federal, state, local or foreign
         law, regulation or rule, or (iv) any decree, judgment or order
         applicable to such Selling Shareholder, except in the case of
         sub-clause (ii) above for such breaches, violations or defaults that
         would not, individually or in the aggregate, result in a Material
         Adverse Effect;

                                      -20-


                  (o) each Selling Shareholder has validly appointed an
         authorized agent for service of process in the United States pursuant
         to this Agreement and in connection with the Registration Statement;
         and

                  (p) upon payment of the purchase price for the Shares to be
         sold by such Selling Shareholder pursuant to this Agreement, delivery
         of such Shares, as directed by the Underwriters, to Cede & Co. ("Cede")
         or such other nominee as may be designated by The Depository Trust
         Company ("DTC"), registration of such Shares in the name of Cede or
         such other nominee, and the crediting of such Shares on the books of
         DTC to securities accounts of the Underwriters (assuming that neither
         DTC nor any such Underwriter has notice of any "adverse claim," within
         the meaning of Section 8-105 of the New York Uniform Commercial Code
         (the "UCC"), to such Shares), (A) DTC shall be a "protected purchaser,"
         within the meaning of Section 8-303 of the UCC, of such Shares and will
         acquire its interest in the Shares (including, without limitation, all
         rights that such Selling Shareholder had or has the power to transfer
         in such Shares) free and clear of any adverse claim within the meaning
         of Section 8-102 of the UCC, (B) under Section 8-501 of the UCC, the
         Underwriters will acquire a valid security entitlement in respect of
         such Shares and (C) no action (whether framed in conversion, replevin,
         constructive trust, equitable lien, or other theory) based on any
         "adverse claim," within the meaning of Section 8-102 of the UCC, to
         such Shares may be asserted against the Underwriters with respect to
         such security entitlement. For purposes of this representation, such
         Selling Shareholder may assume that when such payment, delivery and
         crediting occur, (x) such Shares will have been registered in the name
         of Cede or another nominee designated by DTC, in each case in the
         Company's share registry in accordance with its articles of association
         and applicable law, (y) DTC will be registered as a "clearing
         corporation," within the meaning of Section 8-102 of the UCC, and (z)
         appropriate entries to the accounts of the several Underwriters on the
         records of DTC will have been made pursuant to the UCC.

                  In addition, any certificate signed by any officer of any
Selling Shareholder or any of such Selling Shareholder's subsidiaries or by any
Selling Shareholder or by any Representative of the Selling Shareholders and
delivered to the Underwriters or counsel for the Underwriters in connection with
the offering of the Shares shall be deemed to be a representation and warranty
by such Selling Shareholder as to matters covered thereby, to each Underwriter.

         5.       Certain Covenants of the Company. The Company hereby agrees:

                  (a) to furnish such information as may be required and
         otherwise to cooperate in qualifying the Shares for offering and sale
         under the securities or blue sky laws of such states or other
         jurisdictions as you may designate and to maintain such qualifications
         in effect so long as you may request for the distribution of the
         Shares; provided that the Company shall not be required to qualify as a
         foreign corporation or to consent to the service of process under the
         laws of any such jurisdiction (except service of process with respect
         to the offering and sale of the Shares); and to promptly advise you of
         the receipt by the Company of any


                                      -21-


         notification with respect to the suspension of the qualification of the
         Shares for sale in any jurisdiction or the initiation or threatening of
         any proceeding for such purpose;

                  (b) to make available to the Underwriters in New York City, as
         soon as practicable after the Registration Statement becomes effective,
         and thereafter from time to time to furnish to the Underwriters, as
         many copies of the Prospectus (or of the Prospectus as amended or
         supplemented if the Company shall have made any amendments or
         supplements thereto after the effective date of the Registration
         Statement) as the Underwriters may request for the purposes
         contemplated by the Act; in case any Underwriter is required to deliver
         a prospectus after the nine-month period referred to in Section
         10(a)(3) of the Act in connection with the sale of the Shares, the
         Company will prepare, at its expense, promptly upon request such
         amendment or amendments to the Registration Statement and the
         Prospectus as may be necessary to permit compliance with the applicable
         requirements of Section 10(a)(3) of the Act;

                  (c) if, at the time this Agreement is executed and delivered,
         it is necessary for the Registration Statement or any post-effective
         amendment thereto to be declared effective before the Shares may be
         sold, the Company will endeavor to cause the Registration Statement or
         such post-effective amendment to become effective as soon as possible
         and the Company will advise you promptly and, if requested by you, will
         confirm such advice in writing, (i) when the Registration Statement and
         any such post-effective amendment thereto has become effective, and
         (ii) if Rule 430A under the Act is used, when the Prospectus is filed
         with the Commission pursuant to Rule 424(b) under the Act (which the
         Company agrees to file in a timely manner under such Rule);

                  (d) to advise you promptly, confirming such advice in writing,
         of any request by the Commission for amendments or supplements to the
         Registration Statement or the Prospectus or for additional information
         with respect thereto, or of notice of the institution of proceedings
         for, or the entry of a stop order, suspending the effectiveness of the
         Registration Statement and, if the Commission should enter a stop order
         suspending the effectiveness of the Registration Statement, to use its
         best efforts to obtain the lifting or removal of such order as soon as
         possible; to advise you promptly of any proposal to amend or supplement
         the Registration Statement or the Prospectus, and to provide you and
         Underwriters' counsel copies of any such documents for review and
         comment a reasonable amount of time prior to any proposed filing and to
         file no such amendment or supplement to which you shall reasonably
         object in writing;

                  (e) subject to Section 5(d) hereof, to file promptly all
         reports and any definitive proxy or information statement required to
         be filed by the Company with the Commission in order to comply with the
         Exchange Act subsequent to the date of the Prospectus and for so long
         as the delivery of a prospectus is required in connection with the
         offering or sale of the Shares; and to provide you with a copy of such
         reports and statements and other documents to be filed by the Company
         pursuant to Section 13, 14 or 15(d) of the Exchange Act during such



                                      -22-


         period a reasonable amount of time prior to any proposed filing, and to
         promptly notify you of such filing;

                  (f) if necessary or appropriate, to file a registration
         statement pursuant to Rule 462(b) under the Act;

                  (g) to advise the Underwriters promptly of the happening of
         any event within the time during which a prospectus relating to the
         Shares is required to be delivered under the Act which could require
         the making of any change in the Prospectus then being used so that the
         Prospectus would not include an untrue statement of material fact or
         omit to state a material fact necessary to make the statements therein,
         in the light of the circumstances under which they are made, not
         misleading, and, during such time, subject to Section 5(d) hereof, to
         prepare and furnish, at the Company's expense, to the Underwriters
         promptly such amendments or supplements to such Prospectus as may be
         necessary to reflect any such change;

                  (h) to make generally available to its security holders, and
         to deliver to you, an earning statement of the Company (which will
         satisfy the provisions of Section 11(a) of the Act) covering a period
         of twelve months beginning after the effective date of the Registration
         Statement (as defined in Rule 158(c) under the Act) as soon as is
         reasonably practicable after the termination of such twelve-month
         period but not later than [Insert date twelve months after date of
         execution], 2006;

                  (i) to furnish to its shareholders as soon as practicable
         after the end of each fiscal year an annual report (including a
         consolidated balance sheet and statements of income, shareholders'
         equity and cash flow of the Company and the Subsidiaries for such
         fiscal year, accompanied by a copy of the certificate or report thereon
         of nationally recognized independent certified public accountants), for
         so long as the Company shall have a legal obligation to do so;

                  (j) to furnish to you and your counsel copies of the
         Registration Statement, as initially filed with the Commission, and of
         all amendments thereto (including all exhibits thereto and documents
         incorporated by reference therein) and sufficient copies of the
         foregoing (other than exhibits) for distribution of a copy to each of
         the other Underwriters;

                  (k) to the extent not otherwise available on EDGAR, to furnish
         to you promptly and, upon request, to you and to each of the other
         Underwriters for a period of two years from the date of this Agreement
         (i) copies of any reports, proxy statements, or other communications
         which the Company shall send to its Shareholders or shall from time to
         time publish or publicly disseminate, (ii) copies of all annual,
         quarterly and current reports filed with the Commission on Forms 20-F
         and 6-K, or such other similar forms as may be designated by the
         Commission, (iii) copies of documents or reports filed with any
         national securities exchange on which any class of securities of the
         Company is listed, and (iv) such other information as you may
         reasonably request regarding the Company or the Subsidiaries;

                                      -23-


                  (l) to furnish to you as early as practicable prior to the
         time of purchase and any additional time of purchase, as the case may
         be, but not later than two business days prior thereto, a copy of the
         latest available unaudited interim and monthly (to the extent
         available) consolidated financial statements, if any, of the Company
         and the Subsidiaries which have been read by the Company's independent
         certified public accountants, as stated in their letter to be furnished
         pursuant to Section 8(f) hereof;

                  (m) to apply the net proceeds from the sale of the Shares sold
         by the Company in the manner set forth under the caption "Use of
         Proceeds" in the Prospectus;

                  (n) not to (i) sell, offer to sell, contract or agree to sell,
         hypothecate, pledge, grant any option to purchase or otherwise dispose
         of or agree to dispose of, directly or indirectly, any Ordinary Shares
         or securities convertible into or exchangeable or exercisable for
         Ordinary Shares or warrants or other rights to purchase Ordinary Shares
         or any other securities of the Company that are substantially similar
         to Ordinary Shares, or file or cause to be declared effective a
         registration statement under the Act relating to the offer and sale of
         any shares of Ordinary Shares or securities convertible into or
         exercisable or exchangeable for Ordinary Shares or other rights to
         purchase Ordinary Shares or any other securities of the Company that
         are substantially similar to Ordinary Shares, (ii) enter into any swap
         or other arrangement that transfers to another, in whole or in part,
         any of the economic consequences of ownership of Ordinary Shares or any
         securities convertible into or exercisable or exchangeable for Ordinary
         Shares, or warrants or other rights to purchase Ordinary Shares,
         whether any such transaction is to be settled by delivery of Ordinary
         Shares or such other securities, in cash or otherwise, or (iii)
         publicly announce an intention to effect any transaction specified in
         clause (i) or (ii), in each case, for a period of 180 days after the
         date hereof (the "Lock-Up Period"), without the prior written consent
         of UBS, except for (i) the registration of the Shares and the sales to
         the Underwriters pursuant to this Agreement, (ii) issuances of Ordinary
         Shares upon the exercise of options or warrants disclosed as
         outstanding in the Registration Statement and the Prospectus or the
         2,802 ordinary shares reserved for issuance to Leonardo L.P., and (iii)
         the issuance of employee stock options not exercisable during the
         Lock-Up Period pursuant to stock option plans described in the
         Registration Statement and the Prospectus.

                  Notwithstanding the foregoing, if (1) during the period that
         begins on the date that is 15 calendar days plus 3 business days before
         the last day of the Lock-Up Period and ends on the last day of the
         Lock-Up Period, the Company issues an earnings release or material news
         or a material event relating to the Company occurs, or (2) prior to the
         expiration of the Lock-Up Period, the Company announces that it will
         release earnings results during the 16-day period beginning on the last
         day of the 180-day period, in either case, the restrictions imposed by
         this Section 5(n) shall continue to apply until the expiration of the
         date that is 15 calendar days plus 3 business days after the date on
         which the issuance of the earnings release or the material news or
         material event occurs;

                  (o) to use its best efforts to cause the Shares to be approved
         for quotation on the NASDAQ and the TASE; and

                                      -24-


                  (p) to maintain a transfer agent and, if necessary under the
         jurisdiction of incorporation of the Company, a registrar for the
         Ordinary Shares.

         6.       Certain Covenants of the Selling Shareholders. The Selling
Shareholders, jointly and severally, hereby agree:

                  (a) not, at any time on or after the execution of this
         Agreement, to distribute any "prospectus" (within the meaning of the
         Act) or offering material in connection with the offering or sale of
         the Shares other than the Registration Statement and the then most
         recent Prospectus;

                  (b) not to take, directly or indirectly, any action designed
         to or which may constitute or which might reasonably be expected to
         cause or result in, under the Exchange Act, the ISL or otherwise, the
         stabilization or manipulation of the price of any security of the
         Company to facilitate the sale or resale of the Shares;

                  (c) to pay all expenses incident to the performance of their
         respective obligations under, and the consummation of the transactions
         contemplated by this Agreement, including (i) any stamp duties, capital
         duties and stock transfer taxes, if any, due and payable by them upon
         the sale of the Shares to the Underwriters, and (ii) the fees and
         disbursements of their respective counsel and other advisors; and

                  (d) to advise you promptly, and if requested by you, will
         confirm such advice in writing, so long as delivery of a prospectus
         relating to the Securities by an underwriter or dealer may be required
         under the Act or the Exchange Act, of (i) any material change in the
         Company's condition (financial or otherwise), prospects, earnings,
         business or properties of which such Selling Shareholder has knowledge,
         (ii) any change in information in the Registration Statement or the
         Prospectus relating to the Selling Shareholder or (iii) any new
         material information relating to the Company or relating to any matter
         stated in the Prospectus which comes to the attention of such Selling
         Shareholder.

         7.       Payment of Costs. The Company and each Selling Shareholder
jointly and severally agree to pay all costs, expenses, fees and taxes (other
than fees and disbursements of counsel for the Underwriters except as described
in items (iv) and (vi) below and as provided in Section 8 hereof) in connection
with (i) their costs in the preparation and filing of the Registration
Statement, each Preliminary Prospectus, the Prospectus and any amendments or
supplements thereto, and the printing and furnishing of copies of each thereof
to the Underwriters and to dealers (including costs of mailing and shipment),
(ii) the registration, issue, sale and delivery of the Shares including any
stock or transfer taxes and stamp or similar duties payable upon the sale,
issuance or delivery of the Shares to the Underwriters, (iii) the producing,
word processing and/or printing of this Agreement, any Agreement Among
Underwriters, any dealer agreements, the Power of Attorney, the Custody
Agreement and any closing documents (including compilations thereof) and the
reproduction and/or printing and furnishing of copies of each thereof to the
Underwriters and (except closing documents) to dealers (including costs of
mailing and shipment), (iv) the qualification of the Shares for offering

                                      -25-


and sale under state or foreign laws and the determination of their eligibility
for investment under state or foreign law as aforesaid (including the reasonable
legal fees and filing fees and other disbursements of counsel for the
Underwriters incurred in connection with such qualifications and determinations,
which, together with such other fees described in item (vi) below, shall not
exceed $15,000) and the printing and furnishing of copies of any blue sky
surveys or legal investment surveys to the Underwriters and to dealers, (v) any
listing of the Shares on any securities exchange or qualification of the Shares
for quotation on the NASDAQ and any registration thereof under the Exchange Act,
(vi) any filing for review of the public offering of the Shares by the NASD,
including the reasonable legal fees and filing fees and other disbursements of
counsel to the Underwriters incurred in connection with such qualifications and
determinations, which, together with such other fees described in item (vi)
below, shall not exceed $30,000, (vii) the fees and disbursements of any
transfer agent or registrar for the Shares, (viii) the costs and expenses of the
Company and each Selling Shareholder relating to presentations or meetings
undertaken in connection with the marketing of the offering and sale of the
Shares to prospective investors and the Underwriters' sales forces, including,
without limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in connection with
the road show presentations, travel, lodging and other expenses incurred by the
officers of the Company or by any Selling Shareholder and any such consultants,
and the cost of any aircraft chartered in connection with the road show, (ix)
the costs and expenses of qualifying the Shares for inclusion in the book-entry
settlement system of the Depositary Trust Company (the "DTC"), (x) the
preparation and filing of the Exchange Act Registration Statement, including any
amendments thereto, and (xi) the performance of the Company's and each Selling
Shareholder's other obligations hereunder. The Company hereby agrees with the
Underwriters that it will pay any such amounts not so paid by any Selling
Shareholder.

         8.       Reimbursement of Underwriters' Expenses. If the Shares are
not delivered for any reason other than the termination of this Agreement
pursuant to the fifth paragraph of Section 11 hereof or the default by one or
more of the Underwriters in its or their respective obligations hereunder, the
Company shall, in addition to paying the amounts described in Section 7 hereof,
reimburse the Underwriters for all of their reasonable out-of-pocket expenses
including the reasonable fees and disbursements of their counsel.

         9.       Conditions of Underwriters' Obligations. The several
obligations of the Underwriters hereunder are subject to the accuracy of the
representations and warranties on the part of the Company and each Selling
Shareholder on the date hereof, at the time of purchase and, if applicable, at
the additional time of purchase, the performance by the Company and each Selling
Shareholder of each of their respective obligations hereunder and to the
following additional conditions precedent:

                  (a) The Company shall furnish to you at the time of purchase
         and, if applicable, at the additional time of purchase, an opinion of
         Proskauer Rose LLP, counsel for the Company, addressed to the
         Underwriters, and dated the time of purchase or the additional time of
         purchase, as the case may be, with reproduced copies for each of the
         other


                                      -26-


         Underwriters, in form and substance reasonably satisfactory to UBS and
         covering the matters set forth in Exhibit B hereto and such other
         matters as UBS may reasonably request.

                  (b) The Company shall furnish to you at the time of purchase
         and, if applicable, at the additional time of purchase, an opinion of
         Guy Aharonov, in-house counsel for the Company, addressed to the
         Underwriters, and dated the time of purchase or the additional time of
         purchase, as the case may be, with reproduced copies for each of the
         other Underwriters, in form and substance reasonably satisfactory to
         UBS and covering the matters set forth in Exhibit C hereto and such
         other matters as UBS may reasonably request.

                  (c) The Company shall furnish to you at the time of purchase
         and, if applicable, at the additional time of purchase, an opinion of
         Cohen Lahat & Co., Israel counsel for the Company, addressed to the
         Underwriters, and dated the time of purchase or the additional time of
         purchase, as the case may be, with reproduced copies for each of the
         other Underwriters, in form and substance reasonably satisfactory to
         UBS and covering the matters set forth in Exhibit D hereto and such
         other matters as UBS may reasonably request.

                  (d) The Company shall furnish to you at the time of purchase
         and, if applicable, at the additional time of purchase, an opinion of
         [       ], special Argentine counsel for the Company, addressed to the
         Underwriters, and dated the time of purchase or the additional time of
         purchase, as the case may be, with reproduced copies for each of the
         other Underwriters, in form and substance reasonably satisfactory to
         UBS and covering the matters set forth in Exhibit E hereto and such
         other matters as UBS may reasonably request.

                  (e) The Company shall furnish to you at the time of purchase
         and, if applicable, at the additional time of purchase, an opinion of
         [         ], special Brazil counsel for the Company, addressed to the
         Underwriters, and dated the time of purchase or the additional time of
         purchase, as the case may be, with reproduced copies for each of the
         other Underwriters, in form and substance reasonably satisfactory to
         UBS and covering the matters set forth in Exhibit E hereto and such
         other matters as UBS may reasonably request.

                  (f) The Selling Shareholders shall furnish to you at the time
         of purchase and, if applicable, the additional time of purchase, an
         opinion of [         ], U.S. counsel for the Selling Shareholders
         addressed to the Underwriters, and dated the time of purchase or the
         additional time of purchase, as the case may be, with reproduced copies
         for each of the other Underwriters, in form and substance reasonably
         satisfactory to UBS and covering the matters set forth in Exhibit F
         hereto and such other matters as UBS may reasonably request.

                  (g) The Selling Shareholders shall furnish to you at the time
         of purchase and, if applicable, the additional time of purchase, an
         opinion of [          ], Israel counsel for the Selling Shareholders
         addressed to the Underwriters, and dated the time of purchase or the
         additional time of purchase, as the case may be, with reproduced copies
         for each of the other Underwriters, in form and substance reasonably
         satisfactory to UBS and covering the matters set forth in Exhibit G
         hereto and such other matters as UBS may reasonably request.

                                      -27-


                  (h) You shall have received from Fahn Kanne & Co., a member of
         Grant Thornton International, letters dated, respectively, the date of
         this Agreement, the time of purchase and, if applicable, the additional
         time of purchase, and addressed to the Underwriters (with reproduced
         copies for each of the Underwriters) in the forms heretofore approved
         by UBS.

                  (i) You shall have received at the time of purchase and, if
         applicable, at the additional time of purchase, an opinion of each of
         White & Case LLP, U.S. counsel for the Underwriters, and of Herzog, Fox
         & Neeman, Israeli counsel for the Underwriters, dated the time of
         purchase or the additional time of purchase, as the case may be, with
         respect to the issuance and sale of the Shares, the Registration
         Statement and the Prospectus and other related matters as you may
         reasonably require, and the Company shall have furnished to each such
         counsel such documents as they may reasonably request for the purpose
         of enabling them to pass upon such matters.

                  (j) No Prospectus or amendment or supplement to the
         Registration Statement or the Prospectus shall have been filed to which
         you reasonably object in writing.

                  (k) The Registration Statement shall become effective not
         later than 5:30 P.M. New York City time, on the date of this Agreement
         and, if Rule 430A under the Act is used, the Prospectus shall have been
         filed with the Commission pursuant to Rule 424(b) under the Act at or
         before 5:30 P.M., New York City time, on the second full business day
         after the date of this Agreement and any registration statement
         pursuant to Rule 462(b) under the Act required in connection with the
         offering and sale of the Shares shall have been filed and become
         effective no later than 10:00 p.m., New York City time, on the date of
         this Agreement.

                  (l) Prior to the time of purchase, and, if applicable, the
         additional time of purchase, (i) no stop order with respect to the
         effectiveness of the Registration Statement shall have been issued
         under the Act or proceedings initiated under Section 8(d) or 8(e) of
         the Act; (ii) the Registration Statement and all amendments thereto
         shall not contain an untrue statement of a material fact or omit to
         state a material fact required to be stated therein or necessary to
         make the statements therein not misleading; and (iii) the Prospectus
         and all amendments or supplements thereto shall not contain an untrue
         statement of a material fact or omit to state a material fact required
         to be stated therein or necessary to make the statements therein, in
         the light of the circumstances under which they are made, not
         misleading.

                  (m) Between the time of execution of this Agreement and the
         time of purchase or the additional time of purchase, as the case may
         be, no material adverse change or any development involving a
         prospective material adverse change in the business, properties,
         management, financial condition or results of operations of the Company
         and the Subsidiaries taken as a whole shall occur or become known.

                                      -28-


                  (n) The Company will, at the time of purchase and, if
         applicable, at the additional time of purchase, deliver to you a
         certificate of its Chief Executive Officer and its Chief Financial
         Officer in the form attached as Exhibit H hereto.

                  (o) The Selling Shareholders will, at the time of purchase
         and, if applicable, at the additional time of purchase, deliver to you
         a certificate of the Representative of the Selling Shareholders on
         behalf of each of the Selling Shareholders, in the form attached as
         Exhibit I hereto.

                  (p) You shall have received a duly executed agreement (a
         "Lock-up Agreement"), in the form set forth as Exhibit A hereto, from
         each of the Selling Shareholders and each of the Company's directors
         and executive officers and holders of the Company's Ordinary Shares
         listed under the heading "Management" and "Principal and Selling
         Shareholders" in the Registration Statement and the Prospectus.

                  (q) Each Selling Shareholders will have delivered to you a
         duly executed Power of Attorney and a duly executed Custody Agreement,
         in each case in form and substance reasonably satisfactory to UBS.

                  (r) The Company and the Selling Shareholders shall have
         furnished to you such other documents and certificates as to the
         accuracy and completeness of any statement in the Registration
         Statement and the Prospectus as of the time of purchase and, if
         applicable, the additional time of purchase, as you may reasonably
         request.

                  (s) The Shares shall have been approved for quotation on the
         NASDAQ and listing on the TASE, subject only to notice of issuance at
         or prior to the time of purchase or the additional time of purchase, as
         the case may be.

         10.      Effective Date of Agreement; Termination. This Agreement
shall become effective (i) if Rule 430A under the Act is not used, when you
shall have received notification of the effectiveness of the Registration
Statement, or (ii) if Rule 430A under the Act is used, when the parties hereto
have executed and delivered this Agreement.

                  The obligations of the several Underwriters hereunder shall be
subject to termination in the absolute discretion of UBS or any group of
Underwriters (which may include UBS) which has agreed to purchase in the
aggregate at least 50% of the Firm Shares, if (x) since the time of execution of
this Agreement or the earlier respective dates as of which information is given
in the Registration Statement and the Prospectus, there has been any material
adverse change or any development involving a prospective material adverse
change in the business, properties, management, financial condition or results
of operations of the Company and the Subsidiaries taken as a whole, which would,
in UBS' judgment or in the judgment of such group of Underwriters, make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares on the terms and in the manner contemplated in the Registration
Statement and the Prospectus, or (y) since of execution of this Agreement, there
shall have occurred: (i) a suspension or material limitation in trading in



                                      -29-


securities generally on the New York Stock Exchange, the American Stock
Exchange, the NASDAQ or the TASE; (ii) a suspension or material limitation in
trading in the Company's securities on the NASDAQ or on the TASE; (iii) a
general moratorium on commercial banking activities declared by either U.S.
federal, New York State or Israeli authorities or a material disruption in
commercial banking or securities settlement or clearance services in the United
States or Israel; (iv) an outbreak or escalation of hostilities or acts of
terrorism involving the United States, an escalation of existing hostilities or
an outbreak of additional acts of terrorism involving Israel, or a declaration
by the United States or Israel of a national emergency or war; or (v) any other
calamity or crisis or any change in financial, political or economic conditions
in the United States, Israel or elsewhere, if the effect of any such event
specified in clause (iv) or (v) in UBS' judgment or in the judgment of such
group of Underwriters makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares on the terms and in the manner
contemplated in the Registration Statement and the Prospectus.

                  If UBS or any group of Underwriters elects to terminate this
Agreement as provided in this Section 10, the Company, the Representatives of
the Selling Shareholders and each other Underwriter shall be notified promptly
in writing.

                  If the sale to the Underwriters of the Shares, as contemplated
by this Agreement, is not carried out by the Underwriters for any reason
permitted under this Agreement or if such sale is not carried out because the
Company or the Selling Shareholders, as the case may be, shall be unable to
comply with any of the terms of this Agreement, the Company or the Selling
Shareholders, as the case may be, shall not be under any obligation or liability
under this Agreement (except to the extent provided in Sections 7, 8 and 12
hereof), and the Underwriters shall be under no obligation or liability to the
Company or any Selling Shareholders under this Agreement (except to the extent
provided in Section 12 hereof) or to one another hereunder.

         11.      Increase in Underwriters' Commitments. Subject to Sections
9 and 10 hereof, if any Underwriter shall default in its obligation to take up
and pay for the Firm Shares to be purchased by it hereunder (otherwise than for
a failure of a condition set forth in Section 9 hereof or a reason sufficient to
justify the termination of this Agreement under the provisions of Section 10
hereof) and if the number of Firm Shares which all Underwriters so defaulting
shall have agreed but failed to take up and pay for does not exceed 10% of the
total number of Firm Shares, the non-defaulting Underwriters shall take up and
pay for (in addition to the aggregate number of Firm Shares they are obligated
to purchase pursuant to Section 1 hereof) the number of Firm Shares agreed to be
purchased by all such defaulting Underwriters, as hereinafter provided. Such
Shares shall be taken up and paid for by such non-defaulting Underwriters in
such amount or amounts as you may designate with the consent of each Underwriter
so designated or, in the event no such designation is made, such Shares shall be
taken up and paid for by all non-defaulting Underwriters pro rata in proportion
to the aggregate number of Firm Shares set opposite the names of such
non-defaulting Underwriters in Schedule A.

                  Without relieving any defaulting Underwriter from its
obligations hereunder, the Company and the Selling Shareholders each agree with
the non-defaulting Underwriters that it will



                                      -30-

not sell any Firm Shares hereunder unless all of the Firm Shares are purchased
by the Underwriters (or by substituted Underwriters selected by you with the
approval of the Company or selected by the Company with your approval).

                  If a new Underwriter or Underwriters are substituted by the
Underwriters or by the Company for a defaulting Underwriter or Underwriters in
accordance with the foregoing provision, the Company or you shall have the right
to postpone the time of purchase for a period not exceeding five business days
in order that any necessary changes in the Registration Statement and the
Prospectus and other documents may be effected.

                  The term Underwriter as used in this Agreement shall refer to
and include any Underwriter substituted under this Section 11 with like effect
as if such substituted Underwriter had originally been named in Schedule A.

                  If the aggregate number of Firm Shares which the defaulting
Underwriter or Underwriters agreed to purchase exceeds 10% of the total number
of Firm Shares which all Underwriters agreed to purchase hereunder, and if
neither the non-defaulting Underwriters nor the Company shall make arrangements
within the five business day period stated above for the purchase of all the
Firm Shares which the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement shall terminate without further act or deed and
without any liability on the part of the Company to any non-defaulting
Underwriter and without any liability on the part of any non-defaulting
Underwriter to the Company or to any Selling Shareholder. Nothing in this
paragraph, and no action taken hereunder, shall relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.

         12.      Indemnity and Contribution.

        (a)       The Company agrees to indemnify, defend and hold harmless each
Underwriter, its partners, directors and officers, and any person who controls
any Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, and the successors and assigns of all of the foregoing persons,
from and against any loss, damage, expense, liability or claim (including the
reasonable cost of investigation) which, jointly or severally, any such
Underwriter or any such person may incur under the Act, the Exchange Act, common
law or otherwise, insofar as such loss, damage, expense, liability or claim
arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment thereof by the
Company) or in a Prospectus (the term Prospectus for the purpose of this Section
12 being deemed to include any Preliminary Prospectus, the Prospectus and the
Prospectus as amended or supplemented by the Company), or arises out of or is
based upon any omission or alleged omission to state a material fact required to
be stated in either such Registration Statement or such Prospectus or necessary
to make the statements made therein not misleading, except insofar as any such
loss, damage, expense, liability or claim arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact contained in and
in

                                      -31-

conformity with information concerning such Underwriter furnished in writing by
or on behalf of such Underwriter through you to the Company expressly for use in
either such Registration Statement or such Prospectus or arises out of or is
based upon any omission or alleged omission to state a material fact in
connection with such information required to be stated in such Registration
Statement or such Prospectus or necessary to make such information not
misleading, (ii) the failure by the Company to perform when and as required any
agreement or covenant contained herein or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any audio or visual materials
provided by the Company or based upon written information furnished by or on
behalf of the Company including, without limitation, slides, videos, films or
tape recordings used in connection with the marketing of the Shares; provided
that the foregoing indemnity is subject to the condition that, insofar as it
relates to any untrue statement or omission, or any alleged untrue statement or
omission, made in a Preliminary Prospectus but corrected, eliminated or remedied
in the Prospectus, or any amendment or supplement thereto, it shall not inure to
the benefit of any Underwriter from whom the person asserting the claim
purchased the Shares (or to the benefit of any person who controls such
Underwriter within the meaning of Section 15 of the Securities Act) if the
Company had previously furnished copies of the Prospectus or such amendment or
supplement to such Underwriter in the requisite quantity and on a timely basis
to permit proper delivery and such person was not sent a copy of the Prospectus
at or prior to the written confirmation of the sale of such Share to such person
and the untrue statement or omission contained in the Preliminary Prospectus was
corrected in the Prospectus or such amendment or supplement.

         (b)      Each senior executive Selling Shareholder named in Schedule B
(each a "Senior Executive Selling Shareholder") agrees to indemnify, severally
and not jointly, defend and hold harmless each Underwriter, its partners,
directors and officers, and any person who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, and the
successors and assigns of all of the foregoing persons, from and against any
loss, damage, expense, liability or claim (including reasonable cost of
investigation) which, jointly or severally, any such Underwriter or any such
person may incur under the Act, the Exchange Act, common law or otherwise,
insofar as such loss, damage, expense, liability or claim arises out of or is
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or in the Registration Statement
as amended by any post-effective amendment thereof by the Company) or in a
Prospectus, or arises out of or is based upon any omission or alleged omission
to state a material fact required to be stated in either such Registration
Statement or Prospectus or necessary to make the statements made therein (in the
case of a Prospectus, in light of the circumstances under which they are made)
not misleading; or (ii) the failure by such Senior Executive Selling Shareholder
to perform when and as required pursuant to any agreement or covenant contained
herein, except insofar as any such loss, damage, expense, liability or claim
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact contained in and in conformity with information concerning
such Underwriter furnished in writing by or on behalf of such Underwriter to the
Company expressly for use in such Registration Statement or such Prospectus or



                                      -32-

arises out of or is based upon any omission or alleged omission to state a
material fact in connection with such information required to be stated in such
Registration Statement or such Prospectus or necessary to make such information
not misleading; provided that no Senior Executive Selling Shareholder shall be
responsible, either pursuant to this Section 12(b) or Section (f) or as a result
of any breach of this Agreement, for losses, expenses, liability or claims for
an amount in excess of the proceeds (net of underwriting discounts and
commissions but before deducting expenses) received by such Senior Executive
Selling Shareholder from the sale of Shares hereunder.

         Each Non-Executive Selling Shareholder agrees to indemnify, severally
and not jointly, defend and hold harmless each Underwriter, its partners,
directors and officers, and any person who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, and the
successors and assigns of all of the foregoing persons, from and against any
loss, damage, expense, liability or claim (including reasonable cost of
investigation) which, jointly or severally, any such Underwriter or any such
person may incur under the Act, the Exchange Act, common law or otherwise,
insofar as such loss, damage, expense, liability or claim arises out of or is
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or in the Registration Statement
as amended by any post-effective amendment thereof by the Company) or in a
Prospectus, or arises out of or is based upon any omission or alleged omission
to state a material fact required to be stated in either such Registration
Statement or Prospectus or necessary to make the statements made therein (in the
case of a Prospectus, in light of the circumstances under which they are made)
not misleading, in each case with reference only to untrue statements or alleged
untrue statements or any omission or alleged omission to state a material fact
of which such Non-Executive Selling Shareholder has knowledge or is based on
written information furnished to the Company by or on behalf of such
Non-Executive Selling Shareholder specifically for inclusion in the Registration
Statement or Prospectus; or (ii) the failure by such Non-Executive Selling
Shareholder to perform when and as required pursuant to any agreement or
covenant contained herein; provided that no Non-Executive Shareholder shall be
responsible, either pursuant to this Section 12(b) or Section (f) or as a result
of any breach of this Agreement, for losses, expenses, liability or claims for
an amount in excess of the proceeds (net of underwriting discounts and
commissions but before deducting expenses) received by such Non-Executive
Selling Shareholder from the sale of Shares hereunder.

         (c)      If any action, suit or proceeding (each, a "Proceeding") is
brought against an Underwriter or any such person in respect of which indemnity
may be sought against the Company or the Selling Shareholders pursuant to the
foregoing Sections 12(a) or (b), such Underwriter or such person shall promptly
notify the Company and the Representative of the Selling Shareholders in writing
of the institution of such Proceeding and the Company or such Selling
Shareholder, as applicable (each an "Indemnifying Party", as the case may be),
shall assume the defense of such Proceeding, including the employment of counsel
reasonably satisfactory to such Indemnified Party and payment of all fees and
expenses; provided, however, that the omission to so notify the


                                      -33-


Indemnifying Party shall not relieve the Indemnifying Party from any liability
which the Indemnifying Party may have to any Underwriter or any such person or
otherwise except to the extent that the Indemnifying Party is materially
prejudiced by, and is foreclosed from asserting any material defenses as a
result of, such failure to give timely notice. Such Underwriter or such person
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter or of such person unless the employment of such counsel shall have
been authorized in writing by the Indemnifying Party in connection with the
defense of such Proceeding or the Indemnifying Party shall not have, within a
reasonable period of time in light of the circumstances, employed counsel to
have charge of the defense of such Proceeding or such Indemnified Party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from, additional to or in conflict with those
available to the Indemnifying Party (in which case the Indemnifying Party shall
not have the right to direct the defense of such Proceeding on behalf of the
Indemnified Party or parties but may employ counsel and participate in the
defense thereof, provided that the fees and expenses of such counsel shall be at
the expense of the Indemnifying Party), in any of which events such fees and
expenses shall be borne by the Indemnifying Party and paid as incurred (it being
understood, however, that the Indemnifying Party shall not be liable for the
expenses of more than one separate counsel (in addition to any local counsel) in
any one Proceeding or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such Proceeding). The
Indemnifying Party shall not be liable for any settlement of any Proceeding
effected without its written consent but if settled with the written consent of
the Indemnifying Party, the Indemnifying Party agrees to indemnify and hold
harmless any Underwriter and any such person from and against any loss or
liability by reason of such settlement. Notwithstanding the foregoing sentence,
if at any time an Indemnified Party shall have requested an Indemnifying Party
to reimburse the Indemnified Party for fees and expenses of counsel as
contemplated by the second sentence of this paragraph, then the Indemnifying
Party agrees that it shall be liable for any settlement of any Proceeding
effected without its written consent if (i) such settlement is entered into more
than 60 business days after receipt by such Indemnifying Party of the aforesaid
request, (ii) such Indemnifying Party shall not have fully reimbursed the
Indemnified Party in accordance with such request prior to the date of such
settlement and (iii) such Indemnified Party shall have given the Indemnifying
Party at least 30 days' prior notice of its intention to settle. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, effect
any settlement of any pending or threatened Proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding and does not include an admission
of fault, culpability or a failure to act, by or on behalf of such Indemnified
Party.

         (d)      Each Underwriter severally agrees to indemnify, defend and
hold harmless the Company, its directors and officers, each Selling Shareholder
and its directors and officers and any person who controls the Company or any
Selling Shareholder within the meaning of Section 15 of the



                                      -34-

Act or Section 20 of the Exchange Act, and the successors and assigns of all of
the foregoing persons, from and against any loss, damage, expense, liability or
claim (including the reasonable cost of investigation) which, jointly or
severally, the Company, any Selling Shareholder or any such person may incur
under the Act, the Exchange Act, the common law or otherwise, insofar as such
loss, damage, expense, liability or claim arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact contained in and
in conformity with information concerning such Underwriter furnished in writing
by or on behalf of such Underwriter through you to the Company expressly for use
in the Registration Statement (or in the Registration Statement as amended by
any post-effective amendment thereof by the Company) or in a Prospectus, or
arises out of or is based upon any omission or alleged omission to state a
material fact in connection with such information required to be stated in such
Registration Statement or such Prospectus or necessary to make such information
not misleading.

         (e)       If any Proceeding is brought against the Company, any Selling
Shareholder, or any such person in respect of which indemnity may be sought
against any Underwriter pursuant to Section 12(e), the Company, the Selling
Shareholder or such person shall promptly notify such Underwriter in writing of
the institution of such Proceeding and such Underwriter shall assume the defense
of such Proceeding, including the employment of counsel reasonably satisfactory
to such indemnified party and payment of all fees and expenses; provided,
however, that the omission to so notify such Underwriter shall not relieve such
Underwriter from any liability which such Underwriter may have to the Company,
any Selling Shareholder or any such person or otherwise except to the extent
that the Underwriter is materially prejudiced by, and is foreclosed from
asserting any material defenses as a result of, such failure to give timely
notice. The Selling Company, the Selling Shareholder or such person shall have
the right to employ its own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of the Company, the Selling Shareholders
or such person unless the employment of such counsel shall have been authorized
in writing by such Underwriter in connection with the defense of such Proceeding
or such Underwriter shall not have, within a reasonable period of time in light
of the circumstances, employed counsel to defend such Proceeding or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to or in
conflict with those available to such Underwriter (in which case such
Underwriter shall not have the right to direct the defense of such Proceeding on
behalf of the indemnified party or parties, but such Underwriter may employ
counsel and participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such Underwriter), in any of which events
such fees and expenses shall be borne by such Underwriter and paid as incurred
(it being understood, however, that such Underwriter shall not be liable for the
expenses of more than one separate counsel (in addition to any local counsel) in
any one Proceeding or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such Proceeding). No
Underwriter shall be liable for any settlement of any such Proceeding effected
without the written consent of such Underwriter but if settled with the written
consent of such Underwriter, such Underwriter agrees to indemnify and hold
harmless the Company, any Selling Shareholder and any such person from and
against any loss or liability by reason of such settlement. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party hereunder to reimburse the indemnified party for



                                      -35-


fees and expenses of counsel as contemplated by the second sentence of this
Section 12(f), then such indemnifying party agrees that it shall be liable for
any settlement of any Proceeding effected without its written consent if (i)
such settlement is entered into more than 60 business days after receipt by such
Indemnifying Party of the aforesaid request, (ii) such Indemnifying Party shall
not have reimbursed the indemnified party in accordance with such request prior
to the date of such settlement and (iii) such indemnified party shall have given
the Indemnifying Party at least 30 days' prior notice of its intention to
settle. No indemnifying party hereunder shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
Proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
Proceeding, and does not include an admission of fault, culpability, or failure
to act, by or on behalf of such indemnified party.

         (f)      If the indemnification provided for in this Section 12 is
unavailable to an indemnified party under subsections (a), (b), (c), (d) and (e)
of this Section 12 or insufficient to hold an indemnified party harmless in
respect of any losses, damages, expenses, liabilities or claims referred to
therein, then each applicable indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, damages,
expenses, liabilities or claims (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company or the Selling Shareholders on the one hand and of
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, damages, expenses, liabilities or claims, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Selling Shareholders on the one hand and the Underwriters
on the other shall be deemed to be in the same respective proportions as the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Company and the Selling
Shareholders and the total underwriting discounts and commissions received by
the Underwriters, bear to the aggregate public offering price of the Shares. The
relative fault of the Company and the Selling Shareholders on the one hand and
of the Underwriters on the other shall be determined by reference to, among
other things, whether the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission relates to information supplied by
the Company, the Selling Shareholders or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, damages, expenses, liabilities and claims referred to in
this subsection shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating, preparing to
defend or defending any Proceeding.

         (g)      The Company, the Selling Shareholders and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 12 were determined by pro rata allocation


                                      -36-


(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in subsection (f) above. Notwithstanding the
provisions of this Section 12, (i) no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by such Underwriter and distributed to the public were
offered to the public exceeds the amount of any damage which such Underwriter
has otherwise been required to pay by reason of such untrue statement or alleged
untrue statement or omission or alleged omission and (ii) no Selling Shareholder
shall be required to contribute any amount in excess of the proceeds (net of
underwriting discounts but before deducting expenses) to be received by such
Selling Shareholder in respect of the Shares sold by such Selling Shareholder
hereunder less any amounts for which such Selling Shareholder has previously
made an indemnification payment to any indemnified party pursuant to Section
12(b) above. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 12 are several
in proportion to their respective underwriting commitments and not joint. The
Selling Shareholders' obligations to contribute pursuant to this Section 12 are
several in proportion to their respective proceeds (net of underwriting
discounts but before deducting expenses) to be received by such Selling
Shareholder in respect of the Shares sold by such Selling Shareholder hereunder
and not joint.

         (h)      The indemnity and contribution agreements contained in this
Section 12 and the covenants, warranties and representations of the Company and
the Selling Shareholders contained in this Agreement shall remain in full force
and effect regardless of any investigation made by or on behalf of any
Underwriter, its partners, directors or officers or any person (including each
partner, officer or director of such person) who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, or by or
on behalf of the Company, its directors or officers, any Selling Shareholder,
its directors and officers or any person who controls the Company or any Selling
Shareholder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, and shall survive any termination of this Agreement or the
issuance and delivery of the Shares. The Company, each Selling Shareholder and
each Underwriter agree promptly to notify each other of the commencement of any
Proceeding against it and, in the case of the Company or the Selling
Shareholders, against any of the Company's or the Selling Shareholder's officers
or directors, as the case may be, in connection with the issuance and sale of
the Shares, or in connection with the Registration Statement or the Prospectus.

         13.      Information Furnished by the Underwriters. The statements set
forth in the last paragraph on the cover page of the Prospectus and the
statements set forth in the sections "Over-Allotment Options," "Commissions and
Discounts" and "Price Stabilization, Short Positions" under the caption
"Underwriting" in the Prospectus constitute the only information furnished by or
on behalf of the Underwriters as such information is referred to in Sections 3
and 12 hereof.

         14.      Notices. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if to
the Underwriters, shall be sufficient in all



                                      -37-

respects if delivered or sent to UBS Securities LLC, 299 Park Avenue, New York,
New York, 10171-0026, Attention: Syndicate Department; if to the Company, shall
be sufficient in all respects if delivered or sent to the Company at the offices
of the Company at 3 Hashikma Street, Azour, Israel 58001, Attention: General
Counsel; Facsimile: 011-972-3-557-133 and if to the Selling Shareholders, shall
be sufficient in all respects if delivered or sent to the Representative of the
Selling Shareholders at [           ], Attention: [         ], Facsimile:
[            ].

         15.      Governing Law; Construction. This Agreement and any claim,
counterclaim or dispute of any kind or nature whatsoever arising out of or in
any way relating to this Agreement ("Claim"), directly or indirectly, shall be
governed by, and construed in accordance with, the laws of the State of New
York. The Section headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.

         16.      Submission to Jurisdiction. Except as set forth below, no
Claim may be commenced, prosecuted or continued in any court other than the
courts of the State of New York located in the City and County of New York or in
the United States District Court for the Southern District of New York, which
courts shall have jurisdiction over the adjudication of such matters, and the
Company and each of the Selling Shareholders each consent to the jurisdiction of
such courts and personal service with respect thereto. The Company and each of
the Selling Shareholders each hereby consent to personal jurisdiction, service
and venue in any court in which any Claim arising out of or in any way relating
to this Agreement is brought by any third party against the Underwriters or any
indemnified party. Each of UBS, the Company (on its behalf and, to the extent
permitted by applicable law, on behalf of its Shareholders and affiliates) and
the Selling Shareholders waives all right to trial by jury in any action,
proceeding or counterclaim (whether based upon contract, tort or otherwise) in
any way arising out of or relating to this Agreement. The Company and each of
the Selling Shareholders each agree that a final judgment in any such action,
proceeding or counterclaim brought in any such court shall be conclusive and
binding upon the Company and each of the Selling Shareholders and may be
enforced in any other courts to the jurisdiction of which the Company or any
Selling Shareholder is or may be subject, by suit upon such judgment. The
Company and each of the Selling Shareholders hereby appoint, without power of
revocation, [Ituran U.S.A., Inc.] (which hereby accepts such appointment), as
its agent to accept and acknowledge on its behalf service of any and all process
which may be served in any action, proceeding or counterclaim in any way
relating to or arising out of this Agreement.

         17.      Parties at Interest. The Agreement herein set forth has been
and is made solely for the benefit of the Underwriters, the Company and the
Selling Shareholders and to the extent provided in Section 12 hereof the
controlling persons, partners, directors and officers referred to in such
section, and their respective successors, assigns, heirs, personal
representatives and executors and administrators. No other person, partnership,
association or corporation (including a purchaser, as such purchaser, from any
of the Underwriters) shall acquire or have any right under or by virtue of this
Agreement.



                                      -38-

         18.      Absence of Fiduciary Relationship. The Company acknowledges
and agrees that:

         (a)      the Representative has been retained solely to act as
underwriter in connection with the sale of the Shares and that no fiduciary,
advisory or agency relationship between the Company and the Representative has
been created in respect of any of the transactions contemplated by this
Agreement, irrespective of whether the Representative has advised or is advising
the Company on other matters;

         (b)      the price of the Shares set forth in this Agreement was
established by the Company following discussions and arms-length negotiations
with the Representative and the Company is capable of evaluating and
understanding and understands and accepts the terms, risks and conditions of the
transactions contemplated by this Agreement;

         (c)      it has been advised that the Representative and its
affiliates are engaged in a broad range of transactions which may involve
interests that differ from those of the Company and that the Representative has
no obligation to disclose such interests and transactions to the Company by
virtue of any fiduciary, advisory or agency relationship; and

         (d)      the Company waives, to the fullest extent permitted by law,
any claims it may have against the Representative for breach of fiduciary duty
or alleged breach of fiduciary duty and agrees that the Representative shall
have no liability (whether direct or indirect) to the Company in respect of such
fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf
of or in right of the Company, including shareholders, employees or creditors of
the Company.

         19.      Counterparts. This Agreement may be signed by the parties in
one or more counterparts which together shall constitute one and the same
agreement among the parties.

         20.      Successors and Assigns. This Agreement shall be binding upon
the Underwriters, the Company and the Selling Shareholders and their successors
and assigns and any successor or assign of any substantial portion of the
Company's, any of the Selling Shareholders' and any of the Underwriters'
respective businesses and/or assets.

         21.      Miscellaneous. UBS, an indirect, wholly owned subsidiary of
UBS AG, is not a bank and is separate from any affiliated bank, including any
U.S. branch or agency of UBS AG. Because UBS is a separately incorporated
entity, it is solely responsible for its own contractual obligations and
commitments, including obligations with respect to sales and purchases of
securities. Securities sold, offered or recommended by UBS are not deposits, are
not insured by the Federal Deposit Insurance Corporation, are not guaranteed by
a branch or agency, and are not otherwise an obligation or responsibility of a
branch or agency.

                [Remainder of the page intentionally left blank.]




                                      -39-

         If the foregoing correctly sets forth the understanding among the
Company, the Selling Shareholders and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this agreement
and your acceptance shall constitute a binding agreement among the Company, the
Selling Shareholders and the Underwriters, severally.

                                Very truly yours,

                                ITURAN LOCATION AND CONTROL LTD.


                                By:
                                     -----------------------------------
                                     Title:


                               [ITURAN USA, INC.]
                               (Solely in respect of Section 16 hereof)


                               By:
                                   ---------------------------------------
                                    Name:
                                    Title:


                               THE SELLING SHAREHOLDERS NAMED IN
                               SCHEDULE B ATTACHED HERETO

                               By:  [Representative], Attorney-in-fact


                               By:
                                   ----------------------------------------
                                    Name:
                                    Title:






                                      -40-


Accepted and agreed to as of the
date first above written, on
behalf of itself and the
other several Underwriters
named in Schedule A

UBS SECURITIES LLC


By:
   -----------------------------
    Title:


By:
   -----------------------------
    Title:





                                                                      SCHEDULE A
                                                                      ----------

                                  UNDERWRITERS

                                     Number of            Number of
Underwriter                          Firm Shares          Additional Shares
-----------                          -----------          -----------------

UBS Securities LLC

J.P. Morgan Securities Inc.

C.E. Unterberg, Towbin, LLC

Willaim Blair & Company, LLC

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

         Total......................
                                     ===========          ===========








                                                                      SCHEDULE B
                                                                      ----------

                      SELLING SHARHOLDERS

                                           Number of           Number of
Name of Shareholder                        Firm Shares         Additional Shares
-------------------                        -----------         -----------------

   Senior Executive Selling Shareholders:
   --------------------------------------


   Non-Executive Selling Shareholders:
   -----------------------------------

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

Total.................................
                                          ===========          ===========











                                                                      SCHEDULE C
                                                                      ----------

                                  SUBSIDIARIES

                            Telematics Wireless Ltd.
                               Ituran Beheer B.V.
                               Ituran-Network Ltd.
                       Ituran Cellular Communications Ltd.
                               Hotas Holding Ltd.
                               Ituran U.S.A. Inc.
                              Ituran NY Corporation
                           Ituran Florida Corporation
                           Ituran License Corporation
                            Ituran de Argentina S.A.
                              Ituran Holding Ltda.
                            Teleran Localizacao Ltda.
                             Ituran Servicios Ltda.







                                                                       EXHIBIT A
                                                                       ---------

                            LOCK-UP LETTER AGREEMENT


                        ITURAN LOCATION AND CONTROL, LTD.

                                 Ordinary Shares
                              (NIS 1.00 Par Value)


                                     , 2005

UBS Securities LLC
As Representative of the several Underwriters

c/o UBS Securities LLC
     299 Park Avenue
     New York, New York 10171

Ladies and Gentlemen:

                  This Lock-Up Letter Agreement is being delivered to you in
connection with the proposed Underwriting Agreement (the "Underwriting
Agreement") to be entered into by Ituran Location and Control Ltd. (the
"Company"), the Selling Shareholders named therein and you, as Representative of
the several Underwriters named therein, with respect to the public offering (the
"Offering") of ordinary shares, par value NIS 1.00 per share, of the Company
(the "Ordinary Shares").

                  In order to induce you to enter into the Underwriting
Agreement, the undersigned agrees that for a period of 180 days after the date
of the final prospectus relating to the Offering the undersigned will not,
without the prior written consent of UBS Securities, LLC, (i) sell, offer to
sell, contract or agree to sell, hypothecate, pledge, grant any option to
purchase or otherwise dispose of or agree to dispose of, directly or indirectly,
or file (or participate in the filing of) a registration statement with the
Securities and Exchange Commission (the "Commission") in respect of, or
establish or increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of Section 16 of the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Commission
promulgated thereunder with respect to, any Ordinary Shares of the Company or
any securities convertible into or exercisable or exchangeable for Ordinary
Shares, or warrants or other rights to purchase Ordinary Shares, (ii) enter into
any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of Ordinary Shares or any
securities convertible into or exercisable or exchangeable for Ordinary Shares,
or warrants or other rights to purchase Ordinary Shares, whether any such
transaction is to be settled by delivery of Ordinary Shares or such other
securities, in cash or otherwise, or (iii) publicly announce an intention to
effect any transaction specified in clause (i) or (ii). The foregoing sentence



shall not apply to (a) the registration of or sale to the Underwriters of any
Ordinary Shares pursuant to the Offering and the Underwriting Agreement, (b)
bona fide gifts, provided the recipient thereof agrees in writing with the
Underwriters to be bound by the terms of this Lock-Up Letter Agreement, (c)
dispositions to any trust for the direct or indirect benefit of the undersigned
and/or the immediate family of the undersigned or to a partnership, limited
liability company or other entity, all of the beneficial interests of which are
held by the undersigned or by a member of the undersigned's immediate family,
provided that such trust, partnership, limited liability company or other entity
agrees in writing with the Underwriters to be bound by the terms of this Lock-Up
Letter Agreement, (d) the exercise of stock options granted pursuant to the
Company's stock option/incentive plans or otherwise outstanding on the date
hereof, provided that it shall apply to any Ordinary Shares issued upon such
exercise, (e) transfers by way of testate or intestate succession or by
operation of law, provided that the relevant transferee agrees in writing with
the Underwriters to be bound by the terms of this Lock-Up Letter Agreement, or
(f) if the undersigned is, or controls, a corporation, partnership, limited
liability company or similar entity, transfers to the stockholders, partners,
members or similar persons of such entity, provided that such stockholders,
partners, members or similar persons of such entity agree in writing with the
Underwriters to be bound by the terms of this Lock-Up Letter Agreement.

                  In addition, the undersigned hereby waives any rights the
undersigned may have to require registration of Ordinary Shares in connection
with the filing of a registration statement relating to the Offering, other than
as provided for in the Underwriting Agreement. The undersigned further agrees
that, for a period of 180 days after the date of the final prospectus relating
to the Offering, the undersigned will not, without the prior written consent of
UBS, make any demand for, or exercise any right with respect to, the
registration of Ordinary Shares of the Company or any securities convertible
into or exercisable or exchangeable for Ordinary Shares, or warrants or other
rights to purchase Ordinary Shares.

                  Notwithstanding the foregoing, if (1) during the period that
begins on the date that is 15 calendar days plus 3 business days before the last
day of the 180-day restricted period and ends on the last day of the 180-day
restricted period, the Company issues a earnings release or material news or a
material event relating to the Company occurs, or (2) prior to the expiration of
the 180-day restricted period, the Company announces that it will release
earnings results during the 16-day period beginning on the last day of the
180-day period, in either case, the restrictions imposed by this Lock-Up Letter
Agreement shall continue to apply until the expiration of the date that is 15
calendar days plus 3 business days after the date on which the issuance of the
earnings release or the material news or material event occurs.

                  If (i) the Company notifies you in writing that it does not
intend to proceed with the Offering, (ii) the registration statement filed with
the Securities and Exchange Commission with respect to the Offering is
withdrawn, (iii) for any reason the Underwriting Agreement shall be terminated
prior to the time of purchase (as defined in the Underwriting Agreement) or (iv)
the Offering is not consummated prior to December 31, 2005, this Lock-Up Letter
Agreement shall,








immediately and without any further action, be terminated and the undersigned
shall be released from its obligations hereunder.

                                                     Yours very truly,



                                                     Name:





























                                                                       EXHIBIT B
                                                                       ---------



                    [FORM OF OPINION OF COMPANY U.S. COUNSEL]




























                                                                       EXHIBIT C
                                                                       ---------



                 [FORM OF OPINION OF COMPANY IN-HOUSE COUNSEL]






















                                                                       EXHIBIT D
                                                                       ---------



                  [FORM OF OPINION OF COMPANY ISRAEL COUNSEL]









































                                                                       EXHIBIT E
                                                                       ---------



                        [FORM OF LOCAL COUNSEL OPINION]
















                                                                       EXHIBIT F
                                                                       ---------



             [FORM OF SELLING SHAREHOLDER U.S. COUNSEL OPINION](1)


















(1) Opinions to be provided by either Israel or U.S. Selling Shareholders
    Counsel, as appropriate.






                                                                       EXHIBIT G
                                                                       ---------



              [FORM OF SELLING SHAREHOLDER ISRAEL COUNSEL OPINION]


























                                                                       EXHIBIT H
                                                                       ---------


                              Officers' Certificate
                              ---------------------

1.       I have reviewed the Registration Statement and the Prospectus.

2.       The representations and warranties of the Company as set forth in this
         Agreement are true and correct as of the time of purchase and, if
         applicable, the additional time of purchase.

3.       The Company has performed all of its obligations under this Agreement
         as are to be performed at or before the time of purchase and at or
         before the additional time of purchase, as the case may be.

4.       The conditions set forth in paragraphs (k) and (l) of Section 9 of this
         Agreement have been met.

5.       The financial statements and other financial information included in
         the Registration Statement and the Prospectus fairly present in all
         material respects the financial condition, results of operations, and
         cash flows of the Company as of, and for, the periods presented in the
         Registration Statement.

































                                                                       EXHIBIT I
                                                                       ---------



                        Selling Shareholders' Certificate
                        ---------------------------------

1.       Each Selling Shareholder has reviewed the Registration Statement and
         the Prospectus.

2.       The representations and warranties of each Selling Shareholder as set
         forth in the Underwriting Agreement are true and correct as of the time
         of purchase and, if applicable, the additional time of purchase.

3.       Each Selling Shareholder has performed all of its respective
         obligations under this Agreement as are to be performed at or before
         the time of purchase and at or before the additional time of purchase,
         as the case may be.




























                                                                     EXHIBIT 3.1

                         THE COMPANIES LAW, 5759 - 1999

                             ARTICLES OF ASSOCIATION
                                       OF

                        ITURAN LOCATION AND CONTROL LTD.
                        --------------------------------

                           A COMPANY LIMITED BY SHARES

                                     GENERAL

1.   DEFINITION AND INTERPRETATION

         1.1    The following terms in these Articles of Association shall have
                the respective meanings ascribed to them below:

                ARTICLES              The Articles of Association of the
                                      Company, as set forth herein and or as
                                      amended, from time to time.

                BOARD                 The Board of Directors of the Company.

                BUSINESS DAY          Sunday to Thursday, inclusive, with the
                                      exception of holidays and officials days
                                      of rest in the State of Israel.

                COMPANIES LAW         The Israeli Companies Law, 1999, as may be
                                      amended from time to time, and any law
                                      replacing it.

                COMPANY               Ituran Location and Control Ltd.


                COMPANIES REGULATIONS Regulations issued pursuant to the
                                      Companies Law.



                LAW                   The provisions of any law as defined in
                                      the Interpretation Law, 1981.

                GENERAL MANAGER       The general manager of the Company
                                      pursuant to the Companies Law, which is
                                      known also by the term Chief Executive
                                      Officer or CEO.

                ORDINARY MAJORITY     More than fifty percent (50%) of the votes
                                      of the Shareholders who are entitled to
                                      vote and who voted in a General Meeting in
                                      person, by means of a proxy or by means of
                                      a proxy card.

                SECURITIES LAW        The Securities Law, 1968, as may be
                                      amended from time to time, and any law
                                      replacing it.

                SECURITIES            Regulations issued pursuant to the
                REGULATIONS           Securities Law.

                SHAREHOLDER           Anyone registered as a shareholder in the
                                      Shareholder Register of the Company, or
                                      anyone who is a bearer of a share deed of
                                      the Company; or anyone person who is a
                                      shareholder according to the Companies
                                      Law.




                SPECIAL MAJORITY      A majority of at least three quarters
                                      (75%) of the votes of the Shareholders who
                                      are entitled to vote and who voted in a
                                      General Meeting, in person, by means of a
                                      proxy or by means of a proxy card.

                THE COMPANY           Ituran Location and Control Ltd., or any
                                      other name by which it will be called, in
                                      the event of the Company replacing or
                                      changing its name.

                IN WRITING            In script, in print, by means of a
                                      typewriter, photocopying, telex, cable,
                                      facsimile, electronic mail or in any other
                                      legible form, or which is produced in any
                                      other visual substitute for writing,
                                      including a combination of two or more
                                      methods, and "signed" shall be understood
                                      accordingly.


         1.2   Unless the subject or the context otherwise requires, each word
               and expression not specifically defined herein and defined in the
               Companies Law as in effect on the date when these Articles or any
               amendment hereto, as the case maybe first became effective, shall
               have the same meaning herein, and to the extent that no meaning
               is attached to it in the Companies Law, the meaning ascribed to
               it in the Companies Regulations, and if no meaning is ascribed
               thereto in the Companies Regulations, the meaning ascribed to it
               in the Securities Law or Securities Regulations; words and
               expressions importing the singular shall include the plural and
               vice versa; words and expressions importing the masculine gender
               shall include the feminine gender and vice versa; and words and
               expressions importing persons shall include corporate entities.

         1.3   The captions in these Articles are for convenience only and shall
               not be deemed a part hereof or affect the construction of any
               provision hereof.

         1.4   The specific provisions of these articles supersede the
               provisions of the companies Law to the extent permitted under the
               companies Law with respect to any matter that is not specifically
               addressed in these articles, the provisions of the companies Law
               shall govern.

2.       PUBLIC COMPANY

         The Company is a public company.

3.       THE PURPOSE AND OBJECTIVES OF THE COMPANY

         Subject to the provisions of the Company's Memorandum of Association,
         the purpose of the Company is to engage, directly or indirectly, in any
         lawful business activity or occupation whatsoever; provided, however,
         that the Company may donate reasonable amounts to worthy causes, as the
         Board may determine in its discretion, even if such donations are not
         within the framework of business considerations.

4.       LIMITED LIABILITY



         The liability of each Shareholder for the company's obligations is
         limited to the unpaid sum, if any, owing to the company in
         consideration for the issuance of the shares allotted to him.

                                  SHARE CAPITAL

5.       SHARE CAPITAL

         5.1   The authorized share capital of the Company is 20 million New
               Israeli Shekels (NIS Twenty Million Shekels) divided into 60
               million Ordinary Shares NIS 0.33 1/3 par value each.

         5.2   The ordinary shares of the Company confer on the holders thereof
               rights to receive notice of, attend, and vote in meetings of the
               shareholders, rights to receive dividends, rights to receive a
               distribution of assets upon liquidation and certain other rights
               all as specified in these Articles.

6.       INCREASE OF SHARE CAPITAL

         6.1   The Company may, from time to time, by a resolution of the
               General Meeting adopted by an Ordinary Majority, whether or not
               all the shares then authorized have been issued, and whether or
               not all the shares theretofore issued have been called up for
               payment, increase its share capital by the creation of new
               shares. Any such increase shall be in such amount and shall be
               divided into shares of such nominal value, and such shares shall
               confer such rights and preferences, and shall be subject to such
               restrictions, as such resolution of the General Meeting shall
               provide.

         6.2   Except to the extent otherwise provided in such resolution of the
               General Meeting, such new shares shall be subject to all the
               provisions applicable to the shares of the original capital.

7.       SPECIAL RIGHTS; MODIFICATIONS OF RIGHTS

         7.1   Without prejudice to any special rights previously conferred upon
               the holders of existing shares in the Company, the Company may,
               from time to time, by a resolution of the Board, issue shares
               with such preferred or deferred rights or rights of redemption or
               other special rights and/or restrictions, whether with respect to
               liquidation, dividends, voting, conversion, repayment of share
               capital or otherwise, as may be stipulated in such resolution.

         7.2   If at any time the issued share capital is divided into different
               classes of shares, the rights attached to any class, unless
               otherwise provided by these Articles, may be modified or
               abrogated by the Company, by a resolution of the General Meeting
               adopted by an Ordinary Majority, subject to the consent of the
               holders of more than fifty percent (50%) of the issued shares of
               such class or the sanction of a resolution of a separate General
               Meeting of the holders of the shares of such class adopted by an
               Ordinary Majority, except if no rights in the Company are
               attached to that class of shares other than the receipt of their
               par value on a winding-up of the Company ("DEFERRED SHARES") and
               unless the issue terms of those shares provide otherwise.


         7.3   Unless otherwise provided by these Articles, the increase of the
               authorized number of shares of an existing class of shares, or
               the issuance of additional shares thereof or the creation of a
               new class of shares identical to an existing class of shares in
               all respects, shall not be deemed, for purposes of this Article
               7, to modify or abrogate the rights attached to the previously
               issued shares of such class or of any other class.

8.       CONSOLIDATION. SUBDIVISION. CANCELLATION AND REDUCTION OF SHARE CAPITAL

         8.1   The Company may, from time to time, by a resolution of the
               General Meeting adopted by an Ordinary Majority (subject,
               however, to the provisions of Articles 7.2 and 7.3 hereof and to
               the Companies Law):



               8.1.1     Consolidate and divide all or any of its issued or
                         unissued share capital into shares of larger nominal
                         value than its existing shares;

               8.1.2     Subdivide its shares, issued or unissued, or any of
                         them, into shares of smaller nominal value than is
                         fixed by these Articles, subject to the provisions of
                         the Companies Law, and the resolution whereby any share
                         is subdivided may determine that, as among the holders
                         of the shares resulting from such subdivision, one or
                         more of the shares may, as compared with the others,
                         have any such preferred or deferred rights or rights of
                         redemption or other special rights, or be subject to
                         any such restrictions, as the Company has power to
                         attach to unissued or new shares.

               8.1.3     Cancel any shares which, at the date of the adoption of
                         such resolution of the General Meeting, have not been
                         allotted, so long as the Company is not under an
                         obligation to allot these shares, and diminish the
                         amount of its share capital by the amount of the shares
                         so cancelled; or

               8.1.4     Reduce its share capital in any manner, subject to any
                         authorization or consent required by Law.


         8.2   With respect to any consolidation of issued shares into shares of
               larger nominal value, and with respect to any other action which
               may result in fractional shares, the Board may settle any
               difficulty which may arise with regard thereto, as it deems
               appropriate, including, inter alia, resort to one or more of the
               following actions:



               8.2.1     Determine, as to the holder of shares so consolidated,
                         which issued shares shall be consolidated into each
                         share of larger nominal value;

               8.2.2     Allot, in contemplation of or subsequent to such
                         consolidation or other action, such shares or
                         fractional shares sufficient to preclude or remove
                         fractional share holdings;

               8.2.3     Redeem, in the case of redeemable shares, and subject
                         to applicable Law, such shares or fractional shares
                         sufficient to preclude or remove fractional share
                         holdings;



               8.2.4     Cause the transfer of fractional shares by certain
                         Shareholders to other Shareholders so as to most
                         expediently preclude or remove any fractional
                         shareholdings, and cause the transferees to pay the
                         transferors the fair value of the fractional shares so
                         transferred, and the Board is hereby authorized to act
                         as agent for the transferors and transferees with power
                         of substitution for purposes of implementing the
                         provisions of this Article 8.2.4.



                                     SHARES

9.       ISSUANCE OF SHARE CERTIFICATES: REPLACEMENT OF LOST CERTIFICATES

         9.1   Share certificates shall be issued under the seal or stamp of the
               Company and shall bear the signature of a Director, or of any
               other person or persons so authorized by the Board.

         9.2   Each Shareholder shall be entitled to one numbered certificate
               for all the shares of any class registered in his name, and if
               the Board so approves, to several certificates, each for one or
               more of such shares. Each certificate may specify the serial
               numbers of the shares represented thereby and may also specify
               the amount paid up thereon.

         9.3   A share certificate registered in the names of two or more
               persons shall be delivered to the person first named in the
               Shareholder Register in respect of such co-ownership ("THE FIRST
               CO-OWNER").

         9.4   If a share certificate is defaced, lost or destroyed, it may be
               replaced, upon payment of such fee, and upon the furnishing of
               such evidence of ownership and such indemnity, as the Board may
               deem appropriate.

10.      REGISTERED HOLDER

         Except as otherwise provided in these Articles, the Company shall be
         entitled to treat the registered holder of any share as the absolute
         owner thereof, and, shall be entitled to treat the holder of any share
         in trust as a Shareholder and to issue to him a share certificate, in
         condition that the trustee notifies the Company of the identity of the
         beneficiary, and, accordingly, shall not, except as ordered by a court
         of competent jurisdiction, or as required by Law, be bound to recognize
         any equitable or other claim to, or interest in, such share on the part
         of any other person.

11.      ISSUANCE OF SHARES AND OTHER SECURITIES

         11.1  The unissued shares from time to time shall be under the control
               of the Board, which shall have the power to allot shares or
               otherwise dispose of them to such persons, on such terms and
               conditions (including inter alia terms relating to calls as set
               forth in Article 13 ("Calls on Shares") hereof), and either at
               par or at a premium, or, subject to the provisions of the
               Companies Law, at a discount, and at such times, as the Board may
               deem appropriate, and the power to give to any person the option
               to acquire from the Company any shares, either at par or at a



               premium, or, subject as aforesaid, at a discount, during such
               time and for such consideration as the Board may deem
               appropriate.

         11.2  The Board may determine to issue a series of bonds or other debt
               securities, as part of its authority or to take a loan on behalf
               of the Company, and within the limits of such authority.

         11.3  The Shareholders of the Company at any given time shall not have
               any preemptive right or priority or any other right whatsoever
               with respect to the acquisition of securities of the Company. The
               Board, in its sole discretion, may decide to offer securities of
               the Company first to existing Shareholders or to anyone or more
               of them.

         11.4  The Company is entitled to pay a commission (including
               underwriting fees) to any person, in consideration for
               underwriting services, or the marketing or distribution of
               securities of the Company, whether reserved or unreserved, as
               determined by the Board. Payments, as stated in this Article
               11.4, may be paid in cash or in Securities of the Company, or in
               a combination thereof or in any other manner.

12.      PAYMENT IN INSTALLMENTS

         If by the terms of issuance of any share, the whole or any part of the
         price thereof shall be payable in installments, every such installment
         shall, when due, be paid to the Company by the then registered
         holder(s) of the share or the person(s) entitled thereto.

13.      CALLS ON SHARES

         13.1  The Board may, from time to time, make such calls as it may deem
               appropriate upon Shareholders in respect of any sum unpaid in
               respect of shares held by such Shareholders which is not, by the
               terms of issuance thereof or otherwise, payable at a fixed time,
               and each Shareholder shall pay the amount of every call so made
               upon him (and of each installment thereof if the same is payable
               in installments), to the person(s) and at the time(s) and
               place(s) designated by the Board, as any such time(s) may be
               thereafter extended and/or such person(s) or place(s) changed.
               Unless otherwise stipulated in the resolution of the Board (and
               in the notice referred to in Article13.2), each payment in
               response to a call shall be deemed to constitute a pro rata
               payment on account of all shares in respect of which such call
               was made.

         13.2  Notice of any call shall be given in writing to the applicable
               Shareholder(s) not less than fourteen (14) days prior to the time
               of payment, specifying the time and place of payment, and
               designating the person to whom such payment shall be made;
               provided, however, that before the time for any such payment, the
               Board may, by notice in writing to such Shareholder(s), revoke
               such call in whole or in part, extend such time, or alter such
               designated person and/or place. In the event of a call payable in
               installments, only one notice thereof need be given.

         13.3  If, by the terms of allotment of any share or otherwise, any
               amount is made payable at any fixed time, every such amount shall
               be payable at such time as if it were a call duly made by the
               Board and of which due notice had been given, and



               all the provisions herein contained with respect to calls shall
               apply to each such amount.

         13.4  Any amount unpaid in respect of a call shall bear interest from
               the date on which it is payable until actual payment thereof, at
               such rate (not exceeding the then prevailing debitory rate
               charged by leading commercial banks in Israel), and at such
               time(s) as the Board may prescribe.

         13.5  Upon the allotment of shares, the Board may provide for
               differences among the allottees of such shares as to the amount
               of calls and/or the times of payment thereof

         13.6  The joint holders of a share shall be jointly and severally
               liable to pay all calls in respect thereof and all interest
               payable thereon.

14.      PREPAYMENT

         With the approval of the Board, any Shareholder may pay to the Company
         any amount not yet payable in respect of his shares, and the Board may
         approve the payment of interest on any such amount until the same would
         be payable if it had not been paid in advance, at such rate and time(s)
         as may be approved by the Board. The Board may, at any time cause the
         Company to repay all or any part of the money so advanced, without
         premium or penalty. Nothing in this Article 14 shall derogate from the
         right of the Board to make any call before or after receipt by the
         Company of any such advance.

15.      FORFEITURE AND SURRENDER

         15.1  If any Shareholder fails to pay any amount payable in respect of
               a call, or interest thereon as provided herein, on or before the
               day fixed for payment of the same, the Company, by resolution of
               the Board, may at any time thereafter, so long as such amount or
               interest remains unpaid, forfeit all or any of the shares in
               respect of which such call had been made. Any expense incurred by
               the Company in attempting to collect any such amount or interest,
               including, inter alia, attorneys' fees and costs of suit, shall
               be added to, and shall, for all purposes (including the accrual
               of interest thereon), constitute a part of the amount payable to
               the Company in respect of such call.

         15.2  Upon the adoption of a resolution of forfeiture, the Board shall
               cause notice thereof to be given to the Shareholder whose shares
               are the subject of such forfeiture, which notice shall state
               that, in the event of the failure to pay the entire amount so
               payable within a period stipulated in the notice (which period
               shall not be less than fourteen (14) days and which may be
               extended by the Board), such shares shall be ipso facto
               forfeited, provided, however, that, prior to the expiration of
               such period, the Board may nullify such resolution of forfeiture,
               but no such nullification shall estop the Board from adopting a
               further resolution of forfeiture in respect of the non-payment of
               such amount.

         15.3  Whenever shares are forfeited as herein provided, all
               distributions theretofore declared in respect thereof and not
               actually paid or distributed shall be deemed to have been
               forfeited at the same time.



         15.4  The Company, by resolution of the Board, may accept the voluntary
               surrender of any share.

         15.5  Any share forfeited or surrendered as provided herein shall
               become the property of the Company, and the same, subject to the
               provisions of these Articles, may be sold, re-allotted or
               otherwise disposed of as the Board deems appropriate.

         15.6  Any Shareholder whose shares have been forfeited or surrendered
               shall cease to be a Shareholder in respect of the forfeited or
               surrendered shares, but shall, notwithstanding, be liable to pay,
               and shall forthwith pay, to the Company, all calls, interest and
               expenses owing upon or in respect of such shares at the time of
               forfeiture or surrender, together with interest thereon from the
               time of forfeiture or surrender until actual payment, at the rate
               prescribed in Article 13.4 above, and the Board, in its
               discretion, may enforce the payment of such moneys, or any part
               thereof, but shall not be under any obligation to do so. In the
               event of such forfeiture or surrender, the Company, by resolution
               of the Board, may accelerate the date(s) of payment of any or all
               amounts then owing by the Shareholder in question (but not yet
               due) in respect of all shares owned by such Shareholder, solely
               or jointly with another, and in respect of any other matter or
               transaction whatsoever.

         15.7  The Board may at any time, before any share so forfeited or
               surrendered shall have been sold, re-allotted or otherwise
               disposed of, nullify the forfeiture or surrender on such
               conditions as it deems appropriate, but no such nullification
               shall estop the Board from re-exercising its powers of forfeiture
               pursuant to this Article 15.

16.      LIEN

         16.1  Except to the extent the same may be waived or subordinated in
               writing, the Company shall have a first and paramount lien upon
               all the shares registered in the name of each Shareholder which
               are not fully paid up (without regard to any equitable or other
               claim or interest in such shares on the part of any other
               person), and upon the proceeds of the sale thereof, for the
               amount payable to the Company in respect of such unpaid shares,
               solely or jointly with another, to or with the Company, whether
               the period for the payment, fulfillment or discharge thereof
               shall have actually arrived or not. Such lien shall extend to all
               distributions from time to time declared in respect of such
               shares. Unless otherwise provided, the registration by the
               company of a transfer of shares shall be deemed to be a waiver on
               the part of the company of the lien (if any) existing on such
               shares immediately prior to such transfer.

         16.2  The Board may cause the Company to sell any shares subject to
               such lien when any such debt, liability or engagement has
               matured, in such manner as the Board may deem appropriate, but no
               such sale shall be made unless such debt, liability or engagement
               has not been satisfied within fourteen (14) days after written
               notice of the Company's intention to sell shall have been served
               on such Shareholder, his executors, administrators or assignees.

         16.3  The net proceeds of any such sale, after payment of the costs
               thereof, shall be applied in or toward satisfaction of the debts,
               liabilities or engagements of such


               Shareholder in connection with such unpaid shares (whether or not
               the same have matured), or any specific part of the same (as the
               Board may determine), and the balance, if any, shall be paid to
               the Shareholder, his executors, administrators or assigns.

17.      SALE AFTER FORFEITURE OR SURRENDER OR IN ENFORCEMENT OF LIEN

         Upon any sale of shares after forfeiture or surrender or for enforcing
         a lien, the Board may appoint a person to execute a proper instrument
         of transfer of the shares so sold and cause the purchaser's name to be
         entered in the Shareholders Register in respect of such shares, and the
         purchaser shall not be bound to see to the regularity of the
         proceedings, or to the application of the purchase money, and after his
         name has been entered in the Shareholder Register in respect of such
         shares, the validity of the sale shall not be impeached by any person,
         and the remedy of any person aggrieved by the sale shall be in damages
         only and against the Company exclusively.

18.      REDEEMABLE SHARES

         The Company may, by resolution of the Board, issue redeemable
         securities and the provisions of section 312 of the Companies Law will
         apply to the issue of such securities. The Board shall determine which
         securities of the redeemable securities shall be redeemed, from time to
         time, and it shall furnish written notice thereof of at least 14 days
         to the holders of the above-mentioned securities, regarding the place,
         the date and the conditions of the redemption.

19.      TRANSFER OF SHARES

         19.1  No transfer of shares shall be registered unless the Company
               receives a deed of transfer or other proper instrument of
               transfer (in form and substance satisfactory to the Board),
               together with any share certificate(s). Until the transferee has
               been registered in the Shareholders Register in respect of the
               shares so transferred, the Company may continue to regard the
               transferor as the owner thereof. The Board may, from time to
               time, prescribe a reasonable fee for registration of a transfer.
               A Deed of Transfer shall be in the following form or in any
               substantially similar form, including any such form as is
               acceptable to the transfer agent for the Company's shares, or in
               any form otherwise approved by the board.



                                DEED OF TRANSFER

         "I, ...............(hereinafter: "The Transferor") of,
         .................., do hereby transfer, in consideration for
         .................................. , to (hereinafter: "The

         Transferee"), .....................share(s) NIS ....... par value each
         of Ituran Location and Control Ltd. (hereinafter: "The Company") to be
         held by the Transferee and/or his executors, administrators and
         assigns, subject to the same terms and conditions under which I held
         the same at the time of execution hereof; and I, the said Transferee,
         do hereby agree to take the said share(s) subject to the conditions
         aforesaid. In witness whereof we hereby execute this Deed of Transfer,


         this .... day of ..... 20..."

         The Transferee                   The Transferor



         Name:                            Name:
                --------------------              -------------------
         Signature:                       Signature:


         Witness to Signature             Witness to Signature

         Name:                            Name:
                --------------------              -------------------

         Signature:                       Signature:


         19.2  The transfer of shares which were not fully paid for, or shares
               on which the Company has a lien, shall have no validity unless
               approved by the Board, which may, in its absolute discretion and
               without giving any reason thereto, decline the registration of
               such transferor impose conditions on the transfer.

         19.3  The board may suspend the registration of transfers for such
               periods as it deems appropriate, and no such transfers shall be
               registered during any period in which the shareholders is so
               closed, provided such periods shall not exceed 30 days each year
               and provided that no such suspension shall take place in any 14
               days precluding the recode date for any general meeting or to any
               distribution.

         19.4  Upon the death of a Shareholder



               19.4.1    In case of a share registered in the names of two or
                         more holders, the Company may recognize the survivor(s)
                         as the sole owner(s) thereof.

               19.4.2    Any person becoming entitled to a share in consequence
                         of the death of any person, upon producing evidence of
                         the grand of probate or letters of administration or
                         deceleration of succession (or such other evidence as
                         the Board of Directors may reasonably deem sufficient
                         that he sustains the character in respect of which he
                         proposes to act under this Article or of his title),
                         shall be registered as a shareholder in respect of such
                         shares, or may, subject to the regulations as to
                         transfer herein contained, transfer such share.


         19.5  The Company may recognize the receiver or liquidator of any
               corporate Shareholder in liquidation or dissolution, or the
               receiver or trustee in bankruptcy of any Shareholder, as being
               entitled to the shares registered in the name of such
               Shareholder, after receipt of evidence to the entitlement
               thereto, as determined by the Board.

         19.6  A person acquiring a right in shares as a result of being a
               custodian, administrator of the estate, executor of a will or the
               heir of a Shareholder, or a receiver, liquidator or a trustee in
               a liquidation, dissolution or bankruptcy of a Shareholder or
               according to another provision of Law, is entitled, after
               producing evidence of his right to the satisfaction of the Board,
               to be registered as the Shareholder or to transfer such shares to
               another person, subject to the provisions of this Article 19.

20.      BEARER SHARE

         The Company shall not issue bearer shares.


                                GENERAL MEETINGS

21.      ANNUAL MEETING

         An annual General Meeting shall be held once in every calendar year at
         such time within a period of not more than fifteen (15) months after
         the last preceding annual General Meeting and at such place either
         within or outside of the State of Israel as may be determined by the
         Board. These General Meetings shall be referred to as "Annual
         Meetings."

22.      EXTRAORDINARY MEETINGS

         22.1  All General Meetings other than Annual Meetings shall be referred
               to as "Extraordinary Meetings".

         22.2  The Board may, whenever it deems appropriate, convene an
               Extraordinary Meeting at such time and place, within or outside
               of the State of Israel, as may be determined by the Board, and
               shall be obliged to do so upon the demand in writing of one of
               the following:



               22.2.1    Any two Directors or a quarter of the Directors,
                         whichever is lower; or

               22.2.2    One or more Shareholders, holding alone or together at
                         least five percent (5%) of the issued share capital of
                         the Company, and at least one percent (1%) of the
                         voting rights in the company; or

               22.2.3    One or more Shareholders holding at least five percent
                         (5%) of the voting rights in the company. The demand
                         shall set forth the reasons for convening of the
                         meeting and shall be delivered to the registered office
                         of the Company.


         22.3  The Board, upon demand to convene an Extraordinary Meeting in
               accordance with Article 22.2.2 above, shall announce the
               convening of the General Meeting within twenty one (21) days from
               the receipt of a demand in that respect; provided, however, that
               the date fixed for the Extraordinary Meeting shall not be more
               than thirty five (35) days from the date of the announcement of
               the Extraordinary Meeting, or such other period as may be
               permitted by the Companies Law or Companies Regulations.

23.      CLASS MEETINGS

         The provisions of these Articles of Association with respect to General
         Meetings shall apply, mutatis mutandis, to meetings of the holders of a
         class of shares of the Company (hereinafter: "Class Meetings");
         provided, however, that the requisite quorum at any such Class Meeting
         shall be one or more Shareholders present in person, by proxy or by
         proxy card, and holding together not less than fifty percent (50%) of
         the issued shares of such class.

24.      NOTICE OF GENERAL MEETINGS



         24.1  The Company is not required to give notice under section 69(b) of
               the Companies Law, to the extent that such section is in effect.

         24.2  General Meeting requires prior notice of at least 21 days.

                         PROCEEDINGS AT GENERAL MEETINGS

25.      THE AGENDA OF GENERAL MEETINGS

         25.1  The agenda of General Meetings shall be determined by the Board
               and shall also include issues for which an Extraordinary Meeting
               is being convened in accordance with Article 22 above, or as
               otherwise may be required in accordance with the provisions of
               the Companies Law.

         25.2  The General Meeting shall only adopt resolutions on issues or act
               upon items which are on its agenda.

         25.3  The General Meeting is entitled to accept or reject a proposed
               resolution which is on the agenda of the General Meeting. Subject
               to applicable Law, the General Meeting may adopt a resolution
               which is different from the description thereof included in the
               announcement of the General Meeting, provided that such
               resolution is not materially different from the proposed
               resolution.

         25.4  Any Shareholder entitled to be present and vote in a General
               Meeting may bring any proposal with respect to any of the matters
               on the agenda of such General Meeting, provided however the
               Shareholder submits his written proposal specifying his intention
               to present it to the General Meeting at the Company's Registered
               office, within three (3) days of the announcement of the
               convening of the General Meeting.

26.      QUORUM

         26.1  No business shall be transacted at a General Meeting, or at any
               adjournment thereof, unless a lawful quorum is present when the
               meeting proceeds to business.

         26.2  Subject to the requirements of the Companies Law, the rules of
               Nasdaq National Market and any other exchange on which the
               Company's securities are or may become quoted or listed, and the
               provisions of these Articles, any two or more Shareholders (not
               in default in payment of any sum referred to in Article 13
               hereof), present in person or by proxy, or who have delivered to
               the Company proxy card indicating their manner of voting, and who
               hold or represent shares conferring in the aggregate at least
               thirty-three and one-third percent (33 1/3%) of the voting power
               of the Company, shall constitute a lawful quorum at General
               Meetings. A Shareholder or his proxy, who also serves as a proxy
               for other Shareholder(s), shall be regarded as two or more
               Shareholders, in accordance with the number of Shareholders he is
               representing.

         26.3  If within an hour from the time appointed for the General Meeting
               a quorum is not present, the meeting, if convened by the Board
               upon demand under Article 22.2 or, if not convened by the Board,
               if convened by the persons making or court demanding in
               accordance with the provisions of the Companies Law, shall be


               dissolved, but in any other case it shall stand adjourned to the
               same day in the next week, at the same time and place, or to such
               day and at such time and place as the Chairman may determine with
               the consent of the holders of a majority of the voting power
               represented at the meeting in person or by proxy and voting on
               the question of adjournment. No business shall be transacted at
               any adjourned meeting except business which might lawfully have
               been transacted at the meeting as originally called. At such
               adjourned meeting, any number of Shareholders present in person
               or by proxy or by proxy card, shall constitute a lawful quorum.

27.     CHAIRMAN

         The Chairman of the Board shall preside as Chairman at every General
         Meeting. If there is no such Chairman, or if the Chairman is not
         present within fifteen (15) minutes after the time fixed for holding
         such meeting or is unwilling to act as Chairman, the Shareholders
         present shall choose someone of their number or any other person to be
         Chairman. The position of Chairman shall not, by itself, entitle the
         holder thereof to vote at any General Meeting nor shall it entitle such
         holder to a second or casting vote (without derogating, however, from
         the rights of such Chairman to vote as a Shareholder or proxy of a
         Shareholder if, in fact, he is also a Shareholder or proxy,
         respectively).

28.     ADJOURNED MEETING

         A General Meeting at which a lawful quorum is present (hereinafter:
         "The Original General Meeting"), may resolve by an Ordinary Majority to
         adjourn the General Meeting, from time to time, to another time and/or
         place (hereinafter: an "Adjourned Meeting"). In the event that a
         General Meeting is adjourned for twenty one (21) days or more, a notice
         of the Adjourned Meeting shall be given in the same manner as the
         notice of the Original General Meeting. With the exception of the
         aforesaid, a Shareholder shall not be entitled to receive a notice of
         an Adjourned Meeting or of the issues which are to be discussed in the
         Adjourned Meeting. The Adjourned Meeting shall only discuss issues that
         could have been discussed at the Original General Meeting, and with
         respect to which no resolution was adopted.

29.     ADOPTION OF RESOLUTIONS AT GENERAL MEETINGS

         29.1  Except with respect to matters which require the approval of a
               special majority under the Companies Law or these Articles, all
               resolutions of the General Meeting, shall be deemed adopted if
               approved by an Ordinary Majority. A resolution of the General
               Meeting approving an amendment to the "Appointment of Directors"
               (Article 40 of these Articles) shall be deemed adopted only if
               approved by Special Majority.

         29.2  Every matter submitted to a General Meeting shall be decided by a
               show of hands, but if a written ballot is demanded by any
               Shareholder present in person, by proxy or by proxy card and
               entitled to vote at the meeting, the same shall be decided by
               such ballot. A written ballot may be demanded before the proposed
               resolution is voted upon or immediately after the declaration by
               the Chairman of the results of the vote by a show of hands. If a
               vote by written ballot is taken after such declaration, the
               results of the vote by a show of hands shall be of no effect, and
               the proposed resolution shall be decided by such written ballot.
               The demand for a written ballot may be withdrawn at any time
               before the same is conducted, in


               which event another Shareholder may then demand such written
               ballot. The demand for a written ballot shall not prevent the
               continuance of the meeting for the transaction of business other
               than the question on which the written ballot has been demanded.

         29.3  A declaration by the Chairman of the meeting that a resolution
               has been adopted unanimously, or adopted by a particular
               majority, or rejected, and an entry to that effect in the minute
               book of the Company, shall be conclusive evidence of the fact
               without proof of the number or proportion of the votes recorded
               in favor of or against such resolution.

30.     POWER TO ADJOURN

         (a) The Chairman of a General Meeting at which a quorum is present may,
         with the consent of the holders of a majority of the voting power
         represented in person or by proxy and voting on the question of
         adjournment (and shall if so directed by the meeting), adjourn the
         meeting from time to time and from place to place, but no business
         shall be transacted at any adjournment meeting except business which
         might lawfully have been transacted at the meeting as originally
         called. (b) It shall not be necessary to announce an adjournment,
         unless the meeting is adjourned for thirty (30) days or more in which
         event announcement thereof shall be given in the manner required for
         the meeting as originally called.

31.     VOTING POWER

         Subject to the provisions of Article 32.1 and subject to any provision
         hereof conferring special rights as to voting, or restricting the right
         to vote, every Shareholder shall have one vote for each share held by
         him of record, on every resolution, without regard to whether the vote
         thereon is conducted in person, by proxy or by proxy card, by a show of
         hands, by written ballot or by any other means.

32.     VOTING RIGHTS

         32.1  No Shareholder shall be entitled to vote at any General Meeting
               (or be counted as a part of the lawful quorum thereat), unless
               all calls and other sums then payable by him in respect of his
               shares in the Company have been paid.

         32.2  A company or other corporate entity being a Shareholder of the
               Company may authorize any person to be its representative at any
               General Meeting. Any person so authorized shall be entitled to
               exercise on behalf of such Shareholder all the power which the
               latter could have exercised if it were an individual shareholder.
               Upon the request of the Chairman of the General Meeting, written
               evidence of such authorization (in form acceptable to the
               Chairman) shall be delivered to him.

         32.3  Any Shareholder entitled to vote may vote either personally (or,
               if the Shareholder is a company or other corporate entity, by a
               representative authorized pursuant to Article 32.2) or by proxy
               (subject to Article 34 below), or by proxy card.

         32.4  The Board may determine, in its discretion, matters that may be
               voted upon at the meeting by proxy card in addition to the
               matters listed in section 87(a) to the Companies Law.



       32.5     If two or more persons are registered as joint holders of any
                share, the vote of the senior who tenders a vote, in person, by
                proxy or by proxy card, shall be accepted to the exclusion of
                the vote(s) of the other joint holder(s), and for this purpose
                seniority shall be determined by the order in which the names
                stand in the Shareholder Register.

33.      THE RECORD DATE WITH RESPECT TO PARTICIPATION AND VOTING

         The Shareholders who are entitled to participate and vote at a General
         Meeting shall be those Shareholders who are registered in the
         Shareholder Register of the Company on the date determined by the
         Board, provided that such date is not be more than twenty one (21)
         days, nor less than four (4) days, prior to the date of the General
         Meeting, except as otherwise permitted by the Companies Law or the
         Companies Regulations.

                                     PROXIES

34.      VOTING BY MEANS OF A PROXY

         34.1  A Shareholder is entitled to appoint by deed of authorization a
               proxy (who is not required to be a Shareholder of the Company) to
               participate and vote in his stead, whether at a certain General
               Meeting or generally at General Meetings of the Company (e.g,
               until the occurrence of such date or event as is specified in the
               deed of authorization), whether personally, by proxy or by means
               of a proxy card.

         34.2  In the event that the deed of authorization is not limited to a
               certain General Meeting, then the deed of authorization, which
               was deposited prior to a certain General Meeting, shall also be
               good for other General Meetings thereafter, subject to the terms
               of the deed of authorization. This Article 34 shall also apply to
               a Shareholder which is a corporation, appointing a person to
               participate and vote in a General Meeting in its stead.

35.      A DEED OF AUTHORIZATION

         35.1  The deed of authorization shall be in writing and shall be
               substantially in the form specified below, or in any usual or
               common form or in such other form as may be approved by the
               Board. It shall be duly signed by the appointer or his duly
               authorized attorney or, if such appointer is a company or other
               corporate entity, under its common seal or stamp or the hand of
               its duly authorized agent(s) or attorney(s). signed by the
               appointing shareholder or by his attorney duly authorized in
               writing, and shall be in the following form or any form similar
               thereto:

                 ITURAN LOCATION AND CONTROL LTD ("the Company")

         I,....................... of ............................ being a
         shareholder of the Company hereby appoint Mr.
         ............................ of ............................... or, in
         his absence, Mr. ........................ of
         ....................................... as proxy to vote for me and on
         my behalf at the general (ordinary or special) meeting of the Company
         (as the case may be) to be convened on the ..... day of
         ................................... and at every adjournment thereof.



                               Signed this ....... day of ....................".

         (Signature of Appointer)

         35.2  The deed of authorization (and the power of attorney or other
               authority, if any, under which such instrument has been signed)
               shall either be delivered to the Company (at its registered
               office, or at its principal place of business, or at the office
               of its registrar and/or transfer agent or at such place as the
               Board may specify) not less than twenty four (24) hours before
               the time fixed for the meeting, at which the person named in the
               deed of authorization proposes to vote, or presented to the
               Chairman at such meeting.

36.      EFFECT OF DEATH OF APPOINTER OR REVOCATION OF APPOINTMENT

         A vote cast pursuant to a deed of authorization shall be valid
         notwithstanding the previous death, incapacity or bankruptcy, or if a
         company or other corporate entity, the liquidation, of the appointing
         Shareholders (or of his attorney-in fact, if any, who signed such
         instrument), or the revocation of the appointment provided no written
         notice of any such event shall have been received by the Company or by
         the Chairman of the General Meeting before such vote is cast and
         provided, further, that the appointing Shareholder, if present in
         person at said General Meeting, may revoke the appointment by means of
         a written or oral notification to the Chairman, or otherwise.

37.      THE DISQUALIFICATION OF PROXY CARDS AND DEED OF AUTHORIZATION

         Subject to the provisions of applicable Law, the corporate secretary of
         the Company and/or the Chairman of the Board may, in his discretion,
         disqualify proxy card and deed of authorization and so notify the
         Shareholder who submitted a proxy card or deed of authorization in the
         following cases:

         37.1  If there is a reasonable suspicion that they are forged or
               falsified;

         37.2  If they are not duly executed or completed, as set forth in
               Article 35.1 above, if applicable

         37.3  If they are given with respect to shares for which one or more
               proxy cards or deeds of authorization have been given and not
               withdrawn;

         37.4  If more than one choice is marked for the same resolution; or

         37.5  With respect to resolutions which require that the majority for
               their adoption include a certain percentage of those not having a
               personal interest in the approval of the resolution, where it was
               not marked, or otherwise notified to the Company, whether or not
               the relevant Shareholder has a personal interest.

                               BOARD OF DIRECTORS

38.      THE AUTHORITY OF THE BOARD

         38.1  The authority of the Board is as specified in the Companies Law
               and in the provisions of these Articles. Without derogating from
               the generality of the


               aforesaid, The management of the business of the Company shall be
               vested in the Board, which may exercise all such powers and do
               all such acts and things as the Company is authorized to exercise
               and do, and are not hereby or by law required to be exercised or
               done by the company in a General Meeting. The authority conferred
               on the Board by this Article 38 shall be subject to the
               provisions of the Companies Law, of these Articles and any
               regulation or resolution consistent with these Articles adopted
               from time to time by the Company in a General Meeting, provided,
               however, that no such regulation or resolution shall invalidate
               any prior act done by or pursuant to a decision of the Board
               which would have been valid if such regulation or resolution had
               not been adopted.

         38.2  Without derogating from the generality of Articles 38.1 above,
               the Board's authority shall include the following:



               38.2.1    The Board may, from time to time, in its discretion,
                         cause the Company to borrow or secure the payment of
                         any sum or sums of money for the purposes of the
                         Company, and may secure or provide for the repayment of
                         such sum or sums in such manner, at such times and upon
                         such terms and conditions in all respects as it deems
                         appropriate, including, without limitation, by the
                         issuance of bonds, perpetual or redeemable debentures
                         or other securities, or any mortgages, charges, or
                         other liens on the undertaking or the whole or any part
                         of the property of the Company, both present and
                         future, including its uncalled or called but unpaid
                         capital.

               38.2.2    Subject to the provisions of Article 35 below and
                         subject to the provisions of any applicable law, the
                         Board may, from time to time, set aside any amount(s)
                         out of the profits of the Company as a reserve or
                         reserves for any purpose(s) which the Board, in its
                         sole discretion, shall deem appropriate, and may invest
                         any sum so set aside in any manner and from time to
                         time deal with and vary such investments, and dispose
                         of all or any part thereof, and employ any such reserve
                         or any part thereof in the business of the Company
                         without being bound to keep the same separate from
                         other assets of the Company, and may subdivide or
                         re-designate any reserve or cancel the same or apply
                         the funds therein for another purpose, all as the Board
                         may from time to time deem appropriate.

               38.2.3    Subject to the provisions of any Law, the Board may,
                         from time to time, authorize any person to be the
                         representative of the Company with respect to those
                         objectives with such powers, discretions and
                         authorities subject to those conditions and for that
                         time period, as the Board deems appropriate, and any
                         such appointment may contain such provisions for the
                         protection and convince of persons dealing with such
                         representative as the board may deem it and may also
                         grant any such representative the authority to delegate
                         any or all of the authorities, powers and discretions
                         vested in him by the Board.

               38.2.4    The Board may, at any time in its sole discretion,
                         adopt protective measures to prevent or delay a
                         coercive takeover of the company,


                         including without limitation the adoption of a
                         "Shareholder Rights Plan".

39.      BOARD MEETINGS


         39.1  Convening Meetings of the Board



               39.1.1    The Chairman of the Board may convene a meeting of the
                         Board at any time; provided that a meeting of the Board
                         be convened at least once every three (3) months.

               39.1.2    The Chairman of the Board shall convene a meeting of
                         the Board at any time or in any event that such meeting
                         is required by the provisions of the Companies Law.


         39.2  Notice of a Meeting of the Board



               39.2.1    Any notice with respect to a meeting of the Board may
                         be given orally or in writing, so long as the notice is
                         given at least seven (7) days prior to the date fixed
                         for the meeting, unless all members of the Board or
                         their Alternate Directors (as described in Article 41
                         below) or their representatives agree on a shorter time
                         period. Such notice shall be delivered personally, by
                         mail, or transmitted via facsimile or e-mail or through
                         another means of communication, to the address,
                         facsimile number or to the e-mail address or to an
                         address where messages can be delivered through other
                         means of communication, as the case may be, as the
                         Director or its alternate informed the Company in
                         advance.

               39.2.2    A notice with respect to a meeting of the Board shall
                         include the venue, date and time of the meeting of the
                         Board, the issues on its agenda and any other material
                         that the Chairman of the Board requests to be included
                         in the notice with respect to the meeting.


         39.3  The Agenda of Board Meetings

               The agenda of any meeting of the Board shall be as determined by
               the Chairman of the Board, and shall include the following
               matters:



               39.3.1    Matters for which the meeting is required to be
                         convened in accordance with the Companies Law;

               39.3.2    Any matter requested by a Director or by the Chief
                         Executive Officer to be included in the agenda of the
                         meeting within at least 24 hours (taking into account
                         the nature of the matter) prior to the meeting;

               39.3.3    Any other matter determined by the Chairman of the
                         Board.

         39.4  QUORUM


               Unless otherwise unanimously decided by the Board, a quorum at a
               meeting of the Board shall be constituted by the presence of a
               majority of the members of the



               Board then in office who are lawfully entitled to participate in
               the meeting (as conclusively determined by the Chairman of the
               Board), but shall not be less than two Directors.

         39.5  CONDUCTING A MEETING THROUGH MEANS OF COMMUNICATION

               The Board may conduct a meeting of the Board through the use of
               any means of communication, provided all of the participating
               Directors can hear each other simultaneously. A resolution
               approved by use of means of communications as aforesaid, shall
               be deemed to be a resolution lawfully adopted at a meeting of
               the Board.

         39.6  VOTING IN THE BOARD

                Unless otherwise provided by these Articles, issues presented at
                meetings of the Board shall be decided upon by a majority of the
                votes of Directors present (or participating, in the case of a
                vote through a permitted means of communications) and lawfully
                voting thereon (as conclusively determined by the Chairman of
                the Board). Subject to the provision of Article 41.2 below, with
                respect to representatives of Directors that are companies, each
                Director shall have a single vote.

         39.7  WRITTEN RESOLUTION

               A resolution in writing signed by all Directors then in office
               and lawfully entitled to vote thereon (as conclusively
               determined by the Chairman of the Board) or to which all of such
               Directors have given their consent (by letter, telegram, telex,
               facsimile, e-mail or other written forms), or their oral consent
               by telephone (provided that a written summary thereof has been
               approved and signed by the Chairman of the Board), shall be
               deemed to have been adopted by a meeting of the board duly
               convened and held. In the event of the adoption of a resolution
               pursuant to this article, the Chairman of the Board shall state
               in the minutes the manner in which each Director voted in the
               resolution and the fact that such Directors consented to the
               adoption of a resolution without the convening of a meeting.

40.      THE APPOINTMENT OF DIRECTORS

         40.1  The Number of Directors

               The Board shall consist of such number of Directors, not less
               than two (2) nor more than twelve (12) (including External
               Directors, as defined by the Companies Law).

         40.2  Classes & Term of Directors Office

               The Directors on the Board, other than the External Directors,
               are divided into three classes, Class A, Class B and Class C,
               consisting of up to 3 Directors each.

               The term of office of the directors assigned to Class A will
               expire at the Company's second Annual Meeting to be convened
               following the adoption of these Articles, and at each third
               succeeding Annual Meeting thereafter.



               The term of office of the directors assigned to Class B will
               expire at the third annual meeting of shareholders, to be
               convened following the adoption of these Articles and at each
               third succeeding Annual Meeting thereafter.

               The term of office of the directors assigned to Class C will
               expire at the forth annual meeting of shareholders, to be
               convened following the adoption of these Articles and at each
               third succeeding Annual Meeting thereafter.

               External Directors shall be elected and serve terms in
               accordance with the Companies Law.



         40.3  DIRECTORS GENERALLY

               40.3.1    Subject to the provisions of the Companies Law, a
                         Director may hold another position in the Company.

               40.3.2    A company or other corporate entity may serve as a
                         Director in the Company.

               40.3.3    The Board shall include External Directors as may be
                         required to comply with the requirements of the
                         Companies Law, and shall include Independent Directors
                         as may be required to comply with the Nasdaq Stock
                         Market or any other securities exchange on which the
                         securities of the Company are or may become quoted or
                         listed.




         40.4  THE ELECTION OF DIRECTORS AND THEIR TERMS OF OFFICE

               40.4.1    Directors (other than the External Directors) shall be
                         elected only at Annual Meetings, unless other provided
                         in these Articles, and shall so serve until the
                         expiration of their term of office pursuant to these
                         Articles. A Director whose office is terminated shall
                         be eligible for re-election (subject to the provisions
                         of the Companies Law applicable to External Directors).
                         The Annual Meeting and in the case of External
                         Directors also the Extraordinary Meeting, at the time
                         of election of a Director, shall classify such Director
                         to Class A, Class B or Class C as set forth above,
                         subject however to the provisions of the Companies Law.

               40.4.2    The Annual Meeting may elect any person(s) as
                         Director(s) if such person served as a Director up
                         until the date of the Annual Meeting, if such person
                         was nominated by the Board or if such person was
                         elected by a Shareholder in accordance with Article
                         40.4.1 above.

               40.4.3    The Annual Meeting at a Special Majority shall be
                         entitled to remove from office any Director.

               40.4.4    The Board of Directors may elect any person or persons
                         as a Director(s), to fill an office which became vacant
                         to the same class of directors and the same duration of
                         office which would have been applicable to the



                         Director whose office became vacant, had his/her office
                         would not have been terminated.

               40.4.5    In addition to the aforesaid, and subject to the
                         provisions of the Companies Law with respect to
                         External Directors, the office of a Director shall
                         vacate with the occurrence of one or more of the events
                         listed in section 228 of the Companies Law (with the
                         exception of section 230 of the Companies Law which
                         shall not apply) as well as in the event the Director
                         dies, is declared by the court to be incapable or, in
                         the event of a company or another corporate entity upon
                         adaptation of a resolution for its voluntary
                         liquidation or the issuance of a liquidation order.

               40.4.6    (a) Notwithstanding anything to the contrary herein,
                         the term of a Director may commence of a date later
                         than the date of the Shareholders Resolution electing
                         said Director, is so specified in said Shareholders
                         Resolution. (b) The election and removal of External
                         Directors shall be governed by the Companies Law,
                         provided, however, that the company shall not have more
                         than three "External Directors".


41.      ALTERNATE DIRECTORS AND REPRESENTATIVE OF A DIRECTOR THAT IS A COMPANY

         41.1  Alternate Directors



               41.1.1    Subject to the provisions of the Companies Law, any
                         Director may, by written notice to the Company, appoint
                         an alternate for himself (in these Articles, an
                         "Alternate Director"), dismiss such Alternate Director
                         and appoint another Alternate Director in place of any
                         Alternate Director appointed by him whose office has
                         been vacated for any reason whatsoever, whether for a
                         certain meeting or a certain period of time or
                         generally. Any notice given to the Company pursuant to
                         this Article shall be in writing, delivered to the
                         Company and signed by the appointing or dismissing
                         Director, and shall become effective on the date fixed
                         therein, or upon the delivery thereof to the Company,
                         whichever is later.

               41.1.2    Anyone who is not qualified to be appointed as a
                         Director and/or anyone serving as a Director or as an
                         existing Alternate Director may not be appointed and
                         may not serve as an Alternate Director.




         41.2  REPRESENTATIVE OF A DIRECTOR THAT IS A COMPANY

               41.2.1    A Director that is a company or other corporate entity
                         shall appoint an individual, qualified to be appointed
                         as a Director in the Company, in order to serve on its
                         behalf, either for a certain meeting or for a certain
                         period of time or generally and such company or other
                         entity may also dismiss that individual and appoint
                         another in his stead (hereinafter: "Director's
                         Representatives"). Any notice given to the Company
                         pursuant to this Article shall be in writing, delivered
                         to the Company and signed by the appointing or
                         dismissing body, and shall become



                         effective on the date fixed therein, or upon the
                         delivery thereof to the Company, whichever is later.

               41.2.2    Subject to Article 41.2.1, any person, whether or not a
                         Director may serve as a Director's Representative. One
                         person may act as a Director's Representative of
                         several Directors, and in such event he shall have a
                         number of votes (and shall be treated as the number of
                         persons for purposes of establishing a quorum) equal to
                         the number of Directors for whom he acts as a
                         Director's Representative. If a Director's
                         Representative is also a Director in his own right, his
                         rights as a Director's Representative shall be in
                         addition to his rights as a Director.


         41.3  Provisions with Respect to Alternate Directors and Director's
               Representatives



               41.3.1    An Alternate Director and a Director's Representative
                         shall have all the authority of the Director who
                         appointed him, provided, however, that an appointment
                         by such alternate or a representative for himself may
                         only be made in compliance with the provisions of the
                         Companies Law, provided further that an Alternate
                         Director and a Director's Representative shall have no
                         standing at any meeting of the Board or any committee
                         thereof while the Director who appointed him is
                         present.

               41.3.2    The office of an Alternate Director or a Director's
                         Representative shall be vacated under the
                         circumstances, mutatis mutandis, set forth in Article
                         40.4.5, and such office shall ipso facto be vacated if
                         the Director who appointed such Alternate Director or
                         Director's Representative ceases to be a Director.


42.      CONTINUING DIRECTORS IN THE EVENT OF VACANCIES

         In the event of one or more vacancies in the Board, the continuing
         Directors may continue to act in every matter; provided, however, that
         if the number of continuing Directors is less than the minimum number
         provided for pursuant to Article 40.1 hereof, and unless the vacancy or
         vacancies is filled by the Board of Directors pursuant to Article
         40.4.4, they may only act for the convening of a General Meeting for
         the purpose of electing Director(s) to fill any or all vacancies.

43.      PERSONAL INTEREST OF A DIRECTOR

         Subject to compliance with the provisions of the Companies Law and the
         Nasdaq rules, the Company may enter into any contract or otherwise
         transact any business with any Director and may enter into any contract
         or otherwise transact any business with any third party in which
         contract or business a Director has a personal interest, directly or
         indirectly.

44.      COMMITTEES OF THE BOARD OF DIRECTORS

         44.1  Subject to the provisions of the Companies Law, the Board may
               delegate its authorities or any part of thereof to committees, as
               it deems appropriate, and it may from time to time cancel the
               delegation of any such authority. Any such committee shall, in
               the exercise of the powers delegated, fulfill all of the
               instructions given to it from time to time by the Board.




         44.2  Subject to the provisions of the Companies Law, the rules of the
               Nasdaq National Market or any other exchange on which the
               Company's securities are or may become quoted or listed, each
               committee of the Board shall consist of at least two (2)
               Directors, of which at least one shall be an External Director;
               provided that the audit committee shall consist of at least three
               (3) Directors, and all of the External Directors of the Company
               shall be members of it.

         44.3  The provisions of these Articles with respect to meetings of the
               Board shall apply, mutatis mutandis, to the meetings and
               discussions of each committee of the Board, so far as they are
               not superseded by any regulations adopted by the Board under this
               Article, and provided that the lawful quorum for the meetings of
               the committee, as stated, shall be at least a majority of the
               members of the committee, unless otherwise Required by Law.

45.      CHAIRMAN OF THE BOARD

         45.1  Appointment



               45.1.1    The Board shall choose one of its members to serve as
                         the Chairman of the Board. Unless otherwise provided in
                         the appointing resolution, the Chairman of the Board
                         shall serve until otherwise resolved by the Board.

               45.1.2    In the event that the Chairman of the Board ceases to
                         serve as a Director in the Company, the Board, in its
                         first meeting held thereafter, shall appoint one of its
                         members to serve as a new Chairman who will serve in
                         his position for the term set in the appointment
                         resolution, and if no period is set, until the
                         appointment of a new Chairman, as provided in this
                         Article.

               45.1.3    In the event that the Chairman of the Board is absent
                         from a meeting of the Board within fifteen (15) minutes
                         of the time fixed for the meeting, or if he is
                         unwilling to preside at the meeting, the Board shall
                         appoint one of the Directors present to preside at the
                         meeting.

         45.2  Authority

               45.2.1    The Chairman of the Board shall preside over meetings
                         of the Board and shall sign the minutes of the
                         meetings.

               45.2.2    In the event of deadlock vote, the Chairman of the
                         Board shall not have an additional or casting vote.

               45.2.3    The Chairman of the Board is entitled, at all times, at
                         his initiative or pursuant to a resolution of the
                         Board, to require reports from the General Manager in
                         matters pertaining to the business affairs of the
                         Company.


               45.2.4    The Chairman of the Board shall not serve as the
                         General Manager of the Company, unless he is appointed
                         in accordance with the provisions of the Companies Law.

               45.2.5    The Chairman of the Board shall not serve as a member
                         of the audit committee.


46.      VALIDITY OF ACTS DESPITE DEFECTS

         Subject to the provisions of the Companies Law, all acts done bona fide
         at any meeting of the Board, or of a committee of the Board, or by any
         person(s) acting as Director(s), shall, notwithstanding that it may
         afterwards be discovered that there was some defect in the appointment
         of the participants in such meetings or any of them or any person(s)
         acting as aforesaid, or that they or any of them were disqualified, be
         as valid as if there was no such defect or disqualification.

                                     MINUTES

47.      MINUTES

         47.1  minutes of each General Meeting and of each meeting of the Board
               shall be recorded and duly entered in books provided for that
               purpose. Such minutes shall set forth all resolutions adopted at
               the meeting and, with respect to minutes of board meetings, the
               names of the persons present at the meeting

         47.2  Any minutes as aforesaid, if purporting to be signed by the
               Chairman of the meeting or by the Chairman of the next succeeding
               meeting, shall constitute prima facie evidence of the matters
               recorded therein.

                                OFFICERS; AUDITOR

48.      THE GENERAL MANAGER

         48.1  The Board shall appoint a General Manager, and may appoint more
               than one General Manager. Subject to Article 45.2.4, the General
               Manager may be a Director. Such appointment(s) may be either for
               a fixed term or without any limitation of time, and the Board of
               Directors may from time to time (subject to the provisions of the
               Companies Law and of any contract between any such person and the
               Company) fix his or their salaries and emoluments, remove or
               dismiss him or them from office and appoint another or others in
               his or their place or places.

         48.2  The Authority of the General Manager



               48.2.1    The General Manager is responsible for the day-to-day
                         management of the affairs of the Company within the
                         framework of the policies set by the Board and subject
                         to its instructions.

               48.2.2    The General Manager shall have all managerial and
                         operational authorities, which were not conferred by
                         Law or pursuant to these Articles to any other organ of
                         the Company, and he shall be under the supervision of
                         the Board.



               48.2.3    In the event the Board appoints more than one General
                         Manager, the Board may determine the respective
                         positions and functions of the General Managers and
                         allocate their authorities as the Board may deem
                         appropriate.

               48.2.4    The Board may assume the authority granted to the
                         General Manager, either with respect to a certain issue
                         or for a certain period of time.

               48.2.5    In the event that the General Manager is unable to
                         exercise his authority, the Board may exercise such
                         authority in his stead, or authorize another to
                         exercise such authority.

               48.2.6    The General Manager, with the approval of the Board,
                         may delegate to his subordinates any of his authority.

49.      INTERNAL AUDITOR


         49.1  The Board shall appoint an internal auditor to the Company in
               accordance with the proposal of the audit committee and with the
               provisions of the Companies Law. The internal auditor shall
               report to the Chairman of the Board, the General Manager and the
               Chairman of the audit committee, all to the extent required by
               Law.

         49.2  The internal auditor shall file with the Audit Committee (after
               consulting with the Chairman of the Board) a proposal for an
               annual or other periodic work plan, which shall be approved by
               the Audit Committee, subject to any changes it deems appropriate.

50.      OTHER OFFICERS OF THE COMPANY

         The Board may appoint, in addition to the General Manager and the
         internal auditor, other officers, define their positions and
         authorities, and set their compensation and terms of employment. Unless
         otherwise resolved by the Board, the General Manager is authorized to
         exercise any or all of its authorities stated in this Article.

51.      THE AUDITOR

         51.1  The Shareholders at the Annual Meeting shall appoint an auditor
               for a period until the close of the following Annual Meeting or
               for a period not to extend beyond the close of the third Annual
               Meeting following the Annual Meeting in which he was appointed.
               Subject to the provisions of the Companies Law, the General
               Meeting is entitled at any time to terminate the service of the
               auditor.

         51.2  The Board shall fix the compensation of the auditor of the
               Company for his auditing activities, and shall also fix the
               compensation of the auditor for additional services, if any,
               which are not auditing activities, and, in each case, shall
               report thereon to the Annual Meeting.



                                  DISTRIBUTIONS



52.     GENERAL

         The Company may effect a distribution to its Shareholders to the extent
         permitted by the Companies Law.

53.     DIVIDEND AND BONUS SHARES

         53.1  Right to Dividend or Bonus Shares

               53.1.1    A shareholder shall be entitled to receive dividends or
                         bonus shares, upon the resolution of the Company in
                         accordance with Article 53.2 below, consistent with the
                         rights attached to the shares held by such Shareholder.

               53.1.2    The Shareholders entitled to receive dividends or bonus
                         shares shall be those who are Shareholders on the date
                         of the resolution approving the distribution or
                         allotment, or on such later date, as may be determined
                         in such resolution.


         53.2  Resolution of the Company with Respect to a Dividend or Bonus
               Shares

               The resolution of the Company with respect to the distribution
               of a dividend or bonus shares shall be adopted by the Board in
               accordance with the provisions of the Companies Law.

         53.3  Specific Dividend

               The Board will determine the way and method of payment of any
               dividend or bonus shares.

         53.4  Deductions from Dividends

               The Board may deduct from any distribution or other moneys
               payable to any Shareholder in respect of a share any and all
               relevant withholding tax, and any and all sums of money then
               payable by him to the Company on account of calls or otherwise
               in respect of shares of the Company.

         53.5  Retention of Dividends



               53.5.1    The Board may retain any dividend, bonus shares or
                         other moneys payable or property distributable in
                         respect of a share on which the Company has a lien, and
                         may apply the same in or toward satisfaction of the
                         debts, liabilities, or engagements in respect of which
                         the lien exists.

               53.5.2    The Board may retain any dividend, bonus shares or
                         other moneys payable or property distributable in
                         respect of a share in respect of which any person is,
                         under Article 19.5, entitled to become a Shareholder,
                         or which any person is, under said Articles, entitled
                         to transfer, until such person shall become a
                         Shareholder in respect of such share or shall transfer
                         the same.




         53.6  Mechanics of Payment

               Any dividend or other moneys payable in cash in respect of a
               share may be paid by check sent by registered mail to, or left
               at, the registered address of the person entitled thereto or by
               transfer to a bank account specified by such person (or, if two
               or more persons are registered as joint holders of such share or
               are entitled jointly thereto as a result of the death or
               bankruptcy of the holder or otherwise, to anyone of such persons
               or to his bank account), or to such person and at such address as
               the person entitled thereto may direct in writing. Every such
               check shall be made payable to the order of the person to whom it
               is sent, or to such person as the person entitled thereto as
               aforesaid may direct, and payment of the check by the banker upon
               whom it is drawn shall be a good discharge to the Company. Every
               such check shall be sent at the risk of the person entitled to
               the money represented thereby.

         53.7  An Unclaimed Dividend

               All unclaimed dividends or other moneys payable in respect of a
               share may be invested or otherwise made use of by the Board for
               the benefit of the Company until claimed. The payment by the
               Board of any unclaimed dividend or such other moneys into a
               separate account shall not constitute the Company a trustee in
               respect thereof, and any dividend unclaimed after a period of
               seven (7) years from the date of declaration of such dividend,
               and any such other moneys unclaimed after a like period from the
               date the same were payable, shall be forfeited and shall revert
               to the Company; provided, however, that the Board may, at its
               discretion, cause the Company to pay any such dividend or such
               other moneys, or any part thereof, to a person who would have
               been entitled thereto had the same not reverted to the Company.

         53.8  Receipt from a Joint Holder

               If two or more persons are registered as joint holders of any
               share, or are entitled jointly thereto as a result of the death
               or bankruptcy of the holder or otherwise, anyone of them may give
               effectual receipts for any dividend, bonus shares or other moneys
               payable or property distributable in respect of such share.

         53.9  Manner of Capitalization of Profits and the Distribution of Bonus
               Shares

               Upon the resolution of the Board the Company may cause any
               moneys, investments, or other assets forming part of the
               undivided profits of the Company, standing to the credit of a
               reserve fund, or to the credit of a reserve fund for the
               redemption of capital, or in the hands of the Company and
               available for distribution, or representing premiums received on
               the issuance of shares and standing to the credit of the share
               premium account, to be capitalized and distributed as capital
               among such of the Shareholders as would be entitled to receive
               the same if distributed by way of dividend and in the same
               proportion, or may cause any part of such capitalized fund to be
               applied on behalf of such Shareholders in paying up in full,
               either at par or at such premium as the resolution may provide,
               any un issued shares or debentures or other securities of the
               Company which shall be distributed accordingly, in payment, in
               full or in part, of





               the uncalled liability on any issued shares or debentures or
               other securities, and may cause such distribution or payment to
               be accepted by such Shareholders in full satisfaction of their
               interest in such capitalized sum.

       53.10   The Board may settle, as it deems fit, any difficulty arising
               with regard to the distribution of bonus shares, distributions
               referred to in Articles 53.2 and 53.9 hereof or otherwise, and
               in particular, to issue certificates for fractions of shares and
               sell such fractions of shares in order to pay their
               consideration to those entitled thereto, to set the value for
               the distribution of certain assets and to determine that cash
               payments shall be paid to the Shareholders on the basis of such
               value, or that fractions whose value is less than NIS 1.00 shall
               not be taken into account. The Board may pay cash or convey
               these certain assets to a trustee in favor of those people who
               are entitled to a dividend or to a capitalized fund, as the
               Board shall deem appropriate.

       53.11   The provisions of this chapter shall also apply to the
               distribution of Securities.


54.  ACQUISITION OF SHARES

         54.1  The Company is entitled to acquire or to finance an acquisition,
               directly or indirectly, of shares of the Company or securities
               convertible or exercisable into shares of the Company, including
               incurring an obligation to take any of these actions, subject to
               the fulfillment of the conditions of a permitted distribution
               under the Companies Law. In the event that the Company so
               acquired any of its shares, any such share shall become a dormant
               share, and shall not confer any rights, so long as it held by the
               Company.

         54.2  A subsidiary or another company controlled by the Company is
               entitled to acquire or finance an acquisition, directly or
               indirectly, of shares of the Company or securities convertible or
               exercisable into shares of the Company, or incur an obligation
               with respect thereto, to the same extent that the Company may
               make a distribution, subject to the terms of, and in accordance
               with the Companies Law. In the event a subsidiary or such
               controlled company so acquired any of the Company's shares, any
               such share shall not confer any voting rights, so long as it is
               held by such subsidiary or controlled company.

         INSURANCE, INDEMNIFICATION AND RELEASE OF OFFICE HOLDERS

55.      DEFINITION

         For purposes of Articles 56, 57 and 58 below, the term "Office Holder"
         shall have the meaning ascribed to such term in the Companies Law.

56.      INSURANCE OF OFFICE HOLDERS

         56.1  The Company may, to the extent permitted by the Companies Law,
               enter into a contract for the insurance of the liability of an
               Office Holder of the Company, in respect of a liability imposed
               on him as a result of an act done by him in his capacity as an
               Office Holder of the Company, in any of the following:

               56.1.1    A breach of his duty of care to the Company or to
                         another person;





               56.1.2    A breach of his duty of loyalty to the Company,
                         provided that the Office Holder acted in good faith and
                         had reasonable grounds to assume that such act would
                         not harm the Company;

               56.1.3    A financial liability imposed on him in favor of
                         another person.


57.      INDEMNIFICATION OF OFFICE HOLDERS

         57.1  The Company may, to the extent permitted by the Companies Law,
               indemnify an Office Holder of the Company for liability or
               expense he incurs as a result of an act done by him in his
               capacity as an Office Holder of the Company, as follows:



               57.1.1    A financial liability imposed on him in favor of
                         another person by a court judgment, including a
                         settlement judgment or an arbitrator's award approved
                         by a court;


               57.1.2    reasonable litigation expenses, including attorneys'
                         fees, expended by an Office Holder pursuant to an
                         investigation or a proceeding commenced against him by
                         a competent authority and that was terminated without
                         an indictment and without having a monetary charge
                         imposed on him in exchange for a criminal procedure (as
                         such terms are defined in the Companies Law), or that
                         was terminated without an indictment but with a
                         monetary charge imposed on him in exchange for a
                         criminal procedure in a crime that does not require the
                         finding of criminal intent.

               57.1.3    reasonable litigation expenses, including attorneys'
                         fees, expended by an Office Holder or charged to him by
                         a court, in a proceeding filed against him by the
                         Company or on its behalf or by another person, or in a
                         criminal charge from which he was acquitted, or in a
                         criminal charge of which he was convicted of a crime
                         which does not require a finding of criminal intent.


         57.2  The Company may indemnify an Office Holder of the Company
               pursuant to this Article 57 retrospectively, and may also
               undertake in advance to indemnify an Office Holder of the Company
               with respect to matters set forth in Articles 57.1.1, 57.1.2 and
               57.1.3, provided that an undertaking with respect to matters set
               forth in Article 57.1.1 is limited to events of a kind which the
               Board believes can be anticipated in light of the Company's
               activities at the time of such undertaking, and in an amount or
               criteria that the Board determines is reasonable under the
               circumstances, and that the indemnification undertaking will
               specify the events of that the Board believes can be anticipated
               in light of the Company's activities at the time of such
               undertaking, and the amount or criteria that the Board determines
               is reasonable under the circumstances.

58.      RELEASE OF OFFICE HOLDERS

         The Company may, to the extent permitted by the Companies Law, release
         an Office Holder of the Company, in advance, from his liability, in
         whole or in part, for damages



         resulting from the breach of his duty of care to the Company, except
         for a breach of the duty of care while distributing dividends or making
         other distributions (as such term is defined in the Companies Law).

59.      GENERAL

         The provisions of Articles 56, 57 and 58 above are not intended, and
         shall not be interpreted, to restrict the Company in any manner in
         respect of the procurement of insurance and/or in respect of
         indemnification and/or release from liability in connection with any
         person who is not an Office Holder, including, without limitation, any
         employee, agent, consultant or contractor of the Company who is not an
         Office Holder, or in connection with any Office Holder to the extent
         that such insurance and/or indemnification and/or release from
         liability us permitted under the law.

                                   LIQUIDATION

60.      LIQUIDATION

         60.1  Subject to applicable Law and to the rights of shares with
               special rights upon liquidation, the assets of the Company
               available for distribution among the Shareholders shall be
               distributed to them in proportion to the amount paid or credited
               as paid on the par value of their respective holdings of the
               shares in respect of which such distribution is being made.

         60.2  In the event that the Company is liquidated, whether voluntarily
               or otherwise, the liquidator, with the approval of a General
               Meeting, may make a distribution in kind to the Shareholders of
               all or part of the property of the Company, and he may, with the
               approval of the General Meeting, deposit any part of the property
               of the Company with trustees in favor of the Shareholders, as the
               liquidator with the aforementioned approval, deems appropriate
               and subject to applicable law.

                                    ACCOUNTS

61.      BOOKS OF ACCOUNT

         The Board shall cause accurate books of account to be kept in
         accordance with the provisions of the Companies Law and of any other
         applicable Law. Such books of account shall be kept at the registered
         office of the Company, or at such other place or places as the Board
         may deem appropriate, and they shall always be open to inspection by
         all Directors. No Shareholder, not being a Director, shall have any
         right to inspect any account or book or other similar document of the
         Company, except as conferred by Law or authorized by the Board or by a
         resolution of the General Meeting adopted by an Ordinary Majority.

62.      AUDIT

         Without derogating from the requirements of any applicable law, at
         least once in every fiscal year the accounts of the Company shall be
         audited and the accuracy of the profit and loss account and balance
         sheet certified by one or more duly qualified auditors.

                       RIGHTS OF SIGNATURE, STAMP AND SEAL



63.      RIGHTS OF SIGNATURE. STAMP AND SEAL

         63.1  The Board shall be entitled to authorize any person or persons
               (who may not be Directors) to act and sign on behalf of the
               Company, and the acts and signature of such person(s) on behalf
               of the Company shall bind the Company insofar as such person(s)
               acted and signed within the scope of his or their authority.

         63.2  The Company shall have at least one official stamp.

         63.3  The Board may provide for a seal. If the Board so provides, it
               shall also provide for the safe custody thereof. Such seal shall
               not be used except by the authority of the Board and in the
               presence of the person(s) authorized to sign on behalf of the
               Company, who shall sign every instrument to which such seal is
               affixed.

                                     NOTICES

64.      NOTICES

         64.1  Any written notice or other document may be served by the Company
               upon any Shareholder either personally or by sending it by
               prepaid registered mail (airmail if sent to a place outside
               Israel) addressed to such Shareholder at his address as described
               in the Shareholder Register or such other address as he may have
               designated in writing for the receipt of notices and other
               documents. Any written notice or other document may be served by
               any Shareholder upon the Company by tendering the same in person
               to the corporate secretary or the General Manager of the Company
               at the principal office of the Company or by sending it by
               prepaid registered mail (airmail if posted outside Israel) to the
               Company at its registered office. Any such notice or other
               document shall be deemed to have been served two (2) Business
               Days after it has been posted (seven (7) Business Days if sent
               internationally), or when actually received by the addressee if
               sooner than two days or seven days, as the case may be, after it
               has been posted, or when actually tendered in person, to such
               Shareholder (or to the corporate secretary or the General
               Manager), provided, however, that notice may be sent by
               cablegram, telex, facsimile or other electronic means and
               confirmed by registered mail as aforesaid, and such notice shall
               be deemed to have been given twenty four (24) hours after such
               cablegram, telex, facsimile or other electronic communication has
               been sent or when actually received by such Shareholder (or by
               the Company), whichever is earlier. If a notice is, in fact,
               received by the addressee, it shall be deemed to have been duly
               served, when received, notwithstanding that it was defectively
               addressed or failed, in some respect, to comply with the
               provisions of this Article 64.1. Unless otherwise provided in
               these Articles, the provisions of this Article 64.1 shall also
               apply to written notices permitted or required to be given by the
               Company to any Director or by any Director to the Company.

         64.2  All notices to be given to the Shareholders shall, with respect
               to any share held by persons jointly, be given to whichever of
               such persons is named first in the Shareholder Register, and any
               notice so given shall be sufficient notice to the holders of such
               share.




         64.3  Any Shareholder whose address is not described in the Shareholder
               Register, and who shall not have designated in writing an address
               for the receipt of notices, shall not be entitled to receive any
               notice from the Company.

         64.4  Any Shareholder and any Director may waive his right to receive
               notices generally or during a specific time period and he may
               consent that a General Meeting of the Company or a meeting of the
               Board, as the case may be, shall be convened and held
               notwithstanding the fact that he did not receive a notice with
               respect thereto, or notwithstanding the fact that the notice was
               not received by him within the required time, in each case
               subject to the provisions of any Law prohibiting any such waiver
               or consent.







                                                                     EXHIBIT 3.2

                            MEMORANDUM OF ASSOCIATION

   1.    Name of Company in Hebrew:       Ituran Location and Control Ltd.
         Name of Company in English:      Ituran Location and Control Ltd.

   2.    The objectives of the company (note main objectives):

                  (a) to engage in locating vehicles.

                  (b) control of vehicle fleets.

                  (c) to engage in providing guarding services, including
                      services of installing, operating and maintaining alarm
                      and security systems.

                  (d) any other legal activity.

3.       The responsibility of the shareholders is limited.

4.       The share capital of the company shall be as determined in the
         articles of association of the company from time to time.







                                                                     EXHIBIT 4.1

                        ITURAN LOCATION AND CONTROL LTD.


                                                             SEE REVERSE FOR
INCORPORATED UNDER THE LAWS                                  CERTAIN DEFINITIONS
OF THE STATE OF ISRAEL
                                                             CUSIP M6158M 10 4



                         COUNTERSIGNED AND REGISTERED:

                              AMERICAN STOCK TRANSFER & TRUST COMPANY
                                                                  TRANSFER AGENT
                                                                   AND REGISTRAR

                         BY


                                                              AUTHORIZED OFFICER

--------------------------------------------------------------------------------
This Certifies that


is the record holder of
--------------------------------------------------------------------------------

     FULLY PAID AND NONASSESSABLE ORDINARY SHARES, NIS 0.33 1/3 PAR VALUE, OF

                        ITURAN LOCATION AND CONTROL LTD.

transferable on the books of the Company by the holder hereof, in person or by
duly authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate is not valid unless countersigned by the Transfer Agent and
registered by the Registrar. The Stock evidenced by this Certificate is not an
account of an insurable type and is not insured by the Federal Deposit Insurance
Corporation.

Witness the facsimile signatures of the Company's duly authorized officers.



Dated

            SIGNATURE TO COME                             SIGNATURE TO COME

            CO-CHIEF EXECUTIVE OFFICER                     DIRECTOR



SECURITY COLUMBIAN UNITED STATES BANKNOTE COMPANY 1960






                        ITURAN LOCATION AND CONTROL LTD.

The Company is authorized to issue more than one class of shares, including a
class of Preferred Shares which may be issued in one or more series. The Company
will furnish to any shareholder upon written request and without charge, a full
statement of designations, preferences, limitations or relative rights of the
shares of each class authorized to be issued and, as to Preferred Shares, the
variations in the relative rights and preferences between the shares of each
series so far as the same have been fixed and determined and the authority to
fix and determine the relative rights and preferences of subsequent series.

The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:




<TABLE>


TEN COM         -- as tenants in common      UNIF GIFT MIN ACT --    __________ Custodian  _________
TEN ENT         -- as tenants by the                                   (Cust)                (Minor)
                   entireties
JT TEN          -- as joint tenants with                             under Uniform Gifts to Minors
                   right of
                   survivorship and not as                           Act __________________________
                   tenants in common
                                                                                   (State)
                                             UNIF TRF MIN ACT --     ____________ Custodian (until age _______)
                                                                      (Cust)
                                                                     _________________ under Uniform Transfers
                                                                      (Minor)
                                                                     to Minors Act ____________________________
                                                                                       (State)
</TABLE>


    Additional abbreviations may also be used though not in the above list.


FOR VALUE RECEIVED, _________________________ hereby sell, assign and transfer
unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

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


--------------------------------------------------------------------------------
  (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

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

_________________________________________________________________________ Shares
of the ordinary shares represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________________________ Attorney
to transfer the said shares on the books of the within named Company with full
power of substitution in the premises.

Dated __________________________________________




                                    --------------------------------------------
                            NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
                                    CORRESPOND WITH THE NAME AS WRITTEN UPON THE
                                    FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
                                    WITHOUT ALTERATION OR ENLARGEMENT OR ANY
                                    CHANGE WHATEVER.




Signature(s) Guaranteed:



----------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED MEDALLION SIGNATURE GUARANTEE
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.









                                                                    EXHIBIT 10.1


                                    AGREEMENT



                   Made and Executed on the 18th of May, 1998



BETWEEN:           MOKED ITURAN LTD., PRIVATE COMPANY 51-218465-6
                   Of _______________________ St.

                   Represented by its Officers Messrs. ___________ and
                   ___________       MOKED ITURAN LTD.
                  (Hereinafter: "MOKED")

                                                                THE FIRST PARTY

AND BETWEEN:

          1.   MOKED SERVICES, INFORMATION, MANAGEMENT, INVESTMENTS LTD.,

               PRIVATE COMPANY 51-115929-8

               Of 155 Yigal Alon St., Ramat-Gan

          2.   YEHUDA KAHANE LTD., PRIVATE COMPANY 51-218173-6

               Of 119 Bar Kokhba St., Herzliya

          3.   P.K. GENERATORS & EQUIPMENT LTD.,

               PRIVATE COMPANY 51-129494-4

               Of Prof. Schorr St., Holon Industrial Area

          4.   GIDEON EZRA LTD., PRIVATE COMPANY 51-221036-0

               Of 24 Be'eri St., Kochav Ya'ir 44864

          5.   EFRAIM SHERATZKY, I.D. 51677128

               Of 24 Zlotopolski St., Tel Aviv 63475

          6.   YIGAL (GIGI) SHANI, I.D. 00780523


               Of 24 Zlotopolski St., Tel Aviv 63475

          Collectively, Jointly And Severally (Hereinafter: "THE SHAREHOLDERS")



                                                                THE SECOND PARTY

THE PARTIES HEREBY AGREE AS FOLLOWS:

1.   INTERPRETATION

     In this Agreement the following terms shall bear the meanings ascribed them
     below, unless some other meaning shall be implied.




     "The Company" - Ituran Location and Control Ltd., Private Company
     51-193664-3

     "The Shares" -  All shares of Moked in the Company, bearing the nominal
                     value of NIS 1.00 each, whatever their number shall be at
                     the time the first prospectus of the Company, intended to
                     be made public in 1998, shall be made public, as well as
                     all bonus shares to be allocated in respect of said shares;
                     and shares to be allocated in order to realize rights to be
                     offered to Moked by virtue of said shares.

2.   SEPARATE MEETING


     Moked hereby undertakes vis-a-vis the Shareholders as follows:

     2.1  A least seven (7) days before any meeting of the Company's
          shareholders, a meeting of the Shareholders shall be convened
          (Hereinafter: "THE SEPARATE MEETING"). Notice of the Separate Meeting
          shall be given, including the agenda of the Separate Meeting, by Moked
          to the Shareholders at least ten (10) days in advance. The agenda of
          the Separate Meeting shall be identical to the agenda of the general
          shareholders' meeting, in respect of which the Separate Meeting had
          been summoned (This general meeting shall hereinafter be termed "THE
          INTENDED MEETING"). Any number of Shareholders shall constitute a
          legal quorum at the Separate Meeting. Whosoever shall hold a majority
          of the shares in Moked shall act as chairperson of the Separate
          Meeting, or his proxy. The above excepted, the provisions of the
          articles of association of Moked concerning the convening and
          conducting of shareholders' meetings of Moked, shall apply to the
          convening and conducting of the Separate Meeting.

     2.2  At the Separate Meeting, all subjects to be found on the agenda of the
          Intended Meeting shall be discussed, voted upon and decided.
          Resolutions at the Separate Meeting shall be passed by a majority vote
          of the Shareholders present and voting at the Separate Meeting (i.e.,
          abstentions

                                        2


          not counted), and the vote shall be counted according to the index of
          holdings detailed in sub-Sections 2.3 to 2.6 below.

     2.3  The index of holdings for the purposes of sub-Section 2.2 of this
          Agreement shall be as follows:

          MOKED SERVICES, INFORMATION, MANAGEMENT, INVESTMENTS LTD. - 38%
          (thirty-eight percent) multiplied by the "Total Stock of Moked" as
          this term is defined below - less the shares to be sold by Moked until
          the time of the Separate Meeting, following a notice of sale from the
          Shareholders holding preferred Class A stock, with the addition of the
          rate specified in Section 2.4 below.

          YEHUDA KAHANE LTD. - 26% (twenty-six percent) multiplied by the "Total
          Stock of Moked" as this term is defined below - less the shares to be
          sold by Moked until the time of the Separate Meeting, following a
          notice of sale from the Shareholders holding preferred Class B stock.

          P.K. GENERATORS AND EQUIPMENT LTD. - 26% (twenty-six percent)
          multiplied by the "Total Stock of Moked" as this term is defined below
          - less the shares to be sold by Moked until the time of the Separate
          Meeting, following a notice of sale from the Shareholders holding
          preferred Class C stock, minus the rate specified in Section 2.4
          below.

          YIGAL (GIGI) SHANI - 3.750% (three and three-quarters percent)
          multiplied by the "Total Stock of Moked" as this term is defined below
          - less the shares to be sold by Moked until the time of the Separate
          Meeting, following a notice of sale from the Shareholders holding
          preferred Class D stock.

          EFRAIM SHERATZKY -3.750% (three and three-quarters percent) multiplied
          by the "Total Stock of Moked" as this term is defined below - less the
          shares to be sold by Moked until the time of the Separate Meeting,
          following a notice of sale from the Shareholders holding preferred
          Class E stock.

          GIDEON EZRA [LTD.] - 2.50% (two and one-half percent) multiplied by
          the "Total Stock of Moked" as this term is defined below - less the
          shares to be sold by Moked until the time of the Separate Meeting,
          following a notice of sale from the Shareholders holding preferred
          Class F stock.

          "The Total Stock of Moked" - The total of the shares owned by Moked on
          the date the first prospectus of the Company is made public, including
          bonus shares allocated by virtue of them, as well as shares in the
          Company allocated to Moked to realize rights to be offered to Moked in
          the Company, excluding that number of shares equal in value to the
          Company's investments in respect of use of the rights, according to
          the price of the "ex-rights." It is

                                       3


          clarified that shares in the Company purchased by Moked - if purchased
          - after the first prospectus is made public, shall not be included in
          the "Total Stock of Moked," unless all the Shareholders shall
          explicitly state otherwise in writing.

     2.4  Without derogating from the aforesaid in sub-Section 2.3 above, it is
          hereby agreed that insofar as the index of holdings of Moked Services,
          Information, Management, Investments Ltd. and of P.K. Generators and
          Equipment Ltd. is concerned, regarding all matters to be discussed at
          the Separate Meeting, except for matters related to determining the
          terms of employment and/or the salary of Mr. Izzy Sheratzky or any
          members of his family, or matters in which Mr. Izzy Sheratzky or
          corporation(s) controlled by him have a personal interest, the share
          of Moked Services, Information, Management, Investments Ltd. - for the
          purposes of calculating the index of holdings for the Separate Meeting
          - will be increased by 3.50% (three and one-half percent) and the
          share of P.K. Generators and Equipment Ltd. will be diminished by an
          identical proportion, accordingly, at the same Separate Meeting.

          It is further clarified and agreed that should a notice of sale be
          given by the Shareholders holding preferred Class C stock, those 3.50%
          (three and one-half percent) shall be considered to have been sold as
          if they were the last.

     2.5  In order to illustrate the content of sub-Sections 2.3 and 2.4 above -
          an example is provided below, based on two additional factual
          assumptions:



          2.5.1     By the Separate Meeting, shares have been sold by virtue of
                    a notice of sale given by the Shareholders holding preferred
                    Class B and Class C stock, as follows:

                    The total stock sold by virtue of the notice of sale given
                    by the Shareholders holding preferred Class B stock -
                    120,000 shares.

                    The total stock sold by virtue of the notice of sale given
                    by the Shareholders holding preferred Class C stock - 80,000
                    shares.

          2.5.2     "The Total Stock of Moked" as stated in sub-Section 2.3
                    above is - 1,000,000 shares.

                    At the Separate Meeting (regarding a matter other than
                    determining the terms of employment and/or the salary of Mr.
                    Izzy

                                       4


                    Sheratzky or any members of his family) the voting index

                    shall be as follows:



<TABLE>


                    Moked Services, Information,                 415,000    votes (1)    51.875
                    Management, Investments Ltd.
                    Yehuda Kahane Ltd.                           140,000    votes          17.5
                    P.K. Generators and Equipment Ltd.           145,000    votes (2)    18.125
                    Yigal (Gigi) Shani                            37,500    votes        4.6875
                    Efraim Sheratzky                              37,500    votes        4.6875
                    Gideon Ezra [Ltd.]                            25,000    votes         3.125
                    Total Votes at the Separate Meeting          800,000                    100
</TABLE>



     2.6  It is hereby clarified that for the purposes of calculating the total
          shares sold by virtue of a notice of sale by the holders of preferred
          shares of any class, if any rights should be issued after the date the
          Company's first prospectus is made public (and should Moked realize
          some of the rights offered to it in said issue) or should bonus shares
          be issued in any form - in such cases the total shares sold by virtue
          of notices of sale by the holders of preferred shares of any class,
          for the purposes of sub-Sections 2.2 through 2.5 above, shall be
          calculated with adjustments which will take these changes into
          account.

3.   VOTING AT MEETINGS OF THE COMPANY'S SHAREHOLDERS

     Moked undertakes vis-a-vis the Shareholders that at the Intended Meeting it
     will vote using all its shares in the Company, according to the resolution
     adopted at the Separate Meeting. Should there be an identical number of
     votes for and against a particular proposal, then Moked shall vote against
     that proposal at the Separate Meeting.

4.   VOTING AT ANNUAL GENERAL MEETINGS (OR OTHER MEETINGS) CONCERNING
     APPOINTMENT OF COMPANY DIRECTORS

     4.1  Moked undertakes vis-a-vis the Shareholders that at annual General
          Meetings (or any other meeting) at which the matter of appointment of
          Company directors shall be



-----------
(1) When voting on a matter connected to determining the terms of employment
and/or the salary of Mr. Izzy Sheratzky or any members of his family, the voting
index shall be reduced by 35,000 votes.

(2) When voting on a matter connected to determining the terms of employment
and/or the salary of Mr. Izzy Sheratzky or any members of his family, the voting
index shall be increased by 35,000 votes.


                                       5


          discussed, it will vote in favor of appointing directors of the
          Company as set out below:

          Each shareholder shall be entitled to inform Moked, in writing,
          regarding the identity of the director proposed by him (hereinafter:
          "A PROPOSED DIRECTOR"), such that by virtue of each 8% (eight percent)
          of the total vote - as defined in sub-Section 4.2 below - held by said
          shareholder at the Separate Meeting preceding the general meeting at
          which directors of the Company are to be appointed - he may request
          one Proposed Director. Notwithstanding the above, in any case, any
          shareholder whose total holdings according to the "voting index,"
          proportional to the total vote are less than 8% (eight percent), shall
          be entitled to request the appointment of one Proposed Director,
          provided that in any event his holdings are no less than 2.0% (two
          percent).

     4.2  The determination of the part of each shareholder in the total vote
          shall be carried out pursuant to the provisions of sub-Sections 2.2 to
          2.5 above, at the Separate Meeting preceding the general meeting of
          the Company's Shareholders at which directors of the Company are to be
          appointed.

     4.3  It shall be clearly understood that regarding the appointment of
          Proposed Directors pursuant to this Section 4 - any of the
          Shareholders may give notice - in writing and bearing his signature -
          to combine their holdings indices in order to achieve holdings of 8%
          (eight percent).

          Without derogating from the above, it shall be clearly understood that
          a proportion of less than 8% shall not provide the right to request
          appointment of a director, unless such a shareholder holding less than
          8% (eight percent) according to his holding index, shall be entitled
          to request one Proposed Director as stated in the last part of
          sub-Section 4.1 above. It shall further be understood, that only a
          shareholder holding more than 8% (eight percent) of the total vote may
          combine his holdings in the manner set out in the first part of this
          Section.

5.   PROHIBITION OF SELLING SHARES AND THE RIGHT OF FIRST REFUSAL

     5.1  Moked undertakes to refrain from selling any of The Shares for a price
          per share 15% (fifteen percent) or more, beyond the price per share of
          the Company's shares at the Stock Exchange at the time the sale
          agreement is signed, for a

                                       6


          period of five (5) years beginning on the date of the first prospectus
          of the Company.

     5.2  Without derogating from the abovementioned in Section 5.1 above, it is
          agreed that should Moked wish to transfer or sell the Shares, in whole
          or in part, to a Shareholder or to any third party whatsoever
          (hereinafter in this Section: "THIRD PARTY"), it shall be obligated to
          offer them initially to all the Shareholders. The offer shall be in
          writing and shall specify the number of shares offered (Hereinafter:
          the "SHARES OFFERED FOR SALE") and the price per share offered by the
          Third Party to Moked for the Shares Offered for Sale and his identity
          - should Moked wish to sell them outside the Stock Exchange, or the
          Requested Price per each share of the Shares Offered for Sale - if
          Moked wishes to sell them on the Stock Exchange (hereinafter: the
          "REQUESTED PRICE"). The offer shall be delivered by messenger, and
          sent by registered mail, to each and every Shareholder. The written
          obligation by the Third Party to acquire shall be attached to the
          offer, if the intention is to sell the shares outside the Stock
          Exchange (The offer by Moked, hereinafter: the "OFFER").

          Within 30 days after the Offer is sent by registered mail, the
          Shareholder(s) who so wish (Hereinafter: the "ACCEPTING
          [SHAREHOLDERS]") shall be entitled to inform Moked in writing that
          they agree to acquire the Shares Offered for Sale, at the Requested
          Price.

          Should the number of the Shares Offered for Sale exceed 2.50% (two and
          one-half percent) of the Company's issued share capital at that time,
          then the period of 30 days shall be lengthened to 45 days. Said period
          of 30 or 45 days shall hereinafter be termed: the "ACCEPTANCE PERIOD."

     5.3  Should the Shareholders of the Company reject the Offer, or refrain
          (all or part of them) from giving their written agreement to acquire
          all the Shares Offered for Sale within the Acceptance Period, or
          should they give written agreement but not according to the terms of
          the Offer, Moked shall be entitled to sell all the Shares Offered for
          Sale to the Third Party, within thirty (30) days of the end of the
          Acceptance Period, if the sale should be to a Third Party outside the
          Stock Exchange, or to sell the Shares Offered for Sale within 180 (one
          hundred and eighty) days from the end of the Acceptance Period,
          provided the sale shall be at a price no lower than the Requested
          Price. Moked shall notify the Shareholders of the sale to the Third
          Party, the terms of the sale and the date of the sale, in writing.
          Should Moked wish to sell the Shares Offered for Sale, in whole or in
          part, after said period of 30 or 180 days, as the case may

                                       7


          be, it shall be obligated to carry out the entire right of refusal
          procedure, as above, ab initio.

          Should all of the Shareholders accept the Offer, the Shares Offered
          for Sale shall be sold to all of the Shareholders at the end of 7 days
          from the end of the Acceptance Period, whereas the Shares shall be
          sold to the Accepting Shareholders according to the index of holdings
          as it stands on the date of the Offer.

          If a minority of the Shareholders should reject the Offer, or if a
          minority of the Shareholders should refrain from responding in any way
          within the Acceptance Period, so long as any Shareholder shall agree
          in writing with regard to all of the Shares Offered for Sale,
          according to the Requested Price, within the Acceptance Period, the
          Shares Offered for Sale shall be sold to the Accepting Shareholders,
          according to the index of holdings as it stands on the date of the
          Offer, and the remaining Shares Offered for Sale shall be sold to the
          Shareholders that agreed to acquire all of the Shares Offered for Sale
          (hereinafter: the "SHAREHOLDERS AGREEING TO FULL ACQUISITION")
          proportionately, according to the proportion between the index of
          holdings of each one of the Shareholders Agreeing To Full Acquisition
          and the total index of holdings of all of those Shareholders Agreeing
          To Full Acquisition.

          It is hereby clarified that during the Acceptance Period a Shareholder
          may give his consent to acquire all of the Shares Offered for Sale,
          only if during the Acceptance Period he also gave his consent for the
          acquisition of his relative portion of the Shares Offered for Sale.

     5.4  For the purposes of sub-Sections 5.2 and 5.3 above - the "index of
          holdings" shall be determined as set out in sub-Sections 2.2 to 2.6
          above and according to the situation as it shall be on the date of the
          Offer.

     5.5  The Accepting Shareholders shall be obligated to pay the entire
          Requested Price in the Offer for the Shares Offered for Sale,
          according to their proportions as set out in sub-Section 5.3 above,
          within seven (7) days of the end of the Acceptance Period, whereupon
          Moked shall sign share transfer bills in respect of the Shares Offered
          for Sale. The payment shall be executed by means of a bank check to
          the order of Moked, unless Moked and the Accepting Shareholders shall
          agree upon a different means of payment.

                                       8


          The provisions of this agreement shall apply to the shares acquired
          through exercise of the right of refusal stated in this agreement.

     5.6  Notwithstanding the provisions of sub-Sections 5.1 and 5.2 above,
          Moked shall be entitled to sell up to 2% (two percent) of the issued
          capital shares of the Company on the Stock Exchange, without such a
          sale being subject to the right of refusal stated in sub-Section 5.2
          above. The above proportion shall be calculated on a cumulative basis,
          and Moked's right to accrue shall be transferable from one year to the
          next.

     5.7  Should the orders of sale be given in any calendar year by more than
          one class of preferred shares, the parties herein shall act in good
          faith and fidelity in order that the benefit of the provision in
          sub-Section 5.6 above shall be divided proportionately and in a fair
          manner between those holders of preferred shares.

          In order to facilitate the implementation of this section, the parties
          agree that the "entitlement" of each party to make use of the quota of
          2.0% mentioned in sub-Section 5.6 above shall be divided between them
          in each calendar year according to the index of holdings set out in
          Section 2.3 above, subject to an amendment, so that the number of
          shares to be sold by Moked which shall be deducted according to said
          sub-Section 2.3 shall be determined according to the situation at the
          beginning of the relevant calendar year (i.e., as of January 1st of
          the relevant year).

          Notwithstanding the above, it is agreed that a party to the agreement
          shall be entitled to "waive" his "entitlement" pursuant to this
          section, in whole or in part, in favor of another party to this
          agreement, if he has not made use of it, provided he does so by means
          written notice signed by him to be delivered to the Company. Such a
          wavier may not be voided, amended or changed for any reason
          whatsoever.

     5.8  The provisions of Sections 3 and 5 of this agreement shall apply to
          shares of the Company that Moked shall acquire - should it do so - in
          any manner (either at the Stock Exchange or outside it).

6.   VALIDITY AND ENFORCEMENT OF THE AGREEMENT

     6.1  This Agreement shall become valid one business day before the date the
          first prospectus of the Company is made public, and shall remain valid
          so long as Moked shall hold at least 25% (twenty-five percent) of the
          issued share capital of the

                                       9


          Company, or - if the Company's stock should not be registered for
          trade on the Stock Exchange following publication of the Company's
          first prospectus, according to the earlier of the two. For this
          purpose "holding" - as this term is defined in Section 1 of the
          Securities Law, 5728 - 1968.

     6.2  Each one of the Shareholders shall be entitled to bring suit to
          enforce this Agreement, including a mandatory injunction and a
          prohibitory injunction (whether interim or permanent).

     6.3  The rights of the parties pursuant to this Agreement are not
          transferable unless the prior written consent of all the parties to
          this Agreement is obtained.

     6.4  No change, amendment or revocation of this Agreement shall be valid
          unless set out in writing and signed by all of the Shareholders and by
          Moked.

7.   GENERAL

     7.1  The section headings in this Agreement are for convenience only and
          shall not be used for purposes of interpretation.

     7.2  This Agreement includes everything that was agreed between the
          parties, and every consent, promise, representation, undertaking and
          the like made between the parties, if made, prior to its signing is
          void and completely invalid.

     7.3  This Agreement shall obligate the heirs to the parties to this
          Agreement as well, and shall remain valid during the dissolution of
          any party to this Agreement and/or the bankruptcy of any party to this
          Agreement.

8.   THE ADDRESSES OF THE PARTIES

     The addresses of the Parties are as specified in the preamble to this
     Agreement. Unless explicitly stated otherwise in this Agreement, any
     notification sent by one party to another to said address by messenger
     shall be considered received on the day of delivery (if delivered on a
     business day) and if sent to said address by registered mail - 72 hours
     after it was submitted to the post office to be sent. Any Party may notify
     all Parties to this Agreement about a change in his address, and then his
     new address shall be considered the address for the purposes of this
     Agreement.




                                       10






       AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES:



[Signature]                                    [Signature]

----------------------------                   ---------------------------
Moked                                          Moked Services, Information,
                                               Management, Investments Ltd.


[Signature]                                    /s/ Yigal Shani

----------------------------                   ----------------------------
Yehuda Kahane Ltd.                             Yigal (Gigi) Shani



[Signature]                                    /s/ Efraim Sheratzky

----------------------------                   ----------------------------
P.K. Generators and Equipment Ltd.             Efraim Sheratzky




[Signature]
----------------------------
Gideon Ezra Ltd.




                                       11








                                                                    EXHIBIT 10.2


                                    AMENDMENT
                    AMENDMENT TO AN AGREEMENT FROM 05/18/1998
                 THAT WAS DRAWN UP AND SIGNED ON ________, 2005


BETWEEN:          MOKED ITURAN LTD., PRIVATE COMPANY 51-218465-6

                                                                 ON THE ONE HAND


AND:     1.      MOKED SERVICES, INFORMATION, MANAGEMENT, INVESTMENTS LTD.,
                 PRIVATE COMPANY 51-115929-8
                 of 155 Yigal Alon Street, Ramat-Gan

         2.      YEHUDA CAHANA LTD., PRIVATE COMPANY 51-218173-6
                 of 119 Bar Kochvah Street, Herzliya

         3.      P.K. GENERATORS AND EQUIPMENT LTD., PRIVATE COMPANY 51-129494-4
                 of Prof. Shorr Street, Holon Industrial Area

         4.      GIDEON EZRA LTD., PRIVATE COMPANY 51-221036-0
                 of 24 Beeri Street, Kochav Yair 44864

         5.      EFFI SHERATZKI, I.D. 51677128 AND/OR T.S.D. HOLDINGS LTD.
                 (PRIVATE COMPANY 51-346469-3)
                 of 24 Saltopolsky Street, Tel-Aviv 63475

         6.      YIGAL (GIGI) SHANI, I.D. 00780523
                 AND/OR G.N.S. HOLDINGS LTD. (PRIVATE COMPANY 51-346470-1)
                 of 24 Saltopolsky Street, Tel-Aviv 63475 Jointly and
                 individually (hereinafter: "THE SHAREHOLDERS")


                                                               ON THE OTHER HAND

WHEREAS          The parties wish to amend the agreement that was signed between
                 them on 05/18/1998 ("THE AGREEMENT");


               NOW, THEREFORE, THE PARTIES HAVE AGREED AS FOLLOWS:

1.       In clause 4 (with all of its sub-clauses) - Wherever the rate of "8%
         (eight percent)" appears, it will be replaced by "10% (ten percent)",
         and wherever the rate of "2% (two percent)" appears, it will be
         replaced by "3.5% (three and a half percent)".





2.       Clause 4.4 will be added and will state as follows:

         "In accordance with the company's new articles of incorporation, it is
         agreed that the directorate members of the company will be divided into
         3 groups and their term of service will end as follows:



         -----------------------------------------------------------------------
             NAME OF THE DIRECTOR          GROUP       END OF TERM OF SERVICE
         -----------------------------------------------------------------------
         Amos Kurtz, Yoav Cahana,            A        Annual general company
         Eyal Sheratzki, Yigal Shani                  meeting for 2007
         -----------------------------------------------------------------------
         Yehuda Cahana, Avner Kurtz,         B        Annual general company
         Nir Sheratzki                                meeting for 2008
         -----------------------------------------------------------------------
         Gil Sheratzki, Ron Binyamin,        C        Annual general company
         Izzi  Sheratzki                              meeting for 2009
         -----------------------------------------------------------------------


         In a manner in which despite the aforesaid in clause 4.1 above,
         starting at the end of the service term of the appointed directors in
         group A above, Moked Services, Information, Management, Investments
         Ltd. will be entitled to require Moked to appoint one director for
         group A, as long as it holds at least 40% of the total votes (jointly
         with 3.5% of the total votes owned by P.K. Generators and Equipment
         Ltd.), Yehuda Cahana Ltd. will be entitled to require Moked to appoint
         one director for group A, as long as it holds at least 20% of the total
         votes, P.K. Generators and Equipment Ltd. will be entitled to require
         Moked to appoint one director for group A, as long as it holds at least
         20% of the total votes, and Yigal (Gigi) Shani or G.N.S. Holdings Ltd.
         will be entitled to require Moked to appoint one director only for
         group A, as long as one of them holds at least 3.5% of the total votes;

         And in a manner in which despite the aforesaid in clause 4.1 above,
         starting at the end of the service term of the appointed directors in
         group B above, Moked Services, Information, Management, Investments
         Ltd. will be entitled to require Moked to appoint one director for
         group B, as long as it holds at least 40% of the total votes (jointly
         with 3.5% of the total votes owned by P.K. Generators and Equipment
         Ltd.), Yehuda Cahana Ltd. will be entitled to require Moked to appoint
         one director for group B, as long as it holds at least 20% of the total
         votes, and P.K. Generators and Equipment Ltd. will be entitled to
         require Moked to appoint one director for group B, as long as it holds
         at least 20% of the total votes.

         And in a manner in which despite the aforesaid in clause 4.1 above,
         starting at the end of the service term of the appointed directors in
         group C above, Moked Services, Information, Management, Investments
         Ltd. will be entitled to require Moked to appoint two directors for
         group C, as long as it holds at least 36.5% of the total votes, and
         Effi Sheratzki or T.S.D. Holdings Ltd. will be entitled to require
         Moked to appoint one director only for group C, as long as one of them
         holds at least 3.5% of the total votes."



3.       Clause 6.1 - Instead of "25% (twenty five percent)" it will state:

                  "20% (twenty percent)".

4.       In the matter of clause 5.2 of the agreement - Whereas Moked
         transferred/sold shares from the time the agreement was signed until
         the signing of this addendum, it is hereby clarified by all the parties
         that they do not have any claim regarding any transfer that was made
         until the signing of this addendum.

5.       The parties undertake to vote for changing the Moked articles of
         incorporation, at the general meeting of Moked, in a manner that will
         reflect this amendment.

6.       This amendment will become effective from the time the application for
         registration of the company's shares (F-1 Registration Statement),
         which will be submitted to the securities authority in the U.S.A.
         (SEC), becomes effective.

7.       With the exception of the aforesaid the agreement remains the same and
         in effect.


           IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED THIS AGREEMENT:



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


MOKED SERVICES, INFORMATION, MANAGEMENT, INVESTMENTS LTD.


-----------------------             -----------------------------------
YEHUDA CAHANA LTD.                  MOKED ITURAN LTD.

-----------------------             -----------------------------------
GIDEON EZRA LTD.                    P.K. GENERATORS AND EQUIPMENT, LTD.

-----------------------             -----------------------------------
YIGAL (GIGI) SHANI                  EFFI SHERATZKI

-----------------------             -----------------------------------
G.N.S. HOLDINGS LTD.                T.S.D. HOLDINGS LTD.









                                                                    EXHIBIT 10.3


                             RADIO LOCATION SYSTEM

                               LICENSE AGREEMENT

                            DATED December 16, 1993

                                    BETWEEN

                                PACTEL TELETRAC

                                      AND

                                  TADIRAN LTD.





TABLE OF CONTENTS

Page

1. Definitions 1

1.1 "Contract Administrator"  1

1.2 "Contract Technical Coordinator"  2

1.3 "Effective Date"  2

1.4 "LIBOR"  2

1.5 "Location Unit"  2

1.6 "Performance Commencement Date"  2

1.7 "PacTel Teletrac High Capacity System"  2

1.8 "Radio Location System"  2

1.9 "RLS Commercial Operation Date"  2

1.10 "RLS Components"  2

1.11 "RLS Coverage Area"  2

1.12 "RLS Customer"  2

1.13 "RLS Customer Equipment"  2

1.14 "RLS Customer Equipment Net Revenue"  3

1.15 "RLS Customer Maintenance"  3

1.16 "RLS Customer Maintenance Net Revenue"  3

1.17 "RLS Customer Services"  4

1.18 "RLS Customer Services Net Revenue"  4

1.19 "RLS Customer Workstation"  4

1.20 "RLS Data Transmission Network"  4

1.21 "RLS -Licensed Software"  4

(a) RLS Customer Workstation Licensed Software 5

                                       i



(b) RLS Network Control Center Licensed Software 5

(c) RLS Transmission and RLS Receiver Sites Licensed Software 5

1.22 "RLS Licensed Software Upgrades"  5

1.23 "RLS Licensed Technical Information"  6

1.24 "RLS Licensed Technical Information Modifications"  6

1.25 "RLS Map"  6

1.26 "RLS Network Control Center"  6

1.27 "RLS Receiver Sites"  6

1.28 "RLS Transmission Sites"  6

1.29 "Spectrum License"  6

1.30 "Tadiran Basestation Agreement"  7

1.31 "Tadiran Basestations"  7

1.32 "Tadiran Location Unit Agreement" 7

1.33 "Territory"  7

1.34 "U.S. CPI"  7

2. Grant of Rights 7

2.1 Radio Location System  7

2.2 RLS Licensed Software Executable Format and RLS Licensed
    Technical Information 7

2.3 RLS Customer Workstation Licensed Software Source Code  8

3. Reservation of Rights 8

4. Consideration 9

4.1 Fees  9

4.1.1 Lump Sum  9

4.1.2 Royalty Interests  9

(a) Equipment Royalty Interest 9

                                       ii



(b) Maintenance Royalty Interest 9

(c) Services Royalty Interest 10

(d) Accrual of Royalty Interests 10

4.2 Records and Adjustments 10

4.3 Reports, Forecasts and Payments  11

4.3.1 Reports  11

4.3.2 Payments 11

4.3.3 Late Payments  12

4.4 Circumstances for Reduction of Royalty Interests  12

5. Term 12

6. Termination 13

7. Restrictions on Business Activities 14

8. Effect of Termination or Cancellation 15

8.1 Circumstances Where Operations Continue--Continued Rights 15

8.2 Circumstances Where Operations End--Return of Materials and Non-Compete  15

8.3 No Damages  16

8.4 Payment Obligations  16

8.5 Survival  16

9. RLS Licensed Software Upgrades and RLS Licensed Technical Information
Modifications 17

9.1 RLS Licensed Software Upgrades  17

9.2 RLS Licensed Technical Information Modifications Developed
    by PacTel Teletrac  17

9.3 Upgrades and Modifications to the Radio Location System Developed by
    Tadiran  17

9.3.1 RLS Licensed Customer Workstation Software  17

(a) Authority to Make Upgrades 17

(b) Ownership and License of Upgrades 18


                                      iii



(i) Derivative Upgrades 18

(ii) Stand-alone Upgrades 18

9.3.2 RLS Licensed Software Other Than RLS Licensed Customer
      Workstation Software  19

(a) Authority to Make Upgrades 19

(b) Ownership and License of Upgrades 19

(i) Derivative Upgrades 19

(ii) Stand-alone Upgrades 20

9.3.3 RLS Licensed Technical Information  20

(a) Authority to Make Modifications 20

(b) Ownership and License of Tadiran Technical Modifications 20

(i) Derivative Upgrades 20

(ii) Stand-alone Upgrades 21

9.3.4 Tadiran Basestations and Location Units  22

(a) Authority to Make Modifications 22

(b) Sale of Basestation and Location Unit Modifications 22

9.4 PacTel Teletrac Obligations With Respect to Tadiran Upgrades and
    Tadiran Modifications  22

9.5 Delivery and Protection of Tadiran Upgrades and Tadiran Modifications  22

10. PacTel Teletrac Indemnity 23

11. Tadiran Indemnity 25

12. PacTel Teletrac Representations, Limited Warranty and Disclaimer 26



12.1 Exhibits  26

12.2 Final Version RLS Licensed Warranty  26

12.2.1 Performance Warranty  26

12.2.2 Warranty Period  26

12.2.3 Limitations on Performance Warranty  27



                                       iv



13. Limitation of Liability 28

14. Obligations and Responsibilities of PacTel Teletrac 28

14.1 Delivery of RLS Licensed Technical Information  28



14.2 Delivery of RLS Licensed Software  28

14.2.1 Current Version Software  29

14.2.2 Final Version Licensed Software  29

(a) Development 29

(b) Delivery 29

14.3 RLS Licensed Software Source Code  30

14.4 Training and Support  30

14.4.1 Training  30

14.4.2 Telephone Support After the RLS Commercial Operation Date  31

14.4.3 On-Site Support After the RLS Commercial Operation Date  32

14.4.4 Payments for Training and Support  32

15. Obligations and Responsibilities of Tadiran 32

15.1 Spectrum License  32

15.2 Reasonable Diligence  32

15.3 RLS Commercial Operation Date  33

15.4 Location Unit Transactions  33

15.4.1 Location Units  33

15.4.2 Location Unit Installation  33

15.5 Confidentiality and Proprietary Protection  33

15.6 Insurance  34

15.7 PacTel Teletrac Marks  34

15.8 Other Marks  34


                                       v




15.9 Infringement by Others  34

16. Relationship of the Parties 35

17. Force Majeure 35

18. Governing Law 35

19. Dispute Resolution 35

20. General 38

20.1 Notices  38

20.1.1 Contract Administrators and Contract Technical Coordinators  38

20.1.2 Other Notices  38

20.2 English Language  38

20.3 No Publicity  39

20.4 Scope and Amendment of License Agreement  39



20.5 Assignment  39

20.6 Binding Effect  39

20.7 Authority  40

20.8 Severability  40

20.9 Headings  40

20.10 Expenses of Litigation  40

20.11 Waiver  40

20.12 Entire Agreement  40

20.13 Re-Export Assurances  41

20.14 Exhibits  41

20.15 Construction of Agreement  41


20.16 Counterparts  42

                                       vi


                                  CONFIDENTIAL
                                  ------------

                     RADIO LOCATION SYSTEM LICENSE AGREEMENT
                     ---------------------------------------

THIS RADIO LOCATION SYSTEM LICENSE AGREEMENT (this "License Agreement"), dated
this 16th day of December 1993, is made by and between PACTEL TELETRAC, a
general partnership organized under the laws of California and having its
principal offices at 9800 La Cienega Boulevard, Suite 800, Inglewood, California
90301 ("PacTel Teletrac"), and TADIRAN LIMITED, a company organized under the
laws of the State of Israel and having its principal offices at 26 Hashoftim
Street, Holon, Israel ("Tadiran"). PacTel Teletrac and Tadiran are sometimes
individually referred to as "Party" and collectively as "Parties."

WITNESSETH:

WHEREAS, PacTel Teletrac owns or possesses rights to proprietary information,
technology and software necessary for the operation of a Radio Location System,
as defined below; and

WHEREAS, Tadiran has obtained a Spectrum License for operation of a land-based
radio location system in the Territory as defined below; and

WHEREAS, Tadiran desires to establish and operate within the Territory a Radio
Location System; and

WHEREAS, subject to the terms and conditions of this License Agreement, and only
for purposes within the Territory, PacTel Teletrac desires to grant to Tadiran:
(i) an exclusive nontransferable right to use, construct, maintain and provide
support for a Radio Location System and to market, sell, promote, maintain and
provide support for RLS Customer Equipment and RLS Customer Services, as defined
below; and (ii) an exclusive nontransferable license to use RLS Licensed
Software and RLS Licensed Technical Information, as defined below, to construct,
maintain, operate and provide support for a Radio Location System in the
Territory, and Tadiran desires to acquire such right and licenses:

NOW THEREFORE, in consideration of the foregoing and the mutual premises set
forth in this License Agreement, the Parties agree as follows:

1. Definitions.

1.1 "Contract Administrator" shall mean the person designated by each Party as
the contact person at such Party for matters, other than engineering matters,
concerning the administration of this License Agreement.

1.2 "Contract Technical Coordinator" shall mean the person designated by each
Party as the contact person at such Party for engineering matters related to
this License Agreement.

1.3 "Effective Date" shall mean the date on which both Parties have executed and
delivered this License Agreement, as evidenced by the last date set forth on the
signature date below.

                                       1


1.4 "LIBOR" shall mean the three (3) month London Interbank Offer Rate as it
appears on the Reuters RMEW screen at noon London time on the due date.

1.5 "Location Unit" shall mean a radio transceiver and its antenna that is
capable of receiving and sending radio signals. Location Units enable a Radio
Location System to locate objects to which such Location Units are attached.
Location Units manufactured by Tadiran or by entities that Tadiran controls or
has the ability to control are referred to in this License Agreement as "Tadiran
Location Units."

1.6 "Performance Commencement Date" shall mean the earliest date when one of the
following events occurs: (a) Tadiran obtains a forward-link spectrum allocation
outside the eight (8) megahertz ("MHZ") range for return-link; (b) Tadiran and
PacTel Teletrac decide by mutual agreement on the Radio Location System in the
Territory that will operate without a forward-link spectrum; (c) PacTel Teletrac
has completed successful field testing on the PacTel Teletrac High Capacity
System, as defined in Section 1.7 below; or (d) July 1, 1995.

1.7 "PacTel Teletrac High Capacity System" shall mean the high capacity radio
location and data communication system to be developed by PacTel Teletrac for
use in the United States.

1.8 "Radio Location System" shall mean a land-based radio location system that
uses the RLS Licensed Software and RLS Licensed Technical Information for
purposes of locating animate or inanimate objects, including people, and, and
when and if the technology is developed, for ancillary activities such as data
messaging or voice messages, or both.

1.9 "RLS Commercial Operation Date" shall mean the date when Tadiran obtains its
first paying RLS Customer.

1.10 "RLS Components" shall mean all components of the Radio Location System in
the Territory and RLS Customer Equipment and RLS Customer Services, other than
the Tadiran Basestations, as defined below, and the Tadiran Location Units. In
general, the major components are: the RLS Customer Workstation; the RLS Network
Control Center and network; the RLS Transmission Sites; and the RLS Receiver
Sites. Each of these major components, in turn, has a number of constituent
parts, all of which, other than the Tadiran Location Units and Tadiran
Basestations, are considered "RLS Components" for purposes of this License
Agreement.

1.11 "RLS Coverage Area" shall mean the geographic area of designed coverage of
the Radio Location System in the Territory.

1.12 "RLS Customer" shall mean a purchaser, renter, lessee or other end user of
any RLS Customer Equipment, RLS Customer Maintenance, RLS Customer Services or
RLS Component, that is provided with respect to the Radio Location System in the
Territory.

1.13 "RLS Customer Equipment" shall mean the equipment, including, but not
limited to, Location Units, that enables an RLS Customer to receive RLS Customer
Services.

1.14 "RLS Customer Equipment Net Revenue" shall mean the gross amount invoiced
to any RLS Customer or other third party for RLS Customer Equipment less the
following amounts:

                                       2


(a) the cost to Tadiran of such RLS Customer Equipment, subject to the
limitations set forth in Section 15.4.1 below concerning purchases of Location
Units from Tadiran and from entities that Tadiran controls or has the ability to
control; (b) the cost to Tadiran of installation of Location Units, which shall
be determined as set forth in Section 15.4.2 below; and (c) any value added tax,
sales tax or other tax or levy actually imposed in the Territory on the RLS
Customer with respect to sales of RLS Customer Equipment and paid by Tadiran
(not including any tax on Tadiran's income with respect to such sales). If
Tadiran receives compensation for RLS Customer Equipment in the form of goods or
services, then the fair market value of such goods or services shall be included
as RLS Customer Equipment Net Revenue.

1.15 "RLS Customer Maintenance" shall mean maintenance and support provided for
software, hardware or other equipment with respect to Location Units, RLS
Customer Workstations and other RLS Customer Equipment.

1.16 "RLS Customer Maintenance Net Revenue" shall mean twenty-five percent (25%)
of the gross amount invoiced to RLS Customers and other third parties for RLS
Customer Maintenance.

1.17 "RLS Customer Services" shall mean the services provided by means of the
Radio Location System, including but not limited to radio location, data
messaging and voice messages. RLS Customer Services do not include RLS Customer
Maintenance.

1.18 "RLS Customer Services Net Revenue" shall mean the gross amount invoiced to
any RLS Customer or other third party for RLS Customer Services, together with
all other income, other than income attributable to RLS Customer Equipment and
RLS Customer Maintenance, received by Tadiran by reason of the rights and
licenses granted under this License Agreement, less any value added tax, sales
tax or other tax or levy actually imposed in the Territory on the RLS Customer
with respect to such Services and paid by Tadiran (not including any tax on
Tadiran's income with respect to such Services). If Tadiran is compensated in
the form of goods or services, then the fair market value of such goods or
services shall be treated as income for the purpose of calculating RLS Customer
Services Net Revenue.

1.19 "RLS Customer Workstation" shall mean a workstation installed at an RLS
Customer site that enables an RLS Customer to forward requests for locations to
the RLS Network Control Center, that receives location information from the RLS
Network Control Center, and displays locations on an RLS Map. The RLS Customer
Workstation consists of hardware and software components.

1.20 "RLS Data Transmission Network" shall mean the data transmission equipment
that transports data between RLS Transmission Sites, RLS Receiver Sites and the
RLS Network Control Center.

1.21 "RLS Licensed Software" shall mean the executable format versions of the
operational computer software or firmware programs, or both, that are listed in
Exhibit A to this License Agreement, as such programs exist and, to the extent
applicable, may be sublicensed by PacTel Teletrac to Tadiran, at the time of
delivery in accordance with this License Agreement, and the available
documentation relating to the use of such software or firmware. With respect to
the



                                       3


RLS Customer Workstation Licensed Software only, RLS Licensed Software also
shall include the source code of such software to the extent that PacTel
Teletrac is entitled to disclose such source code. The RLS Licensed Software
does not include management information software, including, but not limited to,
for purposes such as customer activation, billing and accounting, and Tadiran
will be responsible for supplying any such software. PacTel Teletrac will,
however, provide all of its available interface specifications or software
hooks, for Tadiran's use in designing management information software to be used
with the RLS Licensed Software. In summary, the RLS Licensed Software programs
are the programs designed to perform the following functions for a Radio
Location System:

(a) RLS Customer Workstation Licensed Software: These software programs enable
the RLS Customer to send and receive information to and from the RLS Network
Control Center and to display the location data on the RLS Map when such Map is
provided as part of the RLS Customer Workstation.

(b) RLS Network Control Center Licensed Software: These software programs
consist of the following three categories:

(i) Real Time Operating Software that communicates and synchronizes information
received from Location Unit radio signals to calculate locations in real time.

(ii) Systems Support and Maintenance Software that enables RLS Customers to
access a Radio Location System, that forwards requests for locations to RLS
Transmission Sites and diagnoses Radio Location System malfunctions.

(iii) Database Services Software that performs customer validation functions,
tracks or records use of the Radio Location System and performs message
management functions.

(c) RLS Transmission and RLS Receiver Sites Licensed Software: This software
performs calculations and acts as an interface for signals from RLS Receiver
Sites and RLS Transmission Sites and the RLS Data Transmission Network.

1.22 "RLS Licensed Software Upgrades" shall mean any and all technical,
functional, or other enhancements, improvements, additions, upgrades or
modifications to and new versions of the RLS Licensed Software that PacTel
Teletrac has released to at least fifty percent (50%) of PacTel Teletrac's Radio
Location Systems operating in the United States. RLS Licensed Software Upgrades
shall not include any software or other proprietary data that a third party owns
and that PacTel Teletrac is not authorized to disclose. RLS Licensed Software
Upgrades that PacTel Teletrac provides to Tadiran during the term of this
License Agreement shall be treated as RLS Licensed Software for all purposes
under this License Agreement.

1.23 "RLS Licensed Technical Information" shall mean the manuals, blue prints
and other tangible data listed in Exhibit B to this License Agreement together
with intangible information that is proprietary to PacTel Teletrac and that may
assist Tadiran to use the information listed in Exhibit B for the purpose of
designing, constructing and operating and maintaining the Radio Location System
in the Territory.

                                       4


1.24 "RLS Licensed Technical Information Modifications" shall mean any and all
technical, functional, operational or other enhancements, improvements,
additions, updates or modifications to, or any new versions of, the RLS Licensed
Technical Information, that PacTel Teletrac has released to at least fifty
percent (50%) of PacTel Teletrac's Radio Location Systems operating in the
United States, provided that RLS Licensed Software Upgrades are not included in
this definition. RLS Licensed Technical Information Modifications shall not
include any software or other proprietary data that a third party owns and that
PacTel Teletrac is not authorized to disclose. RLS Licensed Technical
Information Modifications that PacTel Teletrac provides to Tadiran during the
term of this License Agreement, shall be treated as RLS Licensed Technical
Information for all purposes under this License Agreement.

1.25 "RLS Map" shall mean the digitized map of the RLS Coverage Area that
Tadiran will provide and use.

1.26 "RLS Network Control Center" shall mean the master station that serves a
RLS Coverage Area. The RLS Network Control Center consists of a group of
networked or interconnected computers, or both, that constitute the information
processing hub of the Radio Location System.

1.27 "RLS Receiver Sites" shall mean the receivers that gather Location Unit
radio signals. Each RLS Receiver Site consists of equipment and software
components that capture and convert transmitter and Location Unit radio signals
to a computer usable level, and calculate and transmit to the RLS Network
Control Center information about the signals received.

1.28 "RLS Transmission Sites" shall mean the sites that receive location
requests from the RLS Network Control Center and transmit forward link signals
that prompt Location Units located in the RLS Coverage Area to send a response
radio signal to RLS Receiver Sites.

1.29 "Spectrum License" shall mean a permit granted by the Israel Ministry of
Telecommunications to Tadiran to use a radio spectrum of eight (8) MHZ.

1.30 "Tadiran Basestation Agreement" shall mean the Amended Advanced Base
Station Agreement between Tadiran and PacTel Teletrac, as the assignee of
International Teletrac Systems, dated February 15, 1991, together with its
Amendments.

1.31 "Tadiran Basestations" shall mean the basestations that Tadiran
manufactures and sells to PacTel Teletrac pursuant to the Tadiran Basestation
Agreement.

1.32 "Tadiran Location Unit Agreement" shall mean the restated CVLU production
agreement dated July 30, 1991, between PacTel Teletrac, as the assignee of
International Teletrac Systems, and Tadiran.

1.33 "Territory" shall mean the State of Israel and the territories administered
by it.

1.34 "U.S. CPI" shall mean the Consumer Price Index for Urban Wage Earners and
Clerical Workers published by the U.S. Department of Labor, Bureau of Labor
Statistics, U.S. City Average, "All Items," base year 1982-1984 = 100. If for
any reason the U.S. CPI is discontinued or does not exist, "U.S. CPI" shall mean
the official or replacement index published by the U.S.



                                       5


Department of Labor, Bureau of Labor Statistics, or successor or similar
governmental agency which is most similar to the U.S. CPI. U.S. CPI dates shall
mean the latest published U.S. CPI.

2. Grant of Rights.

2.1 Radio Location System. As of the Effective Date and subject to the terms and
conditions of this License Agreement, PacTel Teletrac grants to Tadiran an
exclusive nontransferable right, solely within the Territory, to construct, use,
maintain and provide support for a Radio Location System and to market, sell,
promote, maintain and provide support for RLS Customer Equipment and RLS
Customer Services and to provide RLS Customer Maintenance.

2.2 RLS Licensed Software Executable Format and RLS Licensed Technical
Information. As of the Effective Date and subject to the terms and conditions of
this License Agreement, PacTel Teletrac grants to Tadiran an exclusive
nontransferable license to use RLS Licensed Software in executable format and
RLS Licensed Technical Information solely for the purpose of operating,
maintaining and providing support for a Radio Location System in the Territory.
Tadiran may sublicense to RLS Customers the right to use RLS Customer
Workstation Licensed Software only in executable format and only on such RLS
Customers' designated computer processing unit(s). Tadiran agrees that neither
it nor its employees will use or copy RLS Licensed Software except as authorized
in this License Agreement. Other than the RLS Customer Workstation Licensed
Software in executable format, which Tadiran may copy for its sublicensees,
Tadiran may copy the RLS Licensed Software solely for its own use and solely in
connection with the performance of its obligations under this License Agreement.

2.3 RLS Customer Workstation Licensed Software Source Code. As of the Effective
Date and subject to the terms and conditions of this License Agreement, PacTel
Teletrac grants to Tadiran an exclusive nontransferable license to use the RLS
Customer Workstation Licensed Software that PacTel Teletrac delivers to Tadiran
in source code format solely for the purpose of translating such software to
Hebrew and otherwise adapting such software for purposes of operating the Radio
Location System in the Territory. Tadiran may copy the source code for the RLS
Customer Workstation Licensed Software solely for its own internal use for the
purposes set forth in this Section 2.3 and for the use of independent
contractors that Tadiran has engaged to make the translations or adaptations
authorized under this Section 2.3, provided that such independent contractors
shall execute a confidentiality agreement in substantially the same form as the
Nondisclosure Agreement referred to in Section 15.5 below, and shall execute an
agreement to assign to Tadiran all inventions made and work performed by the
contractor in connection with the RLS Customer Workstation Licensed Software. In
addition, such contractors shall not have any direct or indirect ownership
interest in a land-based radio location system or be in the business of
providing software for any such system, other than the Radio Location System.
Any other use or disclosure of the RLS Customer Workstation Licensed Software
source code or modification of the RLS Customer Workstation Licensed Software
shall be subject to PacTel Teletrac's prior written consent, which consent
PacTel Teletrac may withhold in its sole discretion. PacTel Teletrac shall have
no obligation to provide RLS Licensed Software Upgrades or RLS Licensed
Technical Information Modifications that are compatible with Tadiran's
modifications to the RLS Customer Workstation Licensed Software.


                                       6


3. Reservation of Rights.

Except as to those certain rights and licenses expressly granted to Tadiran
under this License Agreement, PacTel Teletrac reserves all proprietary rights,
title and interest, including all ownership and proprietary rights, in and to
the Radio Location System, RLS Licensed Software, RLS Licensed Technical
Information and the "PacTel" and "Teletrac" marks, including all designs,
inventions, patents, copyrights, trademarks, service marks, trade secrets,
know-how, techniques, engineering details, enhancements, improvements,
additions, upgrades, modifications, derivative works, RLS Licensed Technical
Information Modifications and RLS Licensed Software Upgrades. PacTel Teletrac
acknowledges that this reservation of rights does not apply to Tadiran Location
Units or to Tadiran Basestations, and, subject to the rights and licenses
granted by Tadiran to PacTel Teletrac under this License Agreement, Tadiran
reserves all proprietary rights, title and interest, including all ownership and
proprietary rights in and to Tadiran Location Units and Tadiran Basestations,
including all designs, inventions, patents, copyrights, trademarks, engineering
details, enhancements, additions, improvements, modifications, and derivative
works of such Tadiran Location Units and Tadiran Basestations. Tadiran
acknowledges that no title to the "PacTel" or Teletrac" marks, RLS Licensed
Software or RLS Licensed Technical Information, or any part thereof, has been or
will be transferred to Tadiran. Neither Tadiran nor any Tadiran affiliate will
disassemble or recompile any RLS Licensed Software, other than the RLS Customer
Workstation Licensed Software solely for the purposes set forth in Section 2.3
above.

4. Consideration.

4.1 Fees. In consideration for the grant of rights set forth in Section 2 above,
Tadiran will perform the obligations set forth in this License Agreement and
will pay to PacTel Teletrac:

4.1.1 Lump Sum. Upon delivery of the Current Version Software, as set forth in
Section 14.2.1 below, the sum of five hundred thousand U.S. dollars
(U.S.$500,000) in partial consideration for the RLS Licensed Software;

4.1.2 Royalty Interests.

(a) Equipment Royalty Interest. A fee equal to four percent (4%) of RLS Customer
Equipment Net Revenue, which fee shall increase to six percent (6%) of RLS
Customer Equipment Net Revenue once there are sixty thousand (60,000) RLS
Customers, and shall thereafter increase at the rate of one-half percent (.5%)
for each additional ten thousand (10,000) RLS Customers up to a maximum rate of
eight percent (8%). Once the fee is equal to or greater than six and one-half
percent (6.5%), then such fee shall be subject to decrease at the rate of
one-half percent (.5%) for each decrease of ten thousand (10,000) RLS Customers,
with a minimum rate of six percent (6%). The fees set forth in this subsection
are referred to collectively as the "Equipment Royalty Interest"; and

(b) Maintenance Royalty Interest. A fee equal to four percent (4%) of RLS
Customer Maintenance Net Revenue, which fee shall increase to six percent (6%)
of RLS Customer Maintenance Net Revenue once there are sixty thousand (60,000)
RLS Customers, and shall



                                       7


thereafter increase at the rate of one-half percent (.5%) for each additional
ten thousand (10,000) RLS Customers up to a maximum rate of eight percent (8%).
Once the fee is equal to or greater than six and one-half percent (6.5%), then
such fee shall be subject to decrease at the rate of one-half percent (.5%) for
each decrease of ten thousand (10,000) RLS Customers, with a minimum rate of six
percent (6%). The fees set forth in this subsection are referred to collectively
as the "Maintenance Royalty Interest"; and

(c) Services Royalty Interest. A fee equal to four percent (4%) of RLS Customer
Services Net Revenue, which fee shall increase to six percent (6%) of RLS
Customer Services Net Revenue once there are sixty thousand (60,000) RLS
Customers, and shall thereafter increase at the rate of one-half percent (.5%)
for each additional ten thousand (10,000) RLS Customers up to a maximum rate of
eight percent (8%). Once the fee is equal to or greater than six and one-half
percent (6.5%), then such fee shall be subject to decrease at the rate of
one-half percent (.5%) for each decrease of ten thousand (10,000) RLS Customers,
with a minimum rate of six percent (6%). The fees set forth in this subsection
are referred to collectively as the "Services Royalty Interest."

(d) Accrual of Royalty Interests. The Equipment Royalty Interest, Maintenance
Royalty Interest and Services Royalty Interest are referred to collectively in
this License Agreement as the "Royalty Interests." PacTel Teletrac shall
commence earning its Royalty Interests immediately upon Tadiran's receipt of
revenues with respect to the Radio Location System in the Territory; however, no
payments shall be due on the Royalty Interests until two (2) years after the RLS
Commercial Operation Date. On the day that is two (2) years after the RLS
Commercial Operation Date, Tadiran shall pay all accrued but unpaid amounts, due
on the Royalty Interests and shall commence quarterly payments of the Royalty
Interests in accordance with subsection 4.3 below.

4.2 Records and Adjustments. Tadiran shall keep full, clear, separate and
accurate records, accounts and working papers with respect to RLS Customer
Equipment Net Revenue, RLS Maintenance Net Revenue, and RLS Customer Services
Net Revenue and calculation of Royalty Interests for at least four (4) years
after the termination of the calendar year to which they relate. Tadiran shall
use the same accounting methods as it uses for its own financial statements, for
so long as Tadiran is listed on the New York Stock Exchange. If and when Tadiran
ceases to be listed on the New York Stock Exchange, then it shall use accounting
principles generally accepted in Israel ("Israeli GAAP") for all records and
accounts required under this License Agreement. Tadiran shall engage an
independent accountant to conduct an annual audit of such records and accounts.
In addition, upon two (2) days' notice to Tadiran, PacTel Teletrac or its agent
shall have the right to examine during normal business hours all records and
accounts relating to its Royalty Interests and Tadiran's performance under this
License Agreement, including, but not limited to, any auditors' work records.
Prompt adjustment shall be made by the proper party to compensate for any errors
or omissions disclosed by any such examination. If a special examination or
special audit requested by PacTel Teletrac discloses an under calculation in
excess of five percent (5%) of the amount payable to PacTel Teletrac, then
Tadiran shall bear the cost of such examination, and shall promptly correct the
calculation of amounts payable and pay any underpaid amount, plus all late
payment charges due and owing. If such an examination or audit discloses an
overpayment to PacTel Teletrac, then PacTel Teletrac shall


                                       8


promptly repay to Tadiran the overpaid amount. Disagreements about accounting
matters shall be resolved as set forth in Section 19.4 below.

4.3 Reports, Forecasts and Payments.

4.3.1 Reports. Commencing on the date that Royalty Interests first begin to
accrue, Tadiran shall provide to PacTel Teletrac within thirty (30) days after
the end of each calendar quarter ending on March 31, June 30, September 30 and
December 31, financial information for the quarter that just ended and
year-to-date financial information (in accordance with the accounting
requirements set forth in Section 4.2 above), together with all working papers
used to compile such statements, that show the amount of and the basis for the
calculation of the RLS Customer Equipment Net Revenue, RLS Maintenance Net
Revenue, RLS Customer Services Net Revenue, and Royalty Interests and the number
of activated Location Units and RLS Customers. All such information and working
papers shall be in English and shall be accompanied by a letter from the
independent accountant that Tadiran has engaged as required under Section 4.2
above confirming that such accountant has reviewed and agrees that the method of
computing the Royalty Interests complies with the requirements of this License
Agreement. Tadiran also shall provide with its quarterly financial statements
its forecast of RLS Customer Equipment Net Revenue, RLS Maintenance Net Revenue
and RLS Customer Services Net Revenue for the next four (4) quarters. Such
statements, working papers and forecasts, together with all fees due to PacTel
Teletrac, shall be sent to PacTel Teletrac at its address specified in
accordance with Section 20.1.2 below.

4.3.2 Payments. All payments of Royalty Interests stall be made quarterly and
audited and adjusted annually. The audit shall be conducted by Tadiran's
independent accountant as set forth in Section 4.2 above. All payments shall be
due and payable thirty (30) days after the end of each calendar quarter in U.S.
dollars and any conversion to U.S. dollars shall be made as often as Tadiran
makes such conversions for its own purposes and, in all cases, at least on the
last day, Monday through Friday, excluding Bank of Israel holidays, before the
payment is due, at the Representative Rate of Exchange determined by the Bank of
Israel. Payments of Royalty Interests shall be subject to deduction for Israeli
withholding taxes that apply to payments from Tadiran to PacTel Teletrac.
Tadiran shall cooperate with PacTel Teletrac in providing documentation that
will assist PacTel Teletrac to obtain tax credits with respect to such
withholding. If for any payment period the RLS Equipment Net Revenue is a
negative amount because the allowable cost deductions exceed the invoiced
amounts, then Tadiran shall be entitled to carry forward and deduct such
negative amount (the "Equipment Loss Carry Forward") from future RLS Equipment
Net Revenues. No amount shall be due with respect to the Equipment Royalty
Interest until RLS Equipment Net Revenues exceed the cumulative Equipment Loss
Carry Forward.

4.3.3 Late Payments. Late payments of Royalty Interests or of any other payments
due under this License Agreement shall be subject to a late payment charge
calculated at an annual rate of two percent (2%) over the LIBOR rate during
delinquency. If the amount of such charge exceeds the maximum charge permitted
by law, such charge shall be reduced to such maximum.

4.4 Circumstances for Reduction of Royalty Interest. If seven (7) years after
the RLS Commercial Operation Date, the Parties determine that the Radio Location
System in the


                                       9


Territory requires system level technology that is not available from PacTel
Teletrac in order to be able to compete in the radio location business in the
Territory, then the Parties will meet to discuss in good faith a reduction in
PacTel Teletrac's Royalty Interests to reflect the value and expense of such new
technology. If the Parties are unable to agree on an adjustment to PacTel
Teletrac's Royalty Interests, the matter shall be referred to arbitration
pursuant to Section 19.2 below. In no event shall PacTel Teletrac's Royalty
Interests be reduced to an amount that is less than twenty-five percent (25%) of
the Royalty Interests that would otherwise apply under Section 4.1.2 above.

5. Term.

This License Agreement shall commence on the Effective Date and shall remain in
effect until it is terminated in accordance with Section 6 below.

6. Termination.

Neither Party shall be in breach of this License Agreement if the License
Agreement is terminated under Sections 6.1, 6.2, 6.3, 6.4, 6.5 or 6.6 below, and
the terminating party shall not be in breach of this License Agreement if it
terminates this License Agreement under Section 6.7 below.

6.1 This License Agreement may be terminated by mutual written agreement.

6.2 If the RLS Commercial Operation Date has not occurred within seven (7) years
after the Effective Date, then at any time upon ninety (90) days' notice after
such seven (7) year date, PacTel Teletrac may elect to terminate this License
Agreement by providing notice of such termination to Tadiran.

6.3 If either Party (a) is dissolved or liquidated or otherwise ceases to
operate as a going concern or ceases to operate a Radio Location System, and (b)
does not have a successor to its rights and obligations under this License
Agreement (the "Non-operational Party"), then, at any time within ninety (90)
days from the date that the other Party (the "Operational Party") learns of the
facts referred to in subsections (a) and (b) above, the Operational Party may
elect to terminate this License Agreement upon thirty (30) days' written notice
to the Non-operational Party. If Tadiran elects to terminate this License
Agreement pursuant to this Section 6.3, then Tadiran also may elect to continue
to operate the Radio Location System in the Territory pursuant to Section 8.1
below.

6.4 Tadiran may elect to cease operation of the Radio Location System at any
time and to terminate this License Agreement provided that it complies with the
provisions of Section 8.2 below.

6.5 PacTel Teletrac may elect to cease its Radio Location System business at any
time and to terminate this License Agreement provided that Tadiran is allowed to
continue to operate its Radio Location System as set forth in Section 8.1 and
that PacTel Teletrac delivers source code to Tadiran pursuant to the agreement
referred to in Section 14.3 below.

                                       10


6.6 If either Party files or is the subject of an application or petition or
order in bankruptcy, seeks or suffers the appointment of a receiver or trustee,
or otherwise seeks, submits to or is made subject to any other debtor's relief
law or procedure (a "Party's Insolvency"), then the other Party may terminate
this License Agreement immediately upon notice in writing, provided, however,
that neither Party may terminate this License Agreement solely because of a
Party's Insolvency if the insolvent Party is continuing to perform all of its
obligations under this License Agreement, which shall include, in the case of
Tadiran, timely payment of all amounts due with respect to PacTel Teletrac's
Royalty Interests.

6.7  Either Party may terminate this License Agreement by written notice to the
defaulting Party if any of the following occurs and the defaulting Party has
received written notice of the default and has failed to cure the default during
the cure period specified below:

6.7.1 A Party's failure to timely make any payment as required by this License
Agreement and failure to cure such default within ninety (90) days of its
receipt of written notice of such default during the first two such defaults, or
within thirty (30) days of its receipt of written notice of any late payment
default after the first two events of late payment;

6.7.2 A Party's breach of one or more of its material obligations under this
License Agreement, and the breaching Party's failure to cure such breach within
ninety (90) days of its receipt of written notice of such breach; or

6.7.3 An attempt to sell, transfer or assign a Party's rights or delegate its
duties under this License Agreement in violation of Section 20.5 of this License
Agreement, and failure to cure such default within ninety (90) days of the
defaulting Party's receipt of written notice of such default.

7. Restrictions on Business Activities.

7.1 Except as specifically set forth in Sections 8.1 and 10.2 of this License
Agreement with respect to Tadiran's ability to operate a Radio Location System
in the Territory after termination of this License Agreement, during the term of
this License Agreement and for a period equal to the earlier of (a) five (5)
years after termination of this License Agreement, or (b) the maximum period
allowed by law, neither Tadiran nor any entities that Tadiran controls or has
the ability to control:

7.1.1 Shall construct or operate or invest in any land based radio location
service designed to service the mass consumer or commercial market anywhere in
the world, other than the Radio Location System in the Territory. For purposes
of this Section 7, radio location service shall mean any service which, within a
defined geographic region, a) uses time of arrival radio measurements to locate
an object and b) has been designed primarily for the purpose of determining an
object's location. For purposes of clarification of this Section 7.1.1, PacTel
Teletrac acknowledges that Tadiran and the entities that Tadiran controls or has
the ability to control may in the future develop, operate or acquire an interest
in businesses that may as an incidental service provide radio location service
offerings, such as personal communications networks, cellular radio services,
paging and video transmission services, and that such activities will not be a
violation of the provisions of this Section 7.

                                       11


7.1.2 Shall operate, invest in or acquire a direct or indirect ownership
interest in any company that Tadiran controls or has or will have the ability to
control and that operates a business that competes or will compete with the
radio location service portion of the Radio Location System operated by Tadiran
in the Territory.

7.2 PacTel Teletrac acknowledges that Tadiran and the entities that Tadiran
controls or has the ability to control:

7.2.1 Sell GPS systems;

7.2.2 Manufacture and sell a pilot rescue system and other military equipment
and systems that are used to locate animate and inanimate objects;

7.2.3 Manufacture, sell and operate automatic identification devices and smart
cards;

and that these businesses do not violate the provisions of Section 7.1.2.

8. Effect of Termination or Cancellation.

8.1. Circumstances Where Operations Continue--Continued Rights. If, as set forth
in Sections 6.3 or 10.2, Tadiran elects to terminate this License Agreement, or
as set forth in Section 6.5, PacTel Teletrac elects to terminate this License
Agreement, and Tadiran elects to continue to operate the Radio Location System,
then, solely for the purpose of such operations in the Territory, Tadiran may
continue to use the RLS Licensed Software and RLS Licensed Technical Information
and may also request source code for the RLS Licensed Software pursuant to the
agreement referred to in Section 14.3 below.

8.2 Circumstances Where Operations End--Return of Materials and Non-Compete. In
all cases of termination or cancellation of this License Agreement (other than
where Tadiran elects to terminate this License Agreement under Sections 6.3 or
10.2, or PacTel Teletrac elects to terminate this License Agreement under
Section 6.5, and Tadiran elects to continue operation of the Radio Location
System in the Territory pursuant to Section 8.1 above), within one hundred
eighty (180) days after termination or cancellation of this License Agreement,
Tadiran shall cease all use of RLS Licensed Software and RLS Licensed Technical
Information. In addition, Tadiran shall, at PacTel Teletrac's request, return to
PacTel Teletrac, or to PacTel Teletrac's designee, all RLS Licensed Technical
Information, RLS Licensed Software, and all other data, software, warranty and
maintenance information, and other materials related to Radio Location Systems
other than Tadiran Location Units and Tadiran Basestations, and shall
permanently erase, including low-level re-format of fixed disk storage devices,
and remove from all computer, electronic or other storage devices in its
possession or under its control, or otherwise destroy, all images, copies or
documents that incorporate the RLS Licensed Software or RLS Licensed Technical
Information, or both. Notwithstanding anything to the contrary in this License
Agreement, Tadiran shall not be required to return RLS Customer Equipment that
Tadiran has provided to RLS Customers, or executable format RLS Customer
Workstation Licensed Software that Tadiran has licensed to third parties, in
accordance with the terms and conditions of this License Agreement.

                                       12


8.3 No Damages. Neither Tadiran nor PacTel Teletrac shall, by reason of the
termination or cancellation of this License Agreement in accordance with the
terms of this License Agreement, be liable to the other for compensation,
reimbursement or any damages, either actual, consequential, incidental, special
or punitive, arising out of such termination or cancellation, including, but not
limited to, the loss of prospective profits on anticipated sales, or on account
of expenditures, investments, leases or commitments in connection with the
business or goodwill of PacTel Teletrac or Tadiran or otherwise anticipated
under this License Agreement.

8.4 Payment Obligations. Termination or cancellation of this License Agreement
shall not relieve Tadiran of any obligation to pay PacTel Teletrac any amounts
due and owing to PacTel Teletrac.

8.5 Survival. After the termination or cancellation of this License Agreement by
its terms, operation of law or otherwise, all rights, privileges and obligations
arising from this License Agreement shall cease to exist; provided, however, the
confidentiality requirement in Section 15.5, the obligations and limitations in
Sections 3, 4, 7, 8, 9.3, 9.5, 10, 11, 12.3, 13, 15.7, 16, 18, 19 and 20 and
such other obligations which, from the context hereof, are intended to survive
the termination of this Agreement shall remain.

9. RLS Licensed Software Upgrades and RLS Licensed Technical Information
Modifications.

9.1 RLS Licensed Software Upgrades. After delivery of the RLS Current Version
Software as set forth in Section 14.2.1 below, then within thirty (30) days of
release to at least fifty percent (50%) of PacTel Teletrac's Radio Location
Systems operating in the United States, PacTel Teletrac will deliver to Tadiran,
at no charge, copies in executable format of all RLS Licensed Software Upgrades
created during the term of this License Agreement. PacTel Teletrac shall have no
obligation to create RLS Licensed Software Upgrades or to provide upgrades
requested by Tadiran. PacTel Teletrac shall deliver all such Upgrades to
Tadiran's Contract Technical Coordinator, together with a list of the Upgrades
that PacTel Teletrac is providing.

9.2 RLS Licensed Technical Information Modifications Developed by PacTel
Teletrac. After delivery of the RLS Licensed Technical Information, as set forth
in Section 14.1 below, then within thirty (30) days of release to at least fifty
percent (50%) of PacTel Teletrac's Radio Location Systems operating in the
United States, PacTel Teletrac will deliver to Tadiran, at no charge, copies of
any substantial RLS Licensed Technical Information Modifications during the term
of this License Agreement. PacTel Teletrac shall have no obligation to make RLS
Licensed Technical Information Modifications or to design or implement RLS
Licensed Technical Information Modifications requested by Tadiran. PacTel
Teletrac shall deliver all such Modifications to Tadiran's Contract Technical
Coordinator, together with a list of the Modifications that PacTel Teletrac is
providing. If PacTel Teletrac develops equipment related to the Radio Location
System, PacTel Teletrac shall not be required to disclose to Tadiran the
engineering and manufacturing specifications for the equipment, but PacTel
Teletrac shall notify and provide to the Tadiran Technical Coordinator the
performance specification and Radio Location System interface information for
such equipment, and shall offer to Tadiran the opportunity to purchase such
equipment at a reasonable price.

9.3 Upgrades and Modifications to the Radio Location System Developed by Tadiran

                                       13


9.3.1 RLS Licensed Customer Workstation Software.

(a) Authority to Make Upgrades. Tadiran may make and will notify the PacTel
Teletrac Technical Coordinator of upgrades, improvements, additions,
enhancements or modifications to RLS Licensed Customer Workstation Software
("Tadiran Workstation Software Upgrades"). If such Tadiran Workstation Software
Upgrades consist of a complete re-write of the RLS Licensed Customer Workstation
Software as delivered by PacTel Teletrac to Tadiran, then such Upgrades shall be
compatible with the Microsoft Windows operating system. For all other Tadiran
Workstation Software Upgrades Tadiran may use either the Microsoft Windows
operating system or the language and operating system used for the Software as
delivered by PacTel Teletrac to Tadiran. Tadiran acknowledges and assumes all
risks that Tadiran Workstation Software Upgrades may affect the functionality or
operation of the RLS Licensed Software or Radio Location System, or both.

(b) Ownership and License of Upgrades. Tadiran will be the sole owner of Tadiran
Workstation Software Upgrades.

(i) Derivative Upgrades. As to those Tadiran Workstation Software Upgrades that
are derived from or include any part the RLS Workstation Software or RLS
Licensed Technical Information, Tadiran hereby grants to PacTel Teletrac a
world-wide, exclusive (except in the Territory, where such license shall be
nonexclusive) perpetual, royalty free, license to use, market, distribute,
sublicense, reproduce and have reproduced such Tadiran Workstation Software
Upgrades solely for purposes of land-based radio location systems that locate
animate or inanimate objects, including people, and for ancillary activities
such as data messaging or voice messages. Such licenses shall not include any
portion of the Tadiran Workstation Software Upgrades that is owned by a third
party other than any entity that Tadiran controls or has the ability to control,
and that Tadiran is not authorized to disclose. Tadiran shall have no right,
either during or after the term of this License Agreement, to sell or disclose
to third parties, or make any use of other than as part of the Radio Location
System in the Territory, Tadiran Workstation Software Upgrades that are derived
from or include any part of the RLS Licensed Software or RLS Licensed Technical
Information. Tadiran shall have no obligation to deliver Tadiran Workstation
Software Upgrades to PacTel Teletrac until test versions of such Upgrades are
available.

(ii) Stand-alone Upgrades. As to those Tadiran Workstation Software Upgrades
that are neither derived from nor include any part of the RLS Workstation
Software or RLS Licensed Technical Information, Tadiran hereby grants to PacTel
Teletrac a world-wide, nonexclusive, perpetual, royalty free, license to use,
market, distribute, sublicense, reproduce and have reproduced such Tadiran
Workstation Software Upgrades solely for purposes of land-based radio location
systems that locate animate or inanimate objects, including people, and for
ancillary activities such as data messaging or voice messages. Such licenses
shall not include any portion of the Tadiran Workstation Software Upgrades that
is owned by a third party other than any entity that Tadiran controls or has the
ability to control, and that Tadiran is not authorized to disclose. PacTel
Teletrac shall have no right to sell or disclose stand-alone Tadiran Workstation
Software Upgrades as a product independent from its provision of a radio
location service. Other than the limitations on business activities set forth in
Section 7 above, there shall be no restrictions on Tadiran's rights with respect
to Tadiran Workstation Software Upgrades that do not include and


                                       14


are not derived from any of the RLS Licensed Software or RLS Licensed Technical
Information. Tadiran shall have no obligation to deliver Tadiran Workstation
Software Upgrades to PacTel Teletrac until test versions of such Upgrades are
available.

9.3.2 RLS Licensed Software Other Than RLS Licensed Customer Workstation
Software.

(a) Authority to Make Upgrades. Tadiran may make and will notify the PacTel
Teletrac Technical Coordinator of upgrades, improvements, additions,
enhancements or modifications to RLS Licensed Software other than the RLS
Licensed Customer Workstation Software ("Tadiran Executable Software Upgrades").
Tadiran acknowledges and assumes all risks that Tadiran Executable Software
Upgrades may affect the functionality or operation of the RLS Licensed Software
or Radio Location System, or both.

(b) Ownership and License of Upgrades. Tadiran will be the sole owner of Tadiran
Executable Software Upgrades.

(i) Derivative Upgrades. As to those Tadiran Executable Software Upgrades that
are derived from or include any part the RLS Licensed Software or RLS. Licensed
Technical Information, Tadiran hereby grants to PacTel Teletrac a world-wide,
exclusive (except in the Territory, where such license shall be nonexclusive)
perpetual, royalty free, license to use, market, distribute, sublicense,
reproduce and have reproduced such Tadiran Executable Software Upgrades solely
for purposes of land-based radio location systems that locate animate or
inanimate objects, including people, and for ancillary such as data messaging or
voice messages. Such licenses shall not include any portion of the Tadiran
Executable Software Upgrades that is owned by a third party other than any
entity that Tadiran controls or has the ability to control, and that Tadiran is
not authorized to disclose. Tadiran shall have no right, either during or after
the term of this License Agreement, to sell or disclose to third parties, or
make any use of other than as part of the Radio Location System in the
Territory, Tadiran Executable Software Upgrades that are derived from or include
any part of the RLS Licensed Software. Tadiran shall have no obligation to
deliver Tadiran Executable Software Upgrades to PacTel Teletrac until test
versions of such Upgrades are available.

(ii) Stand-alone Upgrades. As to those Tadiran Executable Software Upgrades that
are neither derived from nor include any part of the RLS Licensed Software or
RLS Licensed Technical Information, Tadiran hereby grants to PacTel Teletrac a
world-wide, non-exclusive, perpetual royalty free, license to use, market,
distribute, sublicense, reproduce and have reproduced such Tadiran Executable
Software Upgrades solely for purposes of land-based radio location systems that
locate animate or inanimate objects, including people, and for ancillary
activities such as data messaging or voice messages. Such licenses shall not
include any portion of the Tadiran Executable Software Upgrades that is owned by
a third party other than any entity that Tadiran controls or has the ability to
control, and that Tadiran is not authorized to disclose. PacTel Teletrac shall
have no right to sell or disclose stand-alone Tadiran Executable Software
Upgrades as a product independent from its provision of a radio location
service. Other than the limitations on business activities set forth in Section
7 above, there shall be no restrictions on Tadiran's rights with respect to
Tadiran Executable Software Upgrades that do not include and are not derived
from any of the RLS Licensed Software or RLS Licensed Technical Information.



                                       15


Tadiran shall have no obligation to deliver Tadiran Executable Software Upgrades
to PacTel Teletrac until test versions of such Upgrades are available.

9.3.3 RLS Licensed Technical Information.

(a) Authority to Make Modifications. Tadiran may make and will notify the PacTel
Teletrac Technical Coordinator of modification, upgrades, additions,
enhancements and improvements to the RLS Licensed Technical Information
("Tadiran Technical Modifications"). Tadiran acknowledges and assumes all risks
that Tadiran Technical Modifications may affect the functionality or operation
of the RLS Licensed Software or Radio Location System, or both.

(b) Ownership and License of Tadiran Technical Modifications. Tadiran will be
the sole owner of Tadiran Technical Modifications.

(i) Derivative Upgrades. As to those Tadiran Technical Modifications that are
derived from or include any part of the RLS Licensed Technical Information,
Tadiran hereby grants to PacTel Teletrac a world-wide, exclusive (except in the
Territory, where such license shall be nonexclusive), perpetual, royalty free,
license to use, market, distribute, sublicense, reproduce and have reproduced
such Tadiran Technical Modifications solely for purposes of land-based radio
location systems that locate animate or inanimate objects, including people, and
for ancillary activities such as data messaging or voice messages. Such licenses
shall not include any portion of the Tadiran Technical Modifications that is
owned by a third party other than any entity that Tadiran controls or has the
ability to control, and that Tadiran is not authorized to disclose. Tadiran
shall have no right, either during or after the term of this License Agreement
to sell or disclose to third parties, or make any use of other than as part of
the Radio Location System in the Territory, Tadiran Technical Modifications that
are derived from or include any part of the RLS Licensed Technical Information.
Tadiran shall have no obligation to deliver Tadiran Technical Modifications to
PacTel Teletrac until test versions of such Modifications are available.

(ii) Stand-alone Upgrades. As to those Tadiran Technical Modifications that are
neither derived from nor include any part of the RLS Licensed Technical
Information, Tadiran hereby grants to PacTel Teletrac a world-wide,
nonexclusive, perpetual, royalty free, license to use, market, distribute,
sublicense, reproduce and have reproduced such Tadiran Technical Modifications
solely for purposes of land-based radio location systems that locate animate or
inanimate objects, including people, and for ancillary activities such as data
messaging or voice messages. Such licenses shall not include any portion of the
Tadiran Technical Modifications that is owned by a third party other than any
entity that Tadiran controls or has the ability to control, and that Tadiran is
not authorized to disclose. In addition, if Tadiran develops equipment related
to the Radio Location System, other than as set forth in Section 9.3.4, Tadiran
shall not be required to disclose to PacTel Teletrac the engineering and
manufacturing specifications for the equipment, but Tadiran shall notify and
provide to the PacTel Teletrac Technical Coordinator the performance
specification and Radio Location System interface information for such
equipment, and shall offer to PacTel Teletrac the opportunity to purchase such
equipment at a reasonable price. PacTel Teletrac shall have no right to sell or
disclose stand-alone Tadiran Technical Modifications as a product independent
from its provision of a radio location service. Other than the limitations on
competition set forth in Section 7 above, there shall be no restrictions on



                                       16


Tadiran's rights with respect to Tadiran Technical Modifications that do not
include and are not derived from any of the RLS Licensed Technical Information.
Tadiran shall have no obligation to deliver Tadiran Technical Modifications to
PacTel Teletrac until test versions of such Modifications are available.

9.3.4 Tadiran Basestations and Location Units.

(a) Authority to Make Modifications. Tadiran and any entities that Tadiran owns
or controls may make and will notify the PacTel Teletrac Technical Coordinator
of modifications, upgrades, additions, enhancements and improvements to the
Tadiran Basestations and Location Units ("Tadiran Basestation Modifications" and
"Location Unit Modifications"). This Agreement does not impose any obligations
on Tadiran to make such Modifications. Tadiran acknowledges and assumes all
risks that Tadiran Basestation Modifications and Tadiran Location Unit
Modifications may affect the functionality or operation of the RLS Licensed
Software Radio Location System, or both.

(b) Sale of Basestation and Location Unit Modifications. Provided that Tadiran
is engaged in, or controls or has the ability to control an entity that is
engaged in, the business of manufacturing Tadiran Basestations or Location
Unit,s then Tadiran shall offer, or cause to be offered, for sale to PacTel
Teletrac each Tadiran Basestation Modification and Location Unit Modification
pursuant to the applicable Tadiran Basestation Agreement or Tadiran Location
Unit Agreement in effect as of the time of such offer provided, however, that in
no case shall the price be greater than the lowest price charged to other radio
location service providers for such modified Tadiran Basestation or Location
Unit.

9.4 PacTel Teletrac Obligations With Respect to Tadiran Upgrades and Tadiran
Modifications. Tadiran's implementation of Upgrades and Modifications authorized
under Section 9.3 will not relieve PacTel Teletrac of its obligations under this
License Agreement. However, the Parties acknowledge and agree that PacTel
Teletrac will have no obligation to provide RLS Licensed Software or RLS
Licensed Technical Information or to modify the training, support and warranty
services that it is obligated to provide under this License Agreement, to make
them compatible with the Tadiran Workstation Software Upgrades, Tadiran
Executable Software Upgrades, Tadiran Technical Modifications or Tadiran
Basestation Modifications or Location Unit Modifications.

9.5 Delivery and Protection of Tadiran Upgrades and Tadiran Modifications. As to
all Tadiran Workstation Software Upgrades, Tadiran Executable Software Upgrades
and Tadiran Technical Modifications that Tadiran delivers to PacTel Teletrac
under this Agreement, Tadiran will deliver to PacTel Teletrac the software
source code and information concerning the source and authorship of delivered
material and inventions. In addition, Tadiran will cooperate with PacTel
Teletrac, at PacTel Teletrac's expense, in taking such actions as PacTel
Teletrac reasonably requests for the purposes of filing, any where in the world,
patent, copyright and other intellectual property registration applications with
respect to the Tadiran Workstation Software Upgrades, Tadiran Executable
Software Upgrades and Tadiran Technical Modifications. Such applications, shall,
where applicable, list Tadiran as the author, owner or inventor. PacTel Teletrac
shall have the right, at its expense, but, except as set forth in Section 10
below, no obligation, to bring, defend and maintain any appropriate suit, action
or proceeding involving


                                       17


the infringement or misappropriation of the Tadiran Workstation Software
Upgrades, Tadiran Executable Software Upgrades or Tadiran Technical
Modifications. If PacTel Teletrac finds it necessary to join Tadiran in such
suit, action or proceeding, Tadiran shall execute all papers and perform such
other acts as may reasonably be required and may, at its option and expense, be
represented by counsel of its choice. Should PacTel Teletrac lack standing to
bring any such suit, action or proceeding, then Tadiran, at the request of
PacTel Teletrac, shall do so, or, at PacTel Teletrac's request, Tadiran shall
assign such rights and interest to PacTel Teletrac as will enable PacTel
Teletrac to gain such standing.

10. PacTel Teletrac Indemnity.

10.1 Subject to Section 13 below, PacTel Teletrac will defend, indemnify and
hold Tadiran harmless from and against any and all claims, demands, liabilities,
actions, suits or proceedings, and PacTel Teletrac agrees to undertake the cost
of defending the same, including reasonable attorneys' fees, asserting that the
RLS Licensed Technical Information, RLS Licensed Software, RLS Licensed Software
Upgrades, or RLS Licensed Technical Information Modifications was created in
violation of the protected trade secret or proprietary right or interest of
another or infringes a patent within the Territory, or arising out of PacTel
Teletrac's use of the Tadiran Workstation Software Upgrades, Tadiran Executable
Software Upgrades or Tadiran Technical Modifications, including a claim of
infringement with respect to such Tadiran Upgrades and Modifications, and will
pay resulting costs and damages finally awarded, provided that:

(a) Tadiran promptly notifies PacTel Teletrac of the claim;

(b) Tadiran cooperates with PacTel Teletrac in the defense, provided that PacTel
Teletrac reimburses Tadiran for its reasonable out-of-pocket expenses (including
reasonable outside counsel legal fees) associated with such cooperation;

(c) PacTel Teletrac has sole control of the defense and all related settlement
negotiations, using counsel satisfactory to Tadiran; and

(d) If the claim is an infringement claim alleging infringement by Tadiran
Workstation Software Upgrades, Tadiran Executable Software Upgrades or Tadiran
Technical Modifications, Tadiran has performed its obligations under Section 9.5
above.

10.2 If an infringement claim occurs with respect to one or more elements of the
RLS Licensed Technical Information, RLS Licensed Software, RLS Licensed Software
Upgrades or RLS Licensed Technical Information Modifications, or in PacTel
Teletrac's opinion is likely to occur, PacTel Teletrac will use reasonable
commercial efforts, at its option and expense, either to procure for Tadiran the
right to continue to use, maintain and provide support for the Radio Location
System, or to replace or modify the alleged infringing element so that such
element becomes noninfringing, provided that such replacement or modification
does not materially affect performance of the Radio Location System. If PacTel
Teletrac has spent or anticipates that it will be required to spend more than
U.S. $500,000 for such efforts, then PacTel Teletrac may give Tadiran a ninety
(90) day option to pursue such efforts on its own and at its own expense. If
Tadiran elects to pursue such efforts on its own, then Tadiran may elect either
to terminate this License Agreement, in which case it will have the rights set
forth in Section 8.1


                                       18


above, or to keep this License Agreement in effect, in which case Tadiran may
deduct from amounts due on PacTel Teletrac's Royalty Interests, the reasonable
expenses Tadiran has incurred in obtaining non-infringing elements. If Tadiran
has not elected to pursue such efforts on its own within such ninety (90) day
option period, then Tadiran must return to PacTel Teletrac and cease all use of
the infringing elements, in which case Tadiran may deduct from amounts due on
PacTel Teletrac's Royalty Interests, the reasonable expenses Tadiran incurs in
obtaining the non-infringing elements. If the use of any RLS Licensed Software
or RLS Licensed Technical Information is enjoined and the foregoing remedies
cannot reasonably be accomplished, or if Tadiran has elected to terminate this
License Agreement but fails to procure the right to use the infringing element
or to replace or modify the infringing element so that it becomes
non-infringing, then PacTel Teletrac may require the return of the infringing
RLS Licensed Software or RLS Licensed Technical Information. Tadiran's right to
use such RLS Licensed Software or RLS Licensed Technical Information shall
thereupon terminate.

10.3 PacTel Teletrac shall have no obligations under this License Agreement, or
otherwise, to defend Tadiran or pay costs, damages or attorneys' fees for any
claim, demand, liability, action, suit or proceeding based upon use of the Radio
Location System, or any part thereof, including but not limited to RLS
Components, RLS Licensed Software and RLS Licensed Technical Information, if
such claim, demand, liability, action, suit or proceeding: (a) could have been
avoided by Tadiran's use of the current, unaltered release of RLS Licensed
Software or RLS Licensed Technical Information; or (b) resulted, in whole or in
part, from a modification to the Radio Location System made or owned by Tadiran
or by one or more of its affiliates; or (c) resulted, in whole or in part, from
Tadiran's use, sale or modification, enhancement or improvement of Location
Units or Tadiran Basestations, or both; or (d) resulted, in whole or in part,
from Tadiran's combination of the RLS Licensed Software or RLS Licensed
Technical Information with any other software, equipment or technology; or (e)
resulted, in whole or in part, from Tadiran's upgrades, enhancements or
modifications to the RLS Licensed Customer Workstation Software or to any other
RLS Licensed Software or RLS Licensed Technical Information; or (f) resulted, in
whole or in part, from Tadiran's breach of its obligations under this License
Agreement.

10.4 The foregoing states the entire obligation of PacTel Teletrac, and the sole
remedies of Tadiran, with respect to infringement of patents, copyrights, trade
secrets and other proprietary rights or interests.

11. Tadiran Indemnity.

Tadiran shall defend, indemnify and hold PacTel Teletrac and each entity that
controls or has the ability to control PacTel Teletrac, and their respective
successors and assigns, directors, officers, employees and agents harmless from
and against any and all claims, demands, liabilities, actions, suits or
proceedings asserted or claimed by any third party: (a) arising out of or
relating to Tadiran's marketing, sale, use, design, construction, manufacture,
maintenance, repair, modification, upgrade, enhancement, improvement or support
of the Radio Location System, or any part thereof, including Tadiran Workstation
Software Upgrades, Tadiran Executable Software Upgrades or Technical
Modifications, Location Units, or Tadiran Basestations, or any combination
thereof, to the extent that such claim arises in the Territory; or (b) arising
out of or relating to Tadiran's performance under or breach of this License
Agreement, or both, provided


                                       19


that any such claims, demands, liabilities, actions, suits or proceedings are
not solely the result of an infringement as to which PacTel Teletrac shall
indemnify Tadiran under Section 10 above. Tadiran agrees to undertake the cost
of defending the above, including reasonable attorneys' fees and to pay all
resulting costs and damages finally awarded therein. Tadiran shall be given
timely notice of and shall have the option to undertake and conduct the defense
of any such claim, demand, liability, action, suit or proceeding, using counsel
satisfactory to PacTel Teletrac.

12. PacTel Teletrac Representations, Limited Warranty and Disclaimer.

12.1 Exhibits. PacTel Teletrac represents that to the best of its knowledge the
RLS Licensed Software listed on Exhibit A and the RLS Licensed Technical
Information listed on Exhibit B to this License Agreement is all of the RLS
Licensed Software and all of the tangible RLS Licensed Technical Information
that has been released to at least fifty percent (50%) of PacTel Teletrac's U.S.
Radio Location Systems as of the date of this License Agreement. If PacTel
Teletrac has omitted any such Software or Information, upon discovery of such
omissions, it will amend Exhibits A and B and deliver such Software or
Information to Tadiran. PacTel Teletrac further represents that, as of the date
of this License Agreement, it has all licenses required under the U.S. Export
Administration Act for purposes of exporting the RLS Licensed Software and RLS
Licensed Technical Information to the Territory.

12.2 Final Version RLS Licensed Warranty.

12.2.1 Performance Warranty. PacTel Teletrac warrants that during the Warranty
Period, as defined below, the Final Version RLS Licensed Software delivered
under Section 14.2.2 below, will enable PacTel Teletrac to operate 103 Tadiran
Basestations from a single RLS Network Control Center in PacTel Teletrac's U.S.
Radio Location Systems (the "Performance Warranty"). PacTel Teletrac will be
responsible for conducting testing in the United States to determine compliance
with the Performance Warranty.

12.2.2 Warranty Period. The Warranty Period will commence on the later of: (a)
the RLS Commercial Operation Date, or (b) the date when Tadiran has 65 Tadiran
Basestations operating as part of the Radio Location System from a single RLS
Network Control Center in the Territory and 1000 Location Units activated in the
Territory (the "Warranty Commencement Date") and will terminate on the date that
is the sooner of: (a) twelve (12) months after the Warranty Commencement Date,
or (b) twenty-four (24) months after the RLS Commercial Operation Date.

12.2.3 Limitations on Performance Warranty. PacTel Teletrac shall have no
responsibility for the design, construction, operation or maintenance of the
Radio Location System. Tadiran acknowledges that the current version of the RLS
Licensed Software is designed to operate no more than 64 Tadiran Basestations
from a single RLS Network Control Center and further acknowledges that the Final
Version RLS Licensed Software will not be error-free and that the Parties will
need to work together prior to and during the one-year period after delivery of
the Final Version RLS Licensed Software to test and de-bug such Software at
PacTel Teletrac's principal place of business in Los Angeles. PacTel Teletrac
makes no warranties or representations as to the number of Tadiran Basestations
that will be necessary to operate a Radio Location System in the Territory, as
to the modifications necessary for the Tadiran Basestations, Location Units or
paging transmitters, or as to any RLS Licensed Software


                                       20


Upgrades, whether provided before, during or after the Warranty Period. If the
Final Version RLS Licensed Software does not operate in the United States in
accordance with the Performance Warranty during the Warranty Period (a "Material
Defect"), then PacTel Teletrac will repair or replace, at PacTel Teletrac's
option, such defective Final Version RLS Licensed Software without charge. Such
repair or replacement is Tadiran's sole remedy with respect to such Material
Defect(s). If the Final Version RLS Licensed Software has defects, errors or
bugs other than Material Defects, then PacTel Teletrac's sole obligation will be
to provide corrections or "bug fixes" to Tadiran when and if such corrections or
"bug fixes" become available for PacTel Teletrac's U.S. Radio Location Systems.
Such corrections or "bug fixes" will be Tadiran's sole remedy with respect to
such defects, errors or bugs. There shall be no hourly charge for support
provided under Sections 14.4.2 or 14.4.3 where such support is required as part
of the remedy available under the Performance Warranty.

12.3 EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 12, PACTEL TELETRAC MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE RADIO LOCATION SYSTEM OR ANY
PART THEREOF, INCLUDING, BUT NOT LIMITED TO, THE RLS COMPONENTS, RLS LICENSED
SOFTWARE AND RLS LICENSED TECHNICAL INFORMATION. BY WAY OF EXAMPLE, BUT NOT OF
LIMITATION, PACTEL TELETRAC MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR WARRANTY THAT THE RADIO LOCATION SYSTEM, OR ANY PART
THEREOF, IS ERROR-FREE OR THAT ITS USE WILL BE UNINTERRUPTED, OR THAT ITS SALE
OR USE WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADE SECRET, TRADEMARK, SERVICE
MARK OR OTHER PROPRIETARY RIGHT OR THAT THE RADIO LOCATION SYSTEM WILL BE A
PROFITABLE ENTERPRISE FOR TADIRAN. Tadiran acknowledges that it has made an
independent investigation of the Radio Location System business that it will
conduct under this License Agreement. PacTel Teletrac and each of its affiliates
expressly disclaim the making of, and Tadiran acknowledges that it has not
received or relied upon, any guarantee or representation, express or implied, as
to the feasibility of operating a Radio Location System in the Territory, as to
Tadiran's ability to design, construct, operate or maintain a Radio Location
System in the Territory or as to the costs Tadiran may incur or the revenues it
may receive with respect to a Radio Location System in the Territory. Tadiran
further acknowledges that it has no knowledge of any representations by any
officer, employee, or agent of PacTel Teletrac that are contrary to this
subsection 12.3.

13. Limitation of Liability.

OTHER THAN WITH RESPECT TO THIRD-PARTY DAMAGE CLAIMS FOR WHICH THE PARTIES MAY
BE OBLIGATED TO INDEMNIFY EACH OTHER AS SET FORTH IN SECTIONS 10 AND 11 ABOVE,
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY DAMAGES OR FOR ANY
LOST REVENUES, LOST PROFITS, OR OTHER, INDIRECT, SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES CAUSED, IN WHOLE OR IN PART, BY THE LICENSING,
USE OR SALE OF THE RADIO LOCATION SYSTEM OR ANY PART THEREOF, INCLUDING, BUT NOT
LIMITED TO, RLS LICENSED SOFTWARE AND RLS LICENSED TECHNICAL INFORMATION, OR
OTHERWISE ARISING OUT OF OR RELATING TO THIS LICENSE AGREEMENT. NOTHING IN THIS
SECTION 13 SHALL RELIEVE TADIRAN OF ANY


                                       21


OBLIGATION TO PAY TO PACTEL TELETRAC AMOUNTS DUE AND OWING AS FEES UNDER SECTION
4.1 AND DEVELOPMENT, TRAINING AND SUPPORT CHARGES UNDER SECTIONS 14.2.2 AND
14.4.

14. Obligations and Responsibilities of PacTel Teletrac.

PacTel Teletrac will have the following obligations and responsibilities in
addition to those specified elsewhere in this License Agreement:

14.1 Delivery of RLS Licensed Technical Information. PacTel Teletrac will
deliver the RLS Licensed Technical Information to Tadiran as applicable, during
the training sessions available pursuant to Section 14.4.1(b) below; provided,
however that all deliveries of RLS Licensed Technical Information shall be
subject to PacTel Teletrac's receipt of all necessary export licenses, and any
required consents from third parties with proprietary rights in the RLS Licensed
Technical Information.

14.2 Delivery of RLS Licensed Software. Notwithstanding anything to the contrary
in this License Agreement, all deliveries of RLS Licensed Software shall be
subject to PacTel Teletrac's receipt of all necessary export licenses and all
required consents from third parties with proprietary rights in such Software,
which PacTel Teletrac shall use reasonable efforts to acquire. If there are
delays in obtaining any such licenses or consents, PacTel Teletrac will make
partial deliveries of RLS Licensed Software, in accordance with the terms and
conditions of this License Agreement, to the extent feasible.

14.2.1 Current Version Software. Within thirty (30) days after the Performance
Commencement Date, PacTel Teletrac will deliver the then current version of the
RLS Licensed Software to Tadiran (the "Current Version Software").

14.2.2 Final Version Licensed Software.

(a) Development. Tadiran acknowledges that the current version of the RLS
Licensed Software is designed to enable PacTel Teletrac's United States Radio
Location Systems to operate up to 64 Tadiran Basestations from a single RLS
Network Control Center and uses a separate spectrum frequency range for purposes
of receiving "forward-link" signals from Tadiran Basestations. PacTel Teletrac
will modify the RLS Licensed Software so that it is capable of operating 103,
rather than 64, Tadiran Basestations from a single RLS Network Control Center
located in the United States or as the Parties otherwise may agree in advance of
the Performance Commencement Date (the "Final Version RLS Licensed Software").
The allocation of the costs of such modifications between PacTel Teletrac and
Tadiran will depend on the timing of the modifications. The Parties will share
on an equal basis the costs of all modifications that PacTel Teletrac makes as
of and subsequent to the Performance Commencement Date. Such costs shall include
charges of U.S. $100.00 per person hour for work on such modifications during
the first year of this License Agreement, with adjustments to such rate to be
made annually thereafter in accordance with percentage changes in the U.S. CPI.
Payments shall be due in U.S. dollars within 30 days of receipt of invoice. If
Tadiran requests modifications before the Performance Commencement Date, then
the Parties also will share such costs on an equal basis.

                                       22


(b) Delivery. PacTel Teletrac will deliver the Final Version RLS Licensed
Software to Tadiran upon Tadiran's request, which request shall be no sooner
than two (2) months before the date when at least 65 Tadiran Basestations are in
operation and capable of operating a Radio Location System in the Territory and
at least 1000 Location Units are in operation in the Territory, and upon receipt
of final payment for Tadiran's share of the Final Version RLS Licensed Software
Development Costs.

14.3 RLS Licensed Software Source Code. The Parties agree to complete and
execute, on or before delivery of the Current Version Software, the Escrow
Agreement that is attached as Exhibit C and incorporated by reference in this
License Agreement.

14.4 Training and Support. PacTel Teletrac shall provide training and support to
Tadiran as set forth in sections 14.4.1 and 14.4.2 below. Notwithstanding its
obligation to provide such training and support, PacTel Teletrac shall have no
responsibility or liability for the design, construction, operation or
maintenance of the Radio Location System.

14.4.1 Training. PacTel Teletrac shall provide, at Tadiran's request, the
training courses set forth in section 14.4.1.1 below. The scope and subject
matter to be covered by each training course shall be determined by the mutual
agreement of the parties at least thirty (30) days in advance of the scheduled
date for the training course. The Parties agree that none of the training
courses shall exceed sixty (60) hours in duration, and all training courses
shall be conducted at PacTel Teletrac's principal place of business, or at such
other location within the United States as PacTel Teletrac may specify. PacTel
Teletrac and Tadiran also agree as follows:

14.4.1.1 The training courses available to Tadiran shall be as set forth below.
Training courses may be offered more than once, subject to the parties' mutual
agreement.

(a) General Manager Training Course;

(b) Technical Manager Training Course;

(c) Technician Training Courses;

(d) Master Control Center Operator Training Course;

(e) RLS Customer Support Training Course;

(f) RLS Customer Service Training Course;

(g) Sales Manager Training Course; and

(h) Trainer Training Course.

14.4.1.2 Training shall not begin prior to the Performance Commencement Date.
Tadiran shall provide PacTel Teletrac with at least ninety (90) days advance
notice of a requested date for a training course. If PacTel Teletrac is not able
to provide the training course on such date, then PacTel Teletrac shall so
notify Tadiran and the Parties will cooperate in selecting an alternative


                                       23


date. PacTel Teletrac also may request a delay of not more than thirty (30) days
for the commencement date of any training course.

14.4.1.3 At Tadiran's request, PacTel Teletrac will prepare a nonbinding
estimate of the cost for a particular training course each time it is to be
provided.

14.4.1.4 PacTel Teletrac will bill Tadiran monthly for the costs that PacTel
Teletrac incurs in preparing and providing each training course, each time it is
provided. Such costs shall include all of the out-of-pocket costs and expenses
that PacTel Teletrac incurs in preparing and providing such course, plus a rate
of U.S. $100.00 per person hour for time PacTel Teletrac employees or
consultants spend preparing and providing such course. Such rate shall be
adjusted annually after the first year of this Agreement to reflect percentage
changes in the U.S. CPI. during the preceding year.

14.4.1.5 Tadiran shall be responsible for all travel arrangements, including
obtaining all visas that may be required, and shall pay all travel costs and
expenses, including transportation, meals, lodging and any per diem pay and
other salary and benefits arrangements, for Tadiran's personnel in connection
with the training courses provided under this Section 14.4. As to training
courses provided at PacTel Teletrac facilities, Tadiran acknowledges that its
employees participating in such training are not employees of PacTel Teletrac,
and Tadiran will obtain such insurance coverage as PacTel Teletrac may
reasonably request for such Tadiran employees, including, but not limited to,
Workers' Compensation Insurance. Tadiran shall provide PacTel Teletrac with a
certificate of such insurance that names PacTel Teletrac as an additional
insured.

14.4.2 Telephone Support After the RLS Commercial Operation Date. After the RLS
Commercial Operation Date PacTel Teletrac will provide reasonable telephone
support to Tadiran, provided that PacTel Teletrac shall have no obligation to
provide in excess of 50 hours of telephone support per month to Tadiran during
the first two years after the RLS Commercial Operation Date, or in excess of 25
hours of telephone support per month thereafter. Tadiran shall pay for such
telephone support at a rate of U.S. $100.00 per person hour, with such rate to
be adjusted annually after the first year of this Agreement to reflect
percentage changes in the U.S. CPI during the preceding year. In addition,
Tadiran shall be responsible for placing and paying for all telephone calls made
in connection with telephone support to be provided under this section.

14.4.3 On-Site Support After the RLS Commercial Operation Date. After the RLS
Commercial Operation Date, if the Parties are unable to answer Tadiran's
questions or to resolve problems concerning operation of the Radio Location
System by means of telephone support, then at Tadiran's request, and subject to
the availability of PacTel Teletrac's personnel, PacTel Teletrac will provide
engineers to make on-site visits to the Radio Location System in the Territory,
to consult with Tadiran on matters relating to the design, construction and
operation of such Radio Location System. Tadiran and PacTel Teletrac shall
agree, in advance, on the type and scope of consultation to be provided during,
and the duration of, any such on-site visit. During the first year of this
License Agreement, the hourly rate for such on-site supports shall be $100.00
per person hour, with adjustments to such rate to be made annually thereafter in
accordance with percentage changes in the U.S. CPI. In addition, Tadiran shall
pay all expenses of on-site support, including travel, lodging and meals.

                                       24


14.4.4 Payments for Training and Support. PacTel Teletrac will bill Tadiran
monthly for training and support provided under this section 14.4, and Tadiran's
payments will be due and payable in U.S. dollars within thirty (30) days of
receipt of the invoice. Solely for budgetary purposes, PacTel Teletrac
reasonably believes that the cost for all of the training courses will be
approximately U.S. $250,000. The actual cost of training may be higher or lower
than $250,000, and Tadiran acknowledges that the actual cost will be highly
dependent upon the timing of Tadiran's request and the scope and subject matter
to be covered by each training course that Tadiran requests from PacTel
Teletrac.

15. Obligations and Responsibilities of Tadiran

Tadiran will have the following obligations and responsibilities in addition to
those specified elsewhere in this License Agreement:

15.1 Spectrum License. The Spectrum License shall be held by Tadiran, and
Tadiran will use reasonable efforts to expand the Spectrum License to obtain
approval for paging, data messaging and other activities via a land-based radio
location system.

15.2 Reasonable Diligence. Tadiran shall use reasonable diligence, at its own
expense, to build, operate and maintain a Radio Location System in the Territory
and to promote, market, sell and support RLS Customer Equipment and RLS Customer
Services in the Territory. Tadiran shall have no obligation to commence
construction of the Radio Location System until the Performance Commencement
Date.

15.3 RLS Commercial Operation Date. Within ten (10) days of the RLS Commercial
Operation Date, an authorized officer of Tadiran, shall certify and send written
notice of such Date to PacTel Teletrac.

15.4 Location Unit Transactions. For purposes of calculating RLS Customer
Equipment Net Revenues:

15.4.1 Location Units. The cost of Location Units that Tadiran manufactures or
purchases from entities that Tadiran controls or has the ability to control
shall be the price calculated under the Tadiran Basestation Agreement and
Location Unit Agreement, provided that in no case shall the price be greater
than the lowest price charged to other service providers for similar quantities.

15.4.2 Location Unit Installation. For purposes of determining the cost to
Tadiran of installation of Location Units ("Location Unit Installation Costs"),
Tadiran shall establish and provide to PacTel Teletrac at the beginning of each
calendar year, a price list for Location Unit Installation Costs. PacTel
Teletrac may either approve such Costs in advance, in which case for purposes of
this License Agreement Location Unit Installation Costs charged during such year
shall not exceed the price list, or PacTel Teletrac may reserve its right to
review Location Unit Installation Costs. In such cases, PacTel Teletrac may
request adjustments in the Location Unit Installation Costs. All disputes
concerning such adjustment shall be resolved by the Neutral Accountant as set
forth in Section 19.4 below.

15.5 Confidentiality and Proprietary Protection. PacTel Teletrac and Tadiran
have executed and delivered a Nondisclosure Agreement, effective January 19,
1993 (the "Nondisclosure


                                       25


Agreement"), which remains in full force and effect. In addition, the Parties
will execute and deliver, as part of this License Agreement, the Nondisclosure
Agreement that is attached as Exhibit D and incorporated by reference in this
License Agreement.

It is expressly agreed that neither title to the Radio Location System, nor
title to any part thereof, including, but not limited to the RLS Licensed
Software and RLS Licensed Technical Information, passes to Tadiran. Tadiran's
license and right to use any part of the Radio Location System is as set forth
in this License Agreement, and PacTel Teletrac reserves all proprietary rights
in the Radio Location System. This reservation of proprietary rights survives
any termination of this License Agreement.

Tadiran and Tadiran's affiliates will cooperate with PacTel Teletrac in taking
such actions as PacTel Teletrac reasonably requests for the purposes of filing
and obtaining copyright registrations, patents and other suitable forms of
protection on the processes, machines, codes, designs and works of authorship of
the Radio Location System, including the RLS Licensed Software and RLS Licensed
Technical Information, RLS Technical Information Modifications and RLS Licensed
Software Upgrades. Tadiran agrees not to remove from view any copyright,
trademark, confidentiality or other proprietary notice, mark, or legend
appearing on any of the RLS Licensed Software, on output generated by such
software or on RLS Licensed Technical Information, and agrees to reproduce and
include the same on each copy of the RLS Licensed Technical Information and RLS
Licensed Software.

15.6 Insurance. Tadiran agrees that at all times during the term of this License
Agreement it will maintain property and liability insurance in an amount
adequate to cover the value of and risks associated with the Radio Location
System in the Territory.

15.7 PacTel Teletrac Marks. The rights and licenses granted under this License
Agreement do not constitute a grant of any right or license to use PacTel
Teletrac's marks, including but not limited to the "PacTel" and "Teletrac"
service marks and trademarks. Upon PacTel Teletrac's request, Tadiran will
cooperate with and, if necessary, consent to, any registration by PacTel
Teletrac or any of its affiliates of the "Teletrac" mark in the Territory.
Tadiran and Tadiran's affiliates are estopped from challenging the validity of
the Teletrac mark or from setting up any claim adverse to PacTel Teletrac with
respect to the Teletrac mark.

15.8 Other Marks. Other than as set forth in Section 15.7 above, Tadiran shall
be the sole owner of valid marks that Tadiran uses to identify the Radio
Location System, or any part thereof. PacTel Teletrac hereby consents to
Tadiran's use of the "Peletrac" mark for the purpose of identifying the Radio
Location System in the Territory.

15.9 Infringement by Others. Tadiran agrees to inform PacTel Teletrac promptly
of any possible infringement of, or unfair competition affecting, the Radio
Location System in the Territory, including the RLS Licensed Software and RLS
Licensed Technical Information, that comes to the attention of Tadiran. If
PacTel Teletrac decides to take action against any such possible Infringement or
act of unfair competition, Tadiran agrees to assist PacTel Teletrac, in whatever
manner PacTel Teletrac may direct, and, provided that neither Tadiran nor one or
more of its affiliates is responsible for such infringement, at the expense of
PacTel Teletrac.

                                       26


16. Relationship of the Parties.

The relationship of the parties established by this License Agreement shall be
that of independent contractors. Nothing in this License Agreement shall be
construed to create an agency, partnership, joint venture or employment
relationship between Tadiran and PacTel Teletrac, nor to make Tadiran the agent
of PacTel Teletrac, or PacTel Teletrac the agent of Tadiran, for any purpose.
Neither party is granted authority by the other to undertake commitments,
transact business, create or assume any obligation (express or implied) or
otherwise act (or represent that it can act) in the other's name or on the
other's behalf.

17. Force Majeure.

If the performance of either Party required by this License Agreement (other
than payment of amounts due under this License Agreement) is prevented,
restricted or delayed by fire, other casualty or accident, war or violence or
serious threat of the same, arrest or restraint of government, requisition of
vessel or aircraft, explosion, governmental request, guidance, order or
regulation, or any other circumstance beyond the reasonable control of the Party
and without such Party's fault or negligence, the affected Party, upon giving
due notice to the other Party, shall be excused from such performance, but only
to the extent directly attributable to the circumstance and the excused party
shall not be liable for loss or damage or failure of or delay in such
performance.

18. Governing Law.

The governing law of this License Agreement shall be that of the State of
California, U.S.A., as if both parties hereto were resident and doing business
in such state.

19. Dispute Resolution.

19.1 The parties intend to carry out the provisions of this License Agreement in
accordance with principles of good faith and fair dealing and to respect and
observe the spirit as well as the letter of this License Agreement. The parties
shall exercise their best efforts to settle between themselves in an amicable
way any dispute which may arise out of or in connection with this License
Agreement.

19.2 Except as set forth in Sections 19.3 and 19.4 below, any controversy or
claim arising out of or relating to this License Agreement, or the breach,
termination or invalidity thereof, shall be settled by arbitration in accordance
with the California Code of Civil Procedure sections 1297.11 et seq.,
Arbitration and Conciliation of International Commercial Disputes, as modified
by this Section 19. The number of arbitrators shall be three (3). The place of
arbitration shall be Los Angeles, California, and the arbitration shall be
conducted in English. The arbitrators shall be bound by stare decisis, and the
arbitral award shall be final and binding, shall be rendered in writing and
shall state the reasons for the award. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. The costs
of arbitration, including the cost of legal counsel, shall be awarded in the
discretion of the arbitrators. The arbitrators shall have the ability to grant
all relief available at law and in equity, to the extent permitted under this
License Agreement.

                                       27


19.3 Either Party may elect to initiate litigation, rather than arbitration, in
claims for nonpayment of amounts it is owed by the other Party or for specific
performance or injunctive relief. In particular, Tadiran acknowledges that its
failure to comply with the provisions of this License Agreement concerning use
of the RLS Licensed Software, RLS Licensed Technical Information or the PacTel
Teletrac's marks will result in immediate and irreparable harm to PacTel
Teletrac for which there is no adequate remedy at law. PacTel Teletrac shall be
entitled to bring an action or proceeding for specific performance, injunctive
relief, declaratory relief or other equitable relief to compel Tadiran to cease
and desist all unauthorized use of the RLS Licensed Software, RLS Licensed
Technical Information or Teletrac Mark, to require Tadiran to perform its
obligations with respect to such software, technology and mark, and to obtain
such other relief as may be necessary and proper. PacTel shall not be required
to post a bond in connection with any such proceeding. The Parties' consent to
the nonexclusive venue and jurisdiction of the state and federal courts serving
San Francisco, California in any proceeding commenced pursuant to this Section
19.3.

19.4 If the sole subject of a dispute under this License Agreement concerns the
manner of accounting for PacTel Teletrac's Royalty Interests and the amount of
royalties due to PacTel Teletrac, then such dispute shall be settled by a
mutually agreeable independent accountant (the "Neutral Accountant"). Either
Party may initiate resolution of an accounting dispute by the Neutral Accountant
by requesting a meeting with the Neutral Accountant, and by sending at least
forty-five (45) days' notice of such meeting to the other Party. If the Parties
are unable to agree on a Neutral Accountant within ten (10) days of the date of
such notice, then, within ten (10) days each Party shall select one accountant
(the "Party Accountant"). The Party Accountants shall then select a Neutral
Accountant within a further ten (10) days and schedule the first meeting with
the Neutral Accountant. If a Party fails to select a Party Accountant, then the
Neutral Accountant shall be the other Party's Party Accountant. At least thirty
(30) days prior to the first meeting with the Neutral Accountant each Party may
submit to the Neutral Accountant a written explanation of the dispute. Within
thirty (30) days after the meeting, the Neutral Accountant shall conduct an
audit of Tadiran, if in the opinion of the Neutral Accountant such an audit is
necessary. Within sixty (60) days after the meeting, the Neutral Accountant
shall issue a decision on the accounting matter. The Neutral Accountant's
decision shall be final and binding, shall be rendered in writing and shall
state the reasons for the decision. Judgment upon the decision rendered by the
Neutral Accountant, and any costs to be awarded as set forth below, may be
entered in any court having jurisdiction thereof. Each Party shall bear its own
costs of the proceeding and the Parties shall share equally the costs of the
Neutral Accountant; provided, however, that if the Neutral Accountant decides
that Tadiran's position has resulted or would result in an under calculation or
underpayment in excess of five (5) percent of the amount owed, paid or to be
paid to PacTel Teletrac, then Tadiran shall be responsible for PacTel Teletrac's
costs of the proceeding, including reasonable legal fees, and for the entire
cost of the Neutral Accountant, and if the Neutral Accountant decides that
PacTel Teletrac's position has resulted or would result in an underpayment to
PacTel Teletrac that is less than five percent (5%) or in any overpayment of the
amount paid or to be paid to PacTel Teletrac, then PacTel Teletrac shall be
responsible for Tadiran's costs of the proceeding, including reasonable legal
fees, and for the entire cost of the Neutral Accountant. During all proceedings
under this Section 19.4, each Party shall continue timely payment of all amounts
owed to the other Party under this License Agreement.

                                       28


20. General.

20.1 Notices.

20.1.1 Contract Administrators and Contract Technical Coordinators. Each party
shall designate a Contract Administrator and Contract Technical Coordinator
within ten (10) business days of the Effective Date. If a Party fails to make
such designation, then that Party's Contract Administrator and Technical
Coordinator shall be the person designated by such Party in Section 20.1.2
below, or such other person as either Party may notify to the other from time to
time.

20.1.2 Other Notices. All notices under this License Agreement shall be in
writing and may be given by delivering the same by hand, or by sending the same
by an overnight courier that maintains verification of delivery, or by
facsimile, to the relevant person and address set out below or such other person
and address as either Party may notify to the other from time to time. Any such
notice given as set forth above shall be deemed to have been given or received
at the time of delivery (if delivered by hand) and upon verified receipt (if
sent by post, facsimile or overnight courier). In the case of facsimile, the
transmission report shall constitute the verified receipt. Each Party may, at
any time, change the persons or address to which its notices are to be sent by
notifying the other Party of such change in accordance with this Section 20.1.2.




         PacTel Teletrac                              Tadiran
         ---------------                              -------

CEO                                          General Manager
PacTel Teletrac                              of Tadiran Communication
9800 La Cienega Blvd.                        Systems Division
Suite 800                                    26 Hashoftim Street
Inglewood, California 90301                  Holon, Israel
         Facsimile:  (310) 338-7199                   Facsimile:

With a copy to:                              With a copy to:

Hal Crookes, Esq.                            Layla Chertow, Adv.
PacTel Legal Department                      Tadiran Legal Department
3 Park Plaza, 9th Floor                      29 Hamerkaua Street
Irvine, California 92714                     Holon, Israel
         Facsimile:  (714) 222-7019                   Facsimile:  972-3-5577554



20.2 English Language. All communications, notices and records required to be
kept under and materials provided pursuant to this License Agreement shall be in
English.

20.3 No Publicity. Each Party agrees not to disclose the contents of this
License Agreement to anyone other than its employees and affiliates with a need
to know, without the prior written consent of the other Party. Consistent with
the requirements of law and any legal process, neither Party will issue any
press or news release, make any public disclosure with respect to the substance
of this License Agreement or the relationship of the Parties, or make any such
general


                                       29


disclosure to either Party's customers, or potential customers, without the
prior written approval of the other Party.

20.4 Scope and Amendment of License Agreement. The parties acknowledge that each
has read this License Agreement, understands it and agrees to be bound by its
terms. This License Agreement may be amended only by a subsequent writing that
specifically refers to this License Agreement and that is signed by both
Parties, and no other act, document, usage or custom shall be deemed to amend
this License Agreement.

20.5 Assignment. Neither Party may assign or delegate any of its rights, duties
or obligations under this License Agreement in whole or in part without the
other Party's written consent. Any attempt by either Party to assign or delegate
any rights, duties or obligations which arise under this License Agreement,
without the other Party's written consent, shall be void. PacTel Teletrac may,
however, upon notice to Tadiran, assign or delegate, or both, its rights, duties
and obligations under this License Agreement to an entity: (a) that PacTel
Teletrac controls or has the ability to control, or that controls or has the
ability to control PacTel Teletrac and that receives and assumes all of PacTel
Teletrac's rights and obligations under this License Agreement; or (b) that
receives and assumes all of PacTel Tetetrac's rights and obligations under this
License Agreement, provided that, in either case, the same entity that is
providing engineering support to Radio Location Systems located in the United
States, also will be available to provide to Tadiran the engineering support
that PacTel Teletrac is required to provide under this License Agreement.
Tadiran may transfer its interest in the Radio Location System to a wholly owned
subsidiary of Tadiran, or, in the case of a publicly held subsidiary, to a
subsidiary in which Tadiran owns at least fifty-one percent (51%) of the
controlling interest, provided that Tadiran remains obligated to perform under
this License Agreement and guarantees the performance of such subsidiary under
this License Agreement.

20.6. Binding Effect. This License Agreement shall be binding on and inure to
the benefit of the respective successors and permitted assigns of the parties.

20.7 Authority. Each of the respective persons executing this License Agreement
hereby covenants and warrants that such person has full legal power; right and
authority to bind the entity on whose behalf such person is signing to each and
every term and provision herein.

20.8 Severability. If any provision of this License Agreement shall be held
illegal or invalid by any court, this License Agreement shall be construed and
enforced as if such illegal or invalid provision had not been contained herein
and this License Agreement shall be deemed an agreement of the Parties to the
full extent permitted by law. If any provision shall be declared invalid or
unenforceable because of its breadth, scope or duration, such provisions shall
be deemed modified to the extent necessary to make it valid and enforceable and
shall remain in full force and effect as so modified, or if not so modified,
shall be severable from the rest of this License Agreement.

20.9 Headings. All headings are for reference only and shall not be considered
in construing this License Agreement.

                                       30


20.10 Expenses of Litigation. In case of litigation arising out of or in
connection with this License Agreement, the prevailing Party shall be entitled
to recover its reasonable attorneys' fees, costs and expenses from the other
Party. In case of arbitration or Neutral Accountant proceedings, such fees,
costs and expenses shall be recovered as set forth in Sections 19.2 and 19.4
above.

20.11 Waiver. The failure of either Party at any time to require performance by
the other Party of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter. Nor shall the waiver by either
party of a breach of any provision hereof be a waiver of any succeeding breach
of the same or any other such provisions or be a waiver of the provision itself.

20.12 Entire Agreement. This License Agreement together with its Exhibits and
the Nondisclosure Agreements constitute the entire agreement of the parties with
respect to the license of RLS Licensed Software and RLS Licensed Technical
Information to Tadiran and supersede any and all prior negotiations,
correspondence, understandings and agreements between the parties respecting the
subject matter of this License Agreement, and the full understanding of the
Parties is embraced herein.

20.13 Re-Export Assurances.

20.13.1 Tadiran agrees to comply with the terms of the Export Administration Act
of 1979 (the "Act") of the United States of America, as amended, and the rules
and regulations promulgated thereunder, now or hereafter in effect, including,
without limitation, restrictions established by the Act and such rules and
regulations upon the export and re-export of any of the RLS Licensed Software
and RLS Licensed Technical Information; or any other technical data relating to
the Radio Location System. Tadiran agrees that it will not knowingly, either
directly or indirectly, export or re-export such technology or products without
the prior authorization of PacTel Teletrac and the United States Office of
Export Administration to Country Group P, Q, W, Y or Z, as defined in the
regulations, or to Afghanistan, or otherwise in violation of any requirement or
prohibition contained in the Act or such rules and regulations.

20.13.2 PacTel Teletrac agrees that it will comply with the terms of any export
laws, rules or regulations in the Territory with respect to the export of
software and technical data and components licensed to PacTel Teletrac under
Section 9.3 above.

20.14 Exhibits.  The following exhibits are a part of this License Agreement:

Exhibit A - List of RLS Licensed Software

Exhibit B - List of RLS Licensed Technical Information

Exhibit C - Escrow Agreement

Exhibit D - Nondisclosure Agreement

                                       31


20.15 Construction of Agreement. This License Agreement has been negotiated by
the Parties and their respective attorneys and the language of this License
Agreement shall not be construed for or against either Party.

20.16 Counterparts. This License Agreement may be executed in counterparts, each
of which shall be an original as against any Party whose signature appears on
such counterpart and all of which together shall constitute one and the same
instrument.

IN WITNESS WHEREOF, the Parties executed and delivered this License Agreement as
of the day and year first above written.

                          TADIRAN LTD


                            By /s/ Gurion Melber Josef Aksman
                               ----------------------------------
                            Print Name  Gurion Melber Josef Aksman
                                       ---------------------------
                            Its President & CEO, General Manager [Illegible]
                              Division
                                -----------------------------------
                            Date:  December 16, 1993
                                   -----------------



                            PACTEL TELETRAC


                            By    [Signature]     [Signature]
                                  ---------------------------------
                       JRL  Print Name Illegible     John R. Lister
                                       ----------------------------
                    1/7-94  Its Co-CEO   President Co-CEO
                                -------------------------
                            Date: 1-7-94
                                  ------



                                       32





                                                                    EXHIBIT 10.4


            ASSIGNMENT, ASSUMPTION, CONSENT AND AMENDMENT AGREEMENT

This Assignment, Assumption, Consent and Amendment Agreement (this "Agreement")
is made and entered into as of this 30th day of April, 1996, by and among
Teletrac, Inc., a Delaware corporation ("Teletrac"), Airtouch Services, a
California corporation and successor in interest to all assets, rights,
liabilities and obligation of Airtouch Teletrac f/k/a PacTel Teletrac, a
California general partnership ("Airtouch"), Tadiran Limited, a company
organized under the laws of the State of Israel ("Tadiran") and Ituran Location
and Control Ltd., a company organized under the laws of the State of Israel
("Ituran").

PREMISES

A. Tadiran and Airtouch are parties to a Radio Location System License Agreement
dated December 16, 1993, as amended by the Agreement to Amend CVLU Production
Agreement and Radio Location System License Agreement dated October 17, 1994
(the "Amendment"), pursuant to which, among other things, Airtouch has granted
Tadiran a license to use certain proprietary software owned by Airtouch (the
"License Agreement").

B. The software licensed under the License Agreement is utilized by Tadiran and
Ituran, a wholly owned subsidiary of Tadiran, to operate a vehicle location
business (the "Business").

C. On July 19, 1995, Tadiran sold its entire ownership interest in Ituran to
Moked Service Information Management Investments & Holdings (1995), a company
organized under the laws of the State of Israel ("Moked").

D. On or before the sale of Ituran to Moked, Tadiran transferred and assigned to
Ituran, all of the assets and rights relating to the Business that were not
previously owned by Ituran, including, without limitation, Tadiran's rights
under the License Agreement.

E. On January 17, 1996, Teletrac purchased substantially all of the assets and
rights of Airtouch, including, without limitation, Airtouch's rights under the
License Agreement.

F. Because the License Agreement provides that a party may not transfer its
rights under the License Agreement without the consent of the other party, the
parties hereto have entered into this Agreement to provide such consent, on the
terms and conditions set forth herein.

AGREEMENTS

NOW, THEREFORE, in consideration of the Premises and the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:

1. Definitions. For the purposes of this Agreement, all terms not otherwise
defined herein which are defined in the License Agreement shall have the
meanings given to such terms in the License Agreement. The definition of the
term "Territory" in section 1.33 of the License Agreement, shall be amended and
restated in it entirety as follows: "Territory" shall mean the state of Israel
and the territories administered by it, the West Bank and Jordan, provided that
any rights granted herein with respect to Jordan shall be non-exclusive and
Teletrac shall have the right to grant identical or similar rights in Jordan to
third parties.



2. Assignment and Assumption of Tadiran's Rights and Obligations. Tadiran hereby
states that on July 19, 1995, it sold, assigned and transferred all of its
right, title and interest in, to and under the License Agreement to Ituran. In
connection with such assignment, Tadiran delegated all of its duties and
obligations of performance under the License Agreement to Ituran. Ituran hereby
agrees and consents to such assignment and delegation, and assumes and agrees to
perform and to be bound by all of the terms, covenants, obligations, conditions
and liabilities of Tadiran under the License Agreement, whether now existing or
arising in the future. This assignment, delegation and assumption was effective
as of July 19, 1995.

3. Assignment and Assumption of Airtouch's Rights and Obligations. Airtouch
hereby states that on January 17, 1996, it sold, assigned and transferred all of
its right, title and interest in, to and under the License Agreement to
Teletrac. In connection with such assignment, Airtouch delegated all of its
duties and obligations of performance under the License Agreement to Teletrac.
Teletrac hereby agrees and consents to such assignment and delegation, and
assumes and agrees to perform and to be bound by all of the terms, covenants,
obligations, conditions and liabilities of Airtouch under the License Agreement,
whether now existing or arising in the future. This assignment, delegation and
assumption was to be effective on January 17, 1996.

4. Consent to Assignment and Assumption. All parties hereto hereby consent and
agree to the assignments, delegations and assumptions described Sections 2 and 3
above.

5. Release of Tadiran. Tadiran is hereby released and discharged from any
further liability or obligation under the License Agreement, whether now
existing or arising in the future, except that:

a. Tadiran shall continue to be bound by the provisions of Section 9.3.4 of the
License Agreement and such provisions shall be deemed to be a part of the
Tadiran Base Station Agreement and the Tadiran Location Unit Agreement and shall
continue in effect as long as such agreements shall remain in effect.

b. Tadiran shall continue to be bound by the provisions set forth in the second
paragraph of Section 15.5 of the License Agreement.

c. The Nondisclosure Agreement between Airtouch and Tadiran dated January 19,
1993 (the "Initial Nondisclosure Agreement"), shall remain in full force and
effect.

d. Tadiran shall be bound by the provisions of the Nondisclosure Agreement
attached hereto as Exhibit D, to the same extent as Ituran, with respect to any
Information (as defined therein) heretofore disclosed to Tadiran.

6. Release of Airtouch. Airtouch shall be released and discharged from any
further liability or obligation under the License Agreement, whether now
existing or arising in the future, except that the Initial Nondisclosure
Agreement shall remain in full force and effect.

7. Other Rights Not Effected. Except as specifically provided herein, the
consents and releases set forth in Sections 4, 5 and 6 shall not:


                                        2



a. Operate as a release or waiver of any rights any party hereto may now or
hereafter have against any other party hereto.

b. Be construed to be a consent to any other or further assignment, sale or
transfer of any rights under the License Agreement.

c. Be construed to eliminate or modify any rights or obligations under the
License Agreement.

d. In any way release any party from any liability to any other party under any
other agreement now in effect, including, without limitation, Tadiran's
obligations to Teletrac, as successor in interest to the rights of Airtouch,
under the Initial Nondisclosure Agreement, the Tadiran Base Station Agreement
and the Tadiran Location Unit Agreement.

8. Warranties Expired. The parties hereto acknowledge and agree that the
warranty provision set forth in Sections 12.1 and 12.2 of the License Agreement
have expired and shall have no further force or effect. No party hereto shall
have any rights or obligations under Sections 12.1 and 12.2 of the License
Agreement.

9. Limitation on Training and Technical Support. Ituran agrees that Teletrac's
obligation to provide training and technical support under the provisions of
Section 14.4 of the License Agreement and Sections 2.2 and 2.5 of the Amendment
shall be limited to the following:

a. Teletrac shall be obligated to provide up to 60 man hours per calendar year
of general training and technical support relating to the existing RLS Licensed
Software and existing RLS Licensed Technical Information.

b. Teletrac shall be obligated to provide up to 160 man hours per calendar year
of training and technical support relating to RLS Licensed Software Upgrades and
RLS Licensed Technical Information Modifications.

c. In the event that Ituran does not request the maximum number of man hours of
training and technical support that Teletrac is obligated to provide in any
calendar year, such hours shall not carry over to future calendar years.

d. Teletrac agrees to make reasonable efforts to accommodate Ituran's request
for training and technical support. Ituran acknowledges and agrees that
Teletrac's obligation to provide training and technical support shall be subject
to the availability of the Teletrac personnel needed to provide such training
and support. In the event Teletrac pays overtime pay to its personnel providing
such training and support, Ituran's charges for such training and support shall
be increased accordingly.

10. Delivery and Receipt of Licensed Software and Licensed Technical Information

a. Attached hereto as Exhibit A is a list of the RLS Licensed Software, which
shall replace Exhibit A to the License Agreement in its entirety. Ituran
acknowledges receipt of the programs described on Exhibit A.


                                        3



b. Attached hereto as Exhibit B is a list of the RLS Licensed Technical
Information, which shall replace Exhibit B to the License Agreement in its
entirety. Ituran acknowledges receipt of the documentation and other items
described on Exhibit B.

c. Teletrac represents and warrants to Ituran that all programs, documentation
and other items required to be delivered pursuant to Sections 14.1 and 14.2.1 of
the License Agreement have been delivered to either Tadiran or Ituran, by either
Airtouch or Teletrac.

11. Final Version RLS Licensed Software. Teletrac is currently working on the
Final Version RLS Licensed Software. Pursuant to Section 14.2.2 of the License
Agreement, Ituran is required to pay 50% of the cost of modifying the RLS
Licensed Software to create the Final Version RLS Licensed Software. The parties
acknowledge and agree that Ituran's right to receive the Final Version RLS
Licensed Software shall be converted into an option, exercisable at Ituran's
sole discretion, to receive such software, and that neither Tadiran nor Ituran
have, to date, paid any portion of such costs. Notwithstanding anything
contained in the License Agreement to the contrary, the parties acknowledge and
agree that Ituran's right to receive the Final Version RLS Licensed Software
shall be converted into an option to receive such software, exercisable at
Ituran's sole discretion, and that Teletrac shall have no obligation to deliver
the Final Version RLS Licensed Software to Ituran unless and until (a) Ituran
notifies Teletrac in writing that it is exercising its option to acquire the
Final Version RLS Licensed Software, (b) Ituran pays Teletrac 50% of the cost of
modifying the RLS Licensed Software to create the Final Version RLS License
Software and (c) the Final Version RLS Licensed Software has been completed and
is in use in Teletrac's United States operations.

12. Tadiran Production Files.

a. Under Section 6.2 of the Agreement between Tadiran and Moked dated July 19,
1995 (the "Ituran Sale Agreement"), pursuant to which Ituran and the Business
were sold to Moked, Ituran has been granted the right to require that Tadiran
release the production files (the "Production Files") to the VLU Units (as
defined in the Ituran Sale Agreement) to a third party manufacturer ("Third
Party Manufacturer"). Ituran and Tadiran agree that the Production Files will
not be turned over to a Ituran or any Third Party Manufacturer without
Teletrac's written consent which will not be unreasonably withheld by Teletrac,
provided that:

i. Ituran fully complies with the provisions of the Ituran Sale Agreement
relating to the transfer of the Production Files to a Third Party Manufacturer.

ii. All necessary and desirable protections are taken by Ituran and Tadiran to
ensure the continued confidentiality of the confidential and proprietary
information and technology contained in the Production Files, including, without
limitation, requiring the Third Party Manufacturer to sign a nondisclosure
agreement in the form attached hereto as Exhibit D to the License Agreement.

iii. The Third Party Manufacturer is not given the right to manufacture VLU
Units for sale or distribution outside of the Territory.

Ituran agrees that it will use its best efforts to ensure that the Third Party
Manufacturer does not disclose the confidential and proprietary information and
technology contained in the Production


                                        4



Files to any third party and does not manufacture the of VLU Units for sale or
distribution outside of the Territory.

b. Tadiran agrees that Teletrac shall have a right of first refusal to purchase
from Tadiran, for sale and distribution outside of the Territory, products
resulting from new technological developments as developed by Tadiran in
connection with base stations and/or VLU Units on the basis of the technology,
other than dedicated developments made for a specific customer and subject to
undertakings given by Tadiran up to the date of signature of the Ituran Sale
Agreement that do not allow or that restrict Tadiran in everything connected
with the provisions of this clause. The cost of adjustments of the developments
for Teletrac, if any, shall be borne by Teletrac alone.

c. Tadiran hereby agrees that if it decides to abandon the field of production
of base stations and/or VLU Units, for any reason, Tadiran shall so notify
Teletrac twelve (12) months in advance of the date on which it abandons such
production.

d. Tadiran hereby agrees that Teletrac shall have a right of first refusal to
purchase the Production Files of the base stations and/or VLU Units, as
relevant, provided that Teletrac exercises or forgoes such right of first
refusal within thirty (30) days of the date on which Tadiran notifies Teletrac
in writing of the price and terms of payment for the Production Files. Tadiran
and Ituran hereby acknowledge and agree that the right of first refusal to
purchase Production Files granted to Ituran in the second paragraph of Section
6.4 of the Ituran Sales Agreement is subordinate to the right of first refusal
granted to Teletrac in the preceding sentence.

e. Tadiran agrees that it shall not sell the Production Files, or any part
thereof, to any third party including Ituran, without obtaining Teletrac's prior
written consent. Tadiran agrees that in the event that it sells the Production
Files to a third party, Tadiran shall obligate the third party to take upon
itself all of the rights and obligations of Tadiran for the continued production
of base stations and/or VLU Units pursuant to the terms of the Tadiran Base
Station Agreement and the Tadiran Location Unit Agreement.

f. The provisions set forth in this Section 12 shall be deemed to be a part of
the Tadiran Base Station Agreement and the Tadiran Location Unit Agreement and
shall continue in effect as long as such agreements remain in effect.

13. Transfers to Ituran. Tadiran and Ituran hereby represent and warrant that
all assets and rights relating to the Business have been transferred and
assigned to Ituran, and that no such assets or rights have been transferred to
Moked.

14. Performance Commencement Date and RLS Commercial Operation Date. The parties
acknowledge and agree that the Performance Commencement Date occurred on March
16, 1995 and the RLS Commercial Operation Date occurred on November 12, 1995.

15. Escrow Agreement. Concurrently with the execution of this Agreement,
Teletrac and Ituran shall execute and deliver the Escrow Agreement that is
attached hereto as Exhibit C, which shall replace in its entirety, the Escrow
Agreement attached as Exhibit C to the License Agreement.


                                        5



16. Nondisclosure Agreement. Concurrently with the execution of this Agreement,
Teletrac and Ituran shall execute and deliver the Nondisclosure Agreement that
is attached hereto as Exhibit D, which shall replace in its entirety, the
Nondisclosure Agreement attached as Exhibit D to the License Agreement.

17. Royalty Reports and Payments.

a. All royalty reports which were required to be delivered under the License
Agreement for the calendar quarter ending on December 31, 1995, and each prior
calendar quarter, are attached hereto as Exhibit E.

b. The parties acknowledge and agree that no payment of Royalty Interests have
been made by either Tadiran or Ituran under the License Agreement. On or before
April 30, 1996, Ituran shall pay to Teletrac all Royalty Interests which have
accrued under the License Agreement between December 16, 1993 and March 31,
1996. Thereafter, Ituran shall make payments of Royalty Interests on a quarterly
basis as required under Section 4.3 of the License Agreement and Royalty
Interests shall not accrue as provided in Section 4.1.2(d) of the License
Agreement.

18. Certain Deletions. Ituran and Teletrac acknowledge and agree that the
following provisions shall be deleted from the License Agreement in their
entirety:

a. The second sentence of Section 3.

b. Section 7.2.

c. Section 12.1.

d. Section 12.2.

19. Notices. Any notices to any party under this Agreement or the License
Agreement shall be sent in a manner provided in Section 20.1.2 of the License
Agreement. Notices to Airtouch and Tadiran shall be sent to the individuals and
the addresses listed in Section 20.1.2 of the License Agreement. Notices to
Tadiran and Teletrac shall be sent to the individuals and the addresses set
forth below:

Ituran:

Gideon Ezra
General Manager
Ituran Location and Control Ltd.
3a Hasikma St.
Azur, Israel
Tel.: 972-3-557-1313
Fax: 972-3-557-1391


                                        6



with a copy to:

Dr. Eddo Dinstein
Cohen Lahat & Co.
155 Bialik St.
Ramat Gan, Israel
Tel.: 972-3-751-2061
Fax: 972-3-751-2066

Teletrac:

James A. Queen
Chief Executive Officer
Teletrac, Inc.
8900 State Line Rd., Ste. 500
Leawood, KS 66206
Tel.: (913) 642-4799
Fax: (913) 642-4214

with a copy to:

Steven A. Scheiwe
General Counsel
Teletrac, Inc.
8900 State Line Rd., Ste. 500
Leawood, KS 66206
Tel.: (913) 642-4799
Fax: (913) 642-4214

20. License Agreement. The parties acknowledge and agree that the License
Agreement shall remain in full force and effect except as expressly amended and
modified by this Agreement.

21. Miscellaneous. The parties acknowledge and agree that the provisions set
forth in Sections 18, 19, 20.2, 20.3, 20.4, 20.5, 20.6, 20.7, 20.8, 20.9, 20.10,
20.11, 20.15 and 20.16 are incorporated herein by reference, except that the
term "License Agreement" shall be read as "Agreement," where appropriate in such
Sections.


                                        7



IN WITNESS WHEREOF, the parties have executed and delivered this agreement as of
the day and year first written above.

TELETRAC, INC.


By: /s/  Steven D. Scheiwe
    --------------------------------------
Name: Steven D. Scheiwe
Title: Secretary
Date: 5/10/96


AIRTOUCH TELETRAC


By:
    --------------------------------------
Name:
      ------------------------------------
Title:
       -----------------------------------
Date:
      ------------------------------------


TADIRAN LIMITED


By: /s/  Eddy Kafry
    --------------------------------------
Name: Eddy Kafry
Title: General Manager, Tadiran Telematics
Date: Dec. 13, 1996


ITURAN LOCATION AND CONTROL LTD.


By: /s/ Avner King  /s/ Sheratzki Eazi
    --------------------------------------
Name: Avner King Sheratzki Eazi
Title: Managers
Date: 5/5/96


                                        8



AIRTOUCH SERVICES


By: /s/ R. Craig Stewart
    --------------------------------------
Name: R. Craig Stewart
Title: Vice President
Date: 5/14/96


TADIRAN LIMITED


By:
    --------------------------------------
Name:
      ------------------------------------
Title:
       -----------------------------------
Date:
      ------------------------------------


ITURAN LOCATION AND CONTROL LTD.


By:
    --------------------------------------
Name:
      ------------------------------------
Title:
       -----------------------------------
Date:
      ------------------------------------


                                        9



                                   EXHIBIT A

                             RLS LICENSED SOFTWARE


                                       10



                       EXHIBIT A - RLS LICENSED SOFTWARE

SECTION 1.21

QNX Real-time Network System Software

o QAVM

o Real-time Forward Customer Data Migration

o Real-time Reverse Customer Billing Migration

o Real-time Customer Database Server

o Episode Manager, Episode Supervisor Workstation and Episode Operator
Workstation

o Quser

o Transaction Logger, Gatherer and Archiver

o Message Manager - With Ituran System changes to allow VLS Workstation to
Workstation communication capabilities

o Store and Forward

o QVCP Voice - Written especially for Ituran System

DOS Real-time Network System Software

o TIP w/alternate frequency changes for Ituran System

o TSolve for TIP Transputers

o SPT

o SPX Diagnostic

o RSSW

o COR DSP Base Station software

o Boocat Test Software

MIS Software

o MIS Metro with MIS National's data entry capability modified for Ituran System

o Usage Gathering from Real-time Network

o QNX MIS / UNIX MIS Interface - Written especially for Ituran System

Workstation Software

o Source code and executable program for Fleet Director version 3.5. In return
for this source code Ituran was to deliver to Teletrac source code to their
Windows workstation software called CVLS 4.0

o CSVLS

o CIVLS

o Wintrak

o Gateway Development Kit

                                       11



                                    EXHIBIT B

                       RLS LICENSED TECHNICAL INFORMATION






                 EXHIBIT B - RLS LICENSED TECHNICAL INFORMATION

SECTION 1.23

<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

900-0002   00                  Theory of System                                  Richard La Porte
                               Operation

----------------------------------------------------------------------------------------------------
900-0003   00       10/18/91   Teletrac Technical                                Drew Bradford
                               Glossary

----------------------------------------------------------------------------------------------------
900-0004   00                  Teletrac Writers'       Shows usage of            Drew Bradford
                               Style Guide             commonly used
                                                       ambiguous terms.
----------------------------------------------------------------------------------------------------
900-0103   D0       1/4/93     Software                Defines and describes     Joy Tamanaha
                               Requirements            the standard format
                               Specification           for Software
                               Document                Requirements
                               Preparation             Specification
                               Description             Documents
----------------------------------------------------------------------------------------------------
900-0105   00                  Software                                          Joy Tamanaha
                               Development Plan
----------------------------------------------------------------------------------------------------
900-0106   input    7/27/92    Software Quality                                  Joy Tamanaha
                               Assurance Manual
----------------------------------------------------------------------------------------------------
900-0107   input    7/28/92    Software                                          Joy Tamanaha
                               Configuration
                               Management Manual
----------------------------------------------------------------------------------------------------
900-0109   B0       9/14/93    Horizon System                                    Joy Tamanaha
                               Specification
----------------------------------------------------------------------------------------------------
900-0111   01       7/1/92     Software Standards                                Joy Tamanaha
                               and Guidelines
----------------------------------------------------------------------------------------------------
900-0113   00       6/10/92    Change Control          Describes change          Joy Tamanaha
                               Procedures              procedures for
                                                       software, hardware
                                                       and documentation.
----------------------------------------------------------------------------------------------------
900-0114   00       6/12/92    Master                  List every component      Ray Campbell
                               Configuration Items     of Teletrac by number.
                               List
----------------------------------------------------------------------------------------------------
900-0116   00       12/22/92   Status-Trac Service     Describes Status-Trac     Stacey Black
                               Description             service at customer
                                                       level of
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                               Document                understanding.
----------------------------------------------------------------------------------------------------
900-0118   00                  Interface               Describes how to          Joy Tamanaha
                               Specification           write the document
                               Document                that specifies the
                               Preparation             interface between two
                               Description             CSCI's. The document
                                                       includes the
                                                       requirement
                                                       specifications and
                                                       design
                                                       specifications.
                                                       Written by Jim Moore
                                                       and Mike Hunter.
----------------------------------------------------------------------------------------------------
900-0119   review   9/1/93     Horizon II Proposal     Engineering document      Joy Tamanaha
                                                       describing resources
                                                       needed, schedule, etc.
----------------------------------------------------------------------------------------------------
900-0122   review   12/20/93   Genesis System                                    Joy Tamanaha
                               Specification
----------------------------------------------------------------------------------------------------
900-0202   review   3/26/93    Horizon Validation      Document that will be     Joy Tamanaha
                               Test Specification      used to test the
                                                       Horizon software.
----------------------------------------------------------------------------------------------------
900-0601   none     ?          System Overview         Training course for       Florin Stelzer
                                                       PTT FEs.
----------------------------------------------------------------------------------------------------
900-0602   00                  City Buildout           Training course for       Florin Stelzer
                               Procedure               PTT FEs.
----------------------------------------------------------------------------------------------------
900-0603   00       1/4/92     Company and System      A module of the           Drew Bradford
                    5/6 93?    Overview - OJT          Control Center System
                               Module                  Operator Training
                                                       Program. Also used in
                                                       Episode Operator
                                                       training. General
                                                       enough that it may be
                                                       slightly revised and
                                                       given to any new
                                                       employee. Written in
                                                       workbook format.
----------------------------------------------------------------------------------------------------
905-0101   00                  Control Center Site                               Dennis McCain
                               Requirements
----------------------------------------------------------------------------------------------------
905-0102   B1       6/3/93     QAVM-IP                                           Joy Tamanaha
                               Communication
                               Protocol
----------------------------------------------------------------------------------------------------
905-0103   review   7/10/92    General                                           Joy Tamanaha
                               Quser-Client
                               Interface
                               Requirements
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                               Specification
----------------------------------------------------------------------------------------------------
905-0104   B3       7/21/94    Version Description                               Joy Tamanaha
                               Document
----------------------------------------------------------------------------------------------------
905-0105   B3       7/21/94    Metro Version           Describes changes to      Joy Tamanaha
                               Description Document    software from
                                                       previous version to
                                                       current.
----------------------------------------------------------------------------------------------------
905-0106   review   7/5/94     RF Services             For future system:        Joy Tamanaha
                               Software                RF Services
                               Requirements Spec       encompasses all the
                                                       old paging and
                                                       scheduling related
                                                       functions of the
                                                       system (IP, SPT, and
                                                       QAVM).
----------------------------------------------------------------------------------------------------
905-0201   00                  Control Center                                    Richard La Porte
                               Assembly & Test
----------------------------------------------------------------------------------------------------
905-0301   00                  Cntrl Cntr On-Site                                Stanley Junken
                               Installation Manual
----------------------------------------------------------------------------------------------------
905-0302   C1       3/19/92    Teletrac Control                                  Joy Tamanaha
                               Center Software
                               Initial
                               Installation Guide
                               for Version 1.4
----------------------------------------------------------------------------------------------------
905-0303   C0       8/08/91    MigNet Upgrade          Instructions on how       Joy Tamanaha
                               Installation Guide      to install the
                                                       hardware and software
                                                       for migration between
                                                       the Metro MIS and
                                                       Information Gateway
                                                       computers.
----------------------------------------------------------------------------------------------------
905-0304   E3       7/21/94    Control Center          Instructions to           Joy Tamanaha
                               Software Upgrade        Metros on how to
                               Installation Guide      install system
                                                       software upgrades.
----------------------------------------------------------------------------------------------------
905-0401   A0                  Cntrl Cntr System                                 Joy Tamanaha
                               Reference Manual
----------------------------------------------------------------------------------------------------
905-0402   D0       2/1/94     Control Center                                    Joy Tamanaha
                               System Operation
                               Manual
----------------------------------------------------------------------------------------------------
905-0403   00       11/25/90   Control Center                                    Bob Hopkins
                               Network Switching
                               Operation
----------------------------------------------------------------------------------------------------
905-0404   00                  Diagnostic Terminal                               Bob Hopkins
                               Users Guide
----------------------------------------------------------------------------------------------------
905-0405   00                  Control Center          Describe and define       Joy Tamanaha
                               Utilities User          utilities that are
                               Reference               used in metro Control
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                                                       Centers.
----------------------------------------------------------------------------------------------------
905-0406   D1       3/2/94     Control Center          How to resolve system     Joy Tamanaha
                               Troubleshooting         operation problems.
                               Guide
----------------------------------------------------------------------------------------------------
905-0407   NA       3/31/94    Advanced Operator       Procedures for doing      Joy Tamanaha
                               Procedures              advanced maintenance,
                                                       such as defragmenting
                                                       a hard disk.
----------------------------------------------------------------------------------------------------
905-0601   00       10/21/91   System Operator         Guides a new system       Natalie Taylor
                               On-the-Job Training     operator trainee
                               Guide                   through a learning
                                                       program.
----------------------------------------------------------------------------------------------------
905-0602   00       2/14/92    SPT Training Guide      Guide to be used by a     Rex Frye
                                                       person experienced
                                                       with QAVM, for
                                                       training FEs.
----------------------------------------------------------------------------------------------------
905-0605   00       2/7/92     Quser Training Guide    Training course for       Rex Frye
                                                       PTT FEs. Bullets
                                                       ideas to be covered
                                                       by an experienced
                                                       Quser user.  Also
                                                       includes information
                                                       for trainee.
----------------------------------------------------------------------------------------------------
905-0606   00       2/8/92     QAVM Training Guide     PTT training course       Rex Frye
                                                       for FE's. Bullets
                                                       ideas to be covered
                                                       by experienced QAVM
                                                       user.  Also contains
                                                       screens and
                                                       information for
                                                       trainee.
----------------------------------------------------------------------------------------------------
905-0608   00       9/25/92    Control Center          Self-paced workbook       Natalie Taylor
                               Operator Training:      to learn knowledge
                               Roadside Assistance     required to handle
                               and Sentry              Roadside Assistance
                               Activation              Episodes and perform
                                                       installation test for
                                                       DLC-22T. Must be
                                                       followed up by
                                                       exercises for
                                                       handling RA episode
                                                       and doing DLC
                                                       installation test.
----------------------------------------------------------------------------------------------------
905-0609   00       2/5/92     Network Control         Training guide for        Ray Campbell
                               Center A/B              teaching someone
                               Switching Training      about the patch panel
                               Guide                   and A/B switches in
                                                       the Control Center.
----------------------------------------------------------------------------------------------------
905-0610   00       10/14/92   Episode Management      Self-paced                Natalie Taylor
                               Training Sentry         instructional
                               Activation              workbook designed for
                                                       Control Center
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                                                       Operators. To train
                                                       on operation and
                                                       installation of
                                                       DLC-22T.
----------------------------------------------------------------------------------------------------
905-0611   00       12/18/92   Episode Management      Self-paced                Natalie Taylor
                               Training Roadside       instructional
                               Assistance              workbook designed for
                                                       Control Center
                                                       Operators. To train
                                                       on how to support
                                                       Roadside Assistance
                                                       service.
----------------------------------------------------------------------------------------------------
905-0612   00       11/1/93    QNX Skills - OJT        A self-paced workbook     Tracey Stone
                               Module                  - one of the training
                                                       modules in the System
                                                       Operator OJT Program:
                                                       Basic Level.
----------------------------------------------------------------------------------------------------
905-0613   NA       12/6/93    Basic Skills for        Training module to        Jack Carchio
                               Control Center -        teach basic skills
                               OJT Module              such as front door &
                                                       CC access; security
                                                       monitor & intercom;
                                                       telephone; radio;
                                                       voice recorder; and
                                                       Daily Log. Part of
                                                       System Operator OJT
                                                       Program: Basic Level.
----------------------------------------------------------------------------------------------------
905-0614   00       2/17/94    Shift Turnover          How to perform the        Kim West
                               Check - OJT Module      Shift Turnover Check
                                                       Module of System
                                                       Operator OJT Program:
                                                       Basic Level.
----------------------------------------------------------------------------------------------------
905-0615                       DOS Skills - OJT        Module of the System      Mary Rowley
                               Module                  Operation OJT
                                                       Program: Basic Level.
----------------------------------------------------------------------------------------------------
905-0616                       Hourly Checks - OJT     Module of the System      Gloria Mann
                               Module                  Operator OJT Program:
                                                       Basic Level.
----------------------------------------------------------------------------------------------------
905-0617                       File Backups - OJT      Module of the System      Debbie Kass
                               Module                  Operator OJT Program:
                                                       Basic Level.
----------------------------------------------------------------------------------------------------
905-0618                       Novell - OJT Module     Module of the System      Mary Rowley
                                                       Operator OJT Program:
                                                       Basic Level.
----------------------------------------------------------------------------------------------------
905-0619   review   1/31/94    Control Center          Module of the            Natalie Taylor
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                               Overview - OJT          System Operator OJT
                               Module                  Program: Basic Level.
----------------------------------------------------------------------------------------------------
905-0620                       Training Program        Module of the System      Natalie Taylor
                               Overview - OJT          Operator OJT Program:
                               Module                  Basic Level.
----------------------------------------------------------------------------------------------------
905-0621                       Support and             Module of the System      unassigned
                               Maintenance - OJT       Operator OJT Program:
                               Module                  Basic Level.
----------------------------------------------------------------------------------------------------
905-0622   NA       2/1/94     Horizon II              Operator training for     Natalie Taylor
                               Training, System        Horizon II.
                               Software Release
                               Version 2.2
----------------------------------------------------------------------------------------------------
905-0801   00                  Control Center          Descriptions of how       Mark Little
                               Policies and            to perform
                               Procedures Manual       administrative tasks
                                                       and management/
                                                       employee
                                                       responsibilities.
----------------------------------------------------------------------------------------------------
906-0101   B0       3/12/92    VDD for Quser 1.6.                                Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
906-0102   B0       3/12/92    VDD for QAVM 3.32,                                Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
906-0103   B0       3/12/92    VDD for EMGR 2.7,                                 Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
906-0104   B0       3/12/92    VDD for RTDB 2.0,                                 Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
906-0105   G0       4/9/93     EMGR Software                                     Joy Tamanaha
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
906-0106   B0       3/12/92    VDD for TP 1.4,                                   Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
906-0107   00       1/13/93    QAVM Software                                     Joy Tamanaha
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
906-0108   A0       2/11/93    Quser Software                                    Joy Tamanaha
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
906-0109   00       1/14/93    Database Services                                 Joy Tamanaha
                               Software
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
906-0110   A0       2/11/93    TP Software                                       Joy Tamanaha
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
906-0111   00       3/12/92    SCUP Version                                      Joy Tamanaha
                               Description Document
----------------------------------------------------------------------------------------------------
906-0112   input    2/4/92     SCUP Software                                     Joy Tamanaha
                               Requirements
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                               Specification
----------------------------------------------------------------------------------------------------
906-0113   A1       3/2/93     RDDS Software           SRS for the Real-time     Joy Tamanaha
                               Requirements            Data Distribution
                               Specification           Sub-system.
----------------------------------------------------------------------------------------------------
906-0114   00                  RDDS Software           Detailed design           Joy Tamanaha
                               Detailed Design         specification for the
                               Specification           Real-time Data
                                                       Distribution
                                                       Sub-system.
----------------------------------------------------------------------------------------------------
906-0115   00       1/11/93    Message Manager                                   Joy Tamanaha
                               Software
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
906-0116   00       11/4/93    Alternate               Related to Message        Joy Tamanaha
                               Notification S/W        Manager CSCI. Will
                               Requirement Spec        not be released until
                                                       October 1 as
                                                       enhancement to
                                                       Horizon service.
----------------------------------------------------------------------------------------------------
906-0117   00       1/13/93    Store and Forward       Related to RTDB CSCI.     Joy Tamanaha
                               S/W Requirement Spec
----------------------------------------------------------------------------------------------------
906-0118   01       3/5/93     Database Services                                 Joy Tamanaha
                               Software Detailed
                               Design Specification
----------------------------------------------------------------------------------------------------
906-0119   00       1/27/93    Transaction                                       Joy Tamanaha
                               Processor Software
                               Detailed Design
                               Specification
----------------------------------------------------------------------------------------------------
906-0120   00       2/2/93     Store and Forward                                 Joy Tamanaha
                               Software Detailed
                               Design Specification
----------------------------------------------------------------------------------------------------
906-0121   00       4/15/93    RDDS User Interface     Requirements              Joy Tamanaha
                               Requirements            specification for
                               Specification           user interface on the
                                                       Real-time Data
                                                       Distribution
                                                       Sub-system.
----------------------------------------------------------------------------------------------------
906-0122   input               RDDS Schema Detail      Detailed explanation      Joy Tamanaha
                               Specification           of the database
                                                       scheme for RDDS.
----------------------------------------------------------------------------------------------------
906-0123   input               RDDS Database                                     Joy Tamanaha
                               General
                               Specification
----------------------------------------------------------------------------------------------------
906-0124                       Interface Services      For future system:        Joy Tamanaha
                               Software                Interface Services
                               Requirements Spec       (IS) includes
                                                       functions of EMGR,
                                                       MMGR and Quser.
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

906-0201   00                  Episode Manager                                   Joy Tamanaha
                               Software Test Plan
----------------------------------------------------------------------------------------------------
906-0202   00                  QAVM Software Test                                Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
906-0203   00                  Quser Software Test                               Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
906-0204   00                  RTDB Software Test                                Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
906-0205   00                  TP Software Test                                  Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
906-0206   00                  SCUP Software Test                                Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
906-0207                       Message Manager                                   Joy Tamanaha
                               Software Test Plan
----------------------------------------------------------------------------------------------------
906-0401   00       3/31/92    Episode Procedures      Tells the operator        Natalie Taylor
                               Manual                  what to do in
                                                       handling each type of
                                                       episode that can
                                                       occur on the episode
                                                       terminal.
----------------------------------------------------------------------------------------------------
906-0402   00                  Episode Manager         Describes the Episode     Joy Tamanaha
                               User Reference          Manager with its
                                                       displays and
                                                       controls, in other
                                                       words, the Supervisor
                                                       and Operator
                                                       terminals.
----------------------------------------------------------------------------------------------------
906-0403   00                  QAVM User Reference     Describes how to use      Joy Tamanaha
                                                       displays and controls
                                                       of QAVM; defines all
                                                       fields.
----------------------------------------------------------------------------------------------------
906-0404   00                  Quser User Reference    Describes how to use      Joy Tamanaha
                                                       displays and controls
                                                       of Quser; defines all
                                                       fields.
----------------------------------------------------------------------------------------------------
906-0405   00                  RTDB User Reference     Descries how to use       Joy Tamanaha
                                                       displays and controls
                                                       of the RTDB, defines
                                                       all fields.
----------------------------------------------------------------------------------------------------
906-0406   00       2/28/92    SCUP Technical                                    Joy Tamanaha
                               Reference Manual
----------------------------------------------------------------------------------------------------
906-0407   00                  TP User Reference                                 Joy Tamanaha
----------------------------------------------------------------------------------------------------
906-0408                       Message Manager                                   Joy Tamanaha
                               User Reference
----------------------------------------------------------------------------------------------------
906-0601   00       7/10/92    SVLU Checkup (SCUP)     Training program to       Drew Bradford
                               Features Training       help Control Center
                                                       Operators learn how
                                                       to download SCUP
                                                       locations to a CSVLS
                                                       workstation, and
                                                       print reports of
                                                       non-responding SVLUs.
----------------------------------------------------------------------------------------------------
906-0602   NA       3/1/93     Using the New           Tutorial for using        Natalie Taylor
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                               QAVM Interface          QAVM interface
                                                       delivered in system
                                                       software release
                                                       version 1.5.
----------------------------------------------------------------------------------------------------
906-0603   05       8/26/93    EMGR Tutorial for       Self-paced                Natalie Taylor
                               Software Version 1.5    instructional
                                                       workbook provides
                                                       information on 2nd
                                                       Generation SVLU and
                                                       instruction on how to
                                                       use Activation
                                                       Episode.
----------------------------------------------------------------------------------------------------
906-0604   NA       12/2/93    QUSER Skills - OJT      Part of System            Peggy Vasco
                               Module                  Operator OJT Program:
                                                       Basic Level, teaches
                                                       System Operator
                                                       skills for using
                                                       Quser.
----------------------------------------------------------------------------------------------------
906-0605   00       2/17/94    TP skills - OJT         Module of System          Monica Scott
                               Module                  Operator OJT Program,
                                                       Basic Level.
----------------------------------------------------------------------------------------------------
906-0606                       EMGR Skills - OJT       Module of System          Jack Carchio
                               Module                  Operator OJT Program,
                                                       Basic Level.
----------------------------------------------------------------------------------------------------
906-0607                       QAVM Skills - OJT       Module of System          Lon Lowen
                               Module                  Operator OJT Program,
                                                       Basic Level.
----------------------------------------------------------------------------------------------------
906-0608                       MMGR - OJT Module       Module of System          unassigned
                                                       Operator OJT
                                                       Program:  Basic Level.
----------------------------------------------------------------------------------------------------
906-0609                       SF Skills - OJT         Module of System          unassigned
                               Module                  Operator OJT
                                                       Program:  Basic Level.
----------------------------------------------------------------------------------------------------
906-0610                       SCUP Skills - OJT       Module of System          Sue Rausch
                               Module                  Operator OJT
                                                       Program:  Basic Level.
----------------------------------------------------------------------------------------------------
906-0611                       RTDB Skills - OJT       Module of System          Sue Rausch
                               Module                  Operator OJT
                                                       Program:  Basic Level.
----------------------------------------------------------------------------------------------------
907-0101   B0       3/12/92    VDD for IP 50.1.                                  Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
907-0102   B0       3/12/92    VDD for IP Tools                                  Joy Tamanaha
                               50.1. Teletrac V1.4
----------------------------------------------------------------------------------------------------
907-0103   00                  IP Software             List of specifications    Joy Tamanaha
                               Requirements            required for next
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                               Specification           release of IP
                                                       software.
----------------------------------------------------------------------------------------------------
907-0104   00       10/9/91    TIP-Transputer                                    Joy Tamanaha
                               Communication
                               Protocol
----------------------------------------------------------------------------------------------------
907-0105                       IP-QVCP                                           Ed Hurst
                               Communication
                               Protocol
----------------------------------------------------------------------------------------------------
907-0201   00                  IP Software Test                                  Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
907-0401   review   11/25/91   IP User Reference       Describes how to use      Drew Bradford
                                                       displays and controls
                                                       of the IP; defines
                                                       all fields.
----------------------------------------------------------------------------------------------------
907-0601   00       2/10/92    IP Training Guide       Guide to be used by       Rex Frye
                                                       person experienced
                                                       with IP, for training
                                                       PTT FEs.
----------------------------------------------------------------------------------------------------
907-0602                       IP Skills - OJT         Module of the System      Glenda Leach
                               Module                  Operator OJT Program:
                                                       Basic Level.
----------------------------------------------------------------------------------------------------
910-0101   none     12/5/90    VLS Version                                       Joy Tamanaha
                               Description Document
----------------------------------------------------------------------------------------------------
910-0102   C0       5/3/94     VLS-Quser                                         Joy Tamanaha
                               Communication
                               Protocol
----------------------------------------------------------------------------------------------------
910-0103   F0       6/1/94     PacTel Teletrac CAD     Documents to              Joy Tamanaha
                               Interface               customers the
                               Requirements Spec       requirements of a
                                                       dispatch program in
                                                       order to interface to
                                                       CIVLS product.
----------------------------------------------------------------------------------------------------
910-0104   00       5/24/94    CVLS-Quser              Version of the
                               Interface               VLS-Quser Protocol.
                               Specification           Jeff updated to give
                                                       to outsiders.
----------------------------------------------------------------------------------------------------
911-0101   00       12/19/90   SVLS Software                                     Joy Tamanaha
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
911-0102   1.0      2/11/91    SVLS Version                                      Joy Tamanaha
                               Description Document
----------------------------------------------------------------------------------------------------
911-0201   00                  SVLS Software Test                                Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
911-0301   00                  SVLS Software           Tells customers how       Karen Birch
                               Installation &          to install the
                               Upgrade Guide           software or software
                                                       upgrade.
----------------------------------------------------------------------------------------------------
911-0401   none     4/30/91    SVLS User's Guide                                 Karen Birch
----------------------------------------------------------------------------------------------------
911-0402   none     4/30/91    SVLS Step-by-Step                                 Karen Birch
                               Guide
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

911-0501   00                  SVLS New Features       Tells customer what       Karen Birch
                               and Changes             the new features and
                                                       modifications are
----------------------------------------------------------------------------------------------------
912-0101   none     3/29/91    CVLS Software                                     Timothy Height
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
912-0102   B0       3/12/92    VDD for CVLS 3.2,                                 Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
912-0103   CZ       3/8/94     Fleet Director 3.5      Describes features of     Joy Tamanaha
                               Feature Requirement     CVLS 3.4, a design
                               Specification           document.
----------------------------------------------------------------------------------------------------
912-0104   review   9/1/93     VAR Workstation         Engineering document      Joy Tamanaha
                               Proposal                describing resources
                                                       needed, schedule, etc
----------------------------------------------------------------------------------------------------
912-0201   00                  CVLS Software Test                                Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
912-0301   00                  CVLS Software           Tells customer how to     Karen Birch
                               Installation &          install software or
                               Upgrade Guide           software upgrade.
----------------------------------------------------------------------------------------------------
912-0401   00       8/20/92    CVLS User's Guide                                 Karen Birch
----------------------------------------------------------------------------------------------------
912-0402                       CVLS Reference Guide                              Karen Birch
----------------------------------------------------------------------------------------------------
912-0403   00       8/20/92    CVLS Quick Reference                              Karen Birch
----------------------------------------------------------------------------------------------------
912-0601   00       8/20/92    CVLS New Features       Tells customer what       Karen Birch
                               and Changes             the new features and
                                                       modifications are
----------------------------------------------------------------------------------------------------
913-0101   00                  CSVLS Software                                    Joy Tamanaha
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
913-0102   B0       3/12/92    VDD for CSVLS 3.1,                                Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
913-0201   00                  CSVLS Software Test                               Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
913-0301   00                  CSVLS Software          Tells customer how to     Karen Birch
                               Installation &          install the software
                               Upgrade Guide           or software upgrade
----------------------------------------------------------------------------------------------------
913-0401   none     11/01/91   CSVLS User              Describes all the         Karen Birch
                               Reference Manual        features of CSVLS
                                                       that are not features
                                                       of CVLS. Used as a
                                                       supplement to CVLS
                                                       user documentation.
                                                       Also describes all
                                                       features of Teletrac
                                                       Access Level, whether
                                                       in CVLS also or just
                                                       in CSVLS.
----------------------------------------------------------------------------------------------------
913-0601   00                  CSVLS New               Tells customer what       Karen Birch
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                               Features                the new features and
                               and Changes             modifications are.
----------------------------------------------------------------------------------------------------
913-0602   0        2/20/92    CSVLS New Features      A self-paced workbook     Natalie Taylor
                    (Nat had   Training                for learning new
                    3/08/92)                           features of latest
                                                       release of CSVLS.
                                                       Current release 3.1.
----------------------------------------------------------------------------------------------------
913-0603                       CSVLS Skills - OJT      Module of the System      Anita Moore
                               Module                  Operator OJT
                                                       Program:  Basic Level.
----------------------------------------------------------------------------------------------------
914-0101   00       8/7/91     VDD for CIVLSSIM                                  Joy Tamanaha
                               1.0, Teletrac V1.3
----------------------------------------------------------------------------------------------------
914-0102   10       5/15/91    CIVLSSIM S/W                                      Joy Tamanaha
                               Requirements Spec
                               for V1.0
----------------------------------------------------------------------------------------------------
914-0103   00       8/7/91     VDD for CIVLS 1.0,                                Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
914-0104   00                  CIVLS Software                                    Joy Tamanaha
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
914-0301   00                  CIVLS Software          Tells customer how to     Karen Birch
                               Installation &          install the software
                               Upgrade Guide           or software upgrade.
----------------------------------------------------------------------------------------------------
914-0401   10       4/23/91    CIVLSSIM User's                                   Joy Tamanaha
                               Manual for V1.0
----------------------------------------------------------------------------------------------------
914-0601   00                  CIVLS New Features      Tells customer what       Karen Birch
                               and Changes             the new features and
                                                       modifications are.
----------------------------------------------------------------------------------------------------
915-0303   draft    11/15/90   GPS Site Survey                                   Ray/Florin
                               Procedure
----------------------------------------------------------------------------------------------------
915-0304   none     1/29/91    GPS Site Survey
                               Procedures (Short
                               Version)
----------------------------------------------------------------------------------------------------
915-0305   none     1/28/91    GPS Antenna
                               Installation
----------------------------------------------------------------------------------------------------
915-0306   draft    8/30/90    Grounding,                                        Ray Campbell
                               Lightning and AC
                               Surge Protection
----------------------------------------------------------------------------------------------------
915-0401   00                  Propagation                                       Bob Hopkins
                               Software User's
                               Guide
----------------------------------------------------------------------------------------------------
915-0402   00                  GPS Data Processing     Instructions for          Florin Stelzer
                               Guide                   processing data after
                                                       a GPS site survey has
                                                       been performed.
                                                       Includes instructions
                                                       for using software
                                                       program for this
                                                       purpose.
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

915-0607   00                  Site Spec               Training course for       Florin Stelzer
                                                       PTT FEs.
----------------------------------------------------------------------------------------------------
915-0608   00       9/18/92    How to Conduct a        Training course for       Florin Stelzer
                               GPS Survey for          PTT FEs.
                               Project Managers
                               and Field Engineers
----------------------------------------------------------------------------------------------------
916-0101   B0       3/12/92    VDD for RSSW 2.7,                                 Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
916-0102   00                  RSSW Software                                     Joy Tamanaha
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
916-0103   G0       9/17/92    RSSW Communication                                Joy Tamanaha
                               Protocol
----------------------------------------------------------------------------------------------------
916-0201   00                  RSU Receiving and                                 Richard La Porte
                               Assembly
----------------------------------------------------------------------------------------------------
916-0202   none     12/17/90   Base Station Test                                 Richard La Porte
                               Procedure
----------------------------------------------------------------------------------------------------
916-0203   00                  RSSW Software Test                                Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
916-0301   00                  Receive Site                                      Florin Stelzer
                               Installation Manual
----------------------------------------------------------------------------------------------------
916-0302   00                  Receive Site                                      TBD
                               Equipment
                               Installation
----------------------------------------------------------------------------------------------------
916-0401   review   5/27/93    RSSW User Reference     Describe displays and     Joy Tamanaha
                                                       controls of RSSW and
                                                       fields, as used in
                                                       the Control Center.
----------------------------------------------------------------------------------------------------
916-0501   none     2/92       RSU Field                                         Richard La Porte
                               Technicians Guide
----------------------------------------------------------------------------------------------------
916-0502   none     5/9/91     Equipment Repair        Procedure for             Richard La Porte
                               Procedure Tadiran       packaging and
                               Units                   shipping failed
                                                       component of RSU to
                                                       Technical Center; to
                                                       Tadiran depot; then
                                                       receiving and testing
                                                       back at Metro.
----------------------------------------------------------------------------------------------------
916-0601   00                  RFI Abatement           Training course for       Florin Stelzer
                                                       PTT FEs.
----------------------------------------------------------------------------------------------------
916-0603   00                  Synch Detect            Training course for       Florin Stelzer
                                                       PTT FEs.
----------------------------------------------------------------------------------------------------
916-0604   00                  RSSW and Tadiran        Training course for       Florin Stelzer
                                                       PTT FEs.
----------------------------------------------------------------------------------------------------
916-0605                       RSSW Skills - OJT       Module of the System      Peggy Vasco
                               Module                  Operator OJT
                                                       Program: Basic Level.
----------------------------------------------------------------------------------------------------
917-0101   00                  SPT Software                                      Joy Tamanaha
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
917-0102   draft    8/24/90    Simulcast Network                                 Bob Hopkins
                               Specification
----------------------------------------------------------------------------------------------------
917-0103   A0       3/12/92    VDD for SPT 2.5,                                  Joy Tamanaha
                               Teletrac V1.4
----------------------------------------------------------------------------------------------------
917-0104   input    10/7/92    SPT-QAVM                                          Joy Tamanaha
                               Communications
                               Protocol
----------------------------------------------------------------------------------------------------
917-0105   review   8/19/92    SPT-SPC                 Communications            Joy Tamanaha
                               Communications          protocol for
                               Protocol                Simulcast Paging
                                                       Controller (SPC).
----------------------------------------------------------------------------------------------------
917-0201   00                  Simulcast Cabinet                                 Bob Hopkins
                               Assembly Instruction
----------------------------------------------------------------------------------------------------
917-0202   00                  Simulcast                                         TBD
                               Installation Test &
                               Acceptance
----------------------------------------------------------------------------------------------------
917-0203   00                  SPT Software Test                                 Joy Tamanaha
                               Plan
----------------------------------------------------------------------------------------------------
917-0301   00                  Simulcast Site                                    Florin Stelzer
                               Installation Manual
----------------------------------------------------------------------------------------------------
917-0302   00                  Simulcast Equipment                               Bob Hopkins
                               Installation
----------------------------------------------------------------------------------------------------
917-0401   00                  SPT Instruction &                                 Bob Hopkins
                               Operation
----------------------------------------------------------------------------------------------------
917-0601   00       2/7/92     GPS Receiver            Training course for       Abel Montes
                               Odetics Model 325       PTT FEs.
                               SATSYNC Training
                               Guide
----------------------------------------------------------------------------------------------------
917-0602   00       4/6/92     Transmitter and         Training course for       Norm Leggett
                               Controller Training     PTT FEs.
                               Guide
----------------------------------------------------------------------------------------------------
917-0603   00       2/14/92    Simulcast Test          Training course for       Bill Goshay
                               Software SPX            PTT FEs. Includes
                               Training Guide          discussion topics to
                                                       be covered by
                                                       experienced user.
----------------------------------------------------------------------------------------------------
917-0604   00       ?          Simulcast Paging        A training document -     ?
                               Network                 describes the
                                                       Simulcast Paging
                                                       Network in some
                                                       technical detail, at
                                                       the level of a Field
                                                       Engineer or a
                                                       Software Engineer.
----------------------------------------------------------------------------------------------------
917-0605                       SPT Skills - OJT        Module of the System      Guy Cauthen
                               Module                  Operator OJT
                                                       Program: Basic Level
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

921-0101   00                  Procurement Spec        Describe                  Richard La Porte
                               for Calibration         specifications for
                               Transmitter Unit        outside manufacturer
                                                       to build from.
----------------------------------------------------------------------------------------------------
921-0201   B        7/17/92    Calibration             Acceptance test to be     Richard La Porte
                               Transmitter Unit        used by outside
                               Acceptance Test         manufacturer of CTU.
                               Procedure
----------------------------------------------------------------------------------------------------
921-0202   none     9/91       Calibration
                               Transmitter Unit
                               Installation and
                               Test Procedure
----------------------------------------------------------------------------------------------------
921-0301   00                  CLU Installation                                  Richard La Porte
                               and Operation
----------------------------------------------------------------------------------------------------
921-0302   A0       9/1/31     CTU Metro Code          Provides instruction      Joy Tamanaha
                               Upgrade Instructions    to Metros on how to
                                                       perform a hardware
                                                       upgrade at the sites.
----------------------------------------------------------------------------------------------------
922-0301   00                  DLU Installation &                                Richard La Porte
                               Operation
----------------------------------------------------------------------------------------------------
923-0401   00                  DFU (Direction          Instructions for          Drew Bradford
                               Finding Unit)           using the Direction       (Keith Smith)
                               User's Manual           Finding Unit (DFU).
                                                       DFU is used to locate
                                                       stolen vehicles that
                                                       are confined within a
                                                       residential garage,
                                                       or comparable
                                                       circumstances.
----------------------------------------------------------------------------------------------------
925-0101   11.C     6/30/93    VLU Second              Requirement
                               Generation              specification for
                               Requirements            second generation VLU
                                                       - includes both SVLU
                                                       and CVLU requirements.
----------------------------------------------------------------------------------------------------
925-0205   00                  VLU Qualification                                 Richard La Porte
                               Test
----------------------------------------------------------------------------------------------------
925-0206   none     3/91       Antenna Return Loss     Acceptance test for       Richard La Porte
                               Test Acceptance Test    hidden antenna.
----------------------------------------------------------------------------------------------------
925-0207   none     3/92       Burn-in Test
----------------------------------------------------------------------------------------------------
925-0208   none     3/92       SA Test Procedure
                               SA Trial Units
----------------------------------------------------------------------------------------------------
925-0211   none     5/92       CVLU Automatic Test
                               Equipment Test
                               Procedure
----------------------------------------------------------------------------------------------------
926-0101   00                  Multi-Function          Multi-function tester     Richard La Porte
                               Tester Functional       is used for testing
                               Specification and       an SVLU installation.
                               Test Procedure          It tests SA and RA
                                                       functionality, in
                                                       addition to other
                                                       SVLU functions.
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

926-0102   00       12/2/92    Passive RF Field        Specification that        Norm Leggel
                               Concept                 defines the concept
                                                       and protocol
                                                       requirements for a
                                                       CVLU bank bag
                                                       application. CVLU is
                                                       installed in box at
                                                       bottom of bank bag.
                                                       If bag is taken,
                                                       guard presses remote
                                                       panic button to send
                                                       a message to the
                                                       bank's CVLS
                                                       workstation.
----------------------------------------------------------------------------------------------------
926-0301   none     12/90      SVLU Installation                                 Victor/Richard
                               Guide
----------------------------------------------------------------------------------------------------
927-0101   none     8/91       Roadside Assistance                               Richard La Porte
                               Switch Assembly
                               Design
                               Recommendations
----------------------------------------------------------------------------------------------------
927-0102   00                  Status Messaging        (I think it should be     Joy Tamanaha
                               Terminal                "Status Message           (Massoud)
                               Requirements            Terminal
                                                       Requirements")
----------------------------------------------------------------------------------------------------
927-0103   00                  Display Messaging       (I think it should be     Joy Tamanaha
                               Terminal                "Data Message             (Massoud)
                               Requirements            Terminal
                                                       Requirements")
----------------------------------------------------------------------------------------------------
927-0104   01       6/16/93    MDT Interface           Describes user            Joy Tamanaha
                               Preprocessor User       interface
                               Interface Reqmt         requirements for s/w
                               Specs                   used by customer to
                                                       program Message
                                                       Display Terminal.
----------------------------------------------------------------------------------------------------
927-0301   B0       5/20/93    CVLU Installation                                 Victor/Richard
                               Guide
----------------------------------------------------------------------------------------------------
927-0303   00       10/5/92    CVLU Battery            Diagram showing how       John Dickson
                               Charger Application     to install CVLU in
                               Installation Guide      Battery Charger
----------------------------------------------------------------------------------------------------
927-0304   00                  Installation            Kenwood VLU in '93        Greg Gates
                               Instructions for        Chevy Capri - CVLU
                               Chicago Autoworks       with floor-mounted
                                                       panic button
----------------------------------------------------------------------------------------------------
927-0305                       EAP Installation                                  Joy
                               Guide
----------------------------------------------------------------------------------------------------
927-0401   00       6/23/93    Message Display         How to program the        Florin Stelzer
                               Terminal                MDT.
                               Programming Guide
----------------------------------------------------------------------------------------------------
927-0402   00       6/23/93    CVLU Programming        For use by Product        Joy Tamanaha
                               Guide                   Support personnel to
                                                       enable certain CVLU
                                                       programming
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

                                                       options.
----------------------------------------------------------------------------------------------------
930-0101   12       2/11/91    VDD for MIS 1.2,                                  Richard Fowler
                               Teletrac V1.1
----------------------------------------------------------------------------------------------------
930-0102   00                  MIS Software                                      Richard Fowler
                               Requirements
                               Specification
----------------------------------------------------------------------------------------------------
930-0201   00                  MIS Software Test                                 Richard Fowler
                               Plan
----------------------------------------------------------------------------------------------------
931-0401   00                  MIS OB User and                                   Mark Nelson
                               Reference Man
----------------------------------------------------------------------------------------------------
931-0402   draft    ?          FDR Access              Instructions for          Mark Nelson
                               Instructions            logging into and out
                                                       of FDR system.
----------------------------------------------------------------------------------------------------
931-5002   A        6/92       Base Station Tester
                               Operators Guide
----------------------------------------------------------------------------------------------------
932-0401   none     5/18/92    MIS Metro User          Describe the MIS as       Mark Nelson
                               Reference               installed in metro
                                                       Control Centers.
----------------------------------------------------------------------------------------------------
932-0601                       MIS Skills - OJT        Module of the System      unassigned
                               Module                  Operator OJT Program
                                                       Basic Level.
----------------------------------------------------------------------------------------------------
935-0301   draft    11/15/90   Digicom Analog                                    Florin Stelzer
                               Modem Installation
----------------------------------------------------------------------------------------------------
935-0302   draft    11/16/90   Fujitsu Data                                      Florin Stelzer
                               Service Unit
----------------------------------------------------------------------------------------------------
935-0303   draft    11/16/90   Anderson Jacobson                                 Florin Stelzer
                               Modem Installation
----------------------------------------------------------------------------------------------------
935-0304   draft    11/16/90   Line Impairment Test                              Florin Stelzer
----------------------------------------------------------------------------------------------------
935-0305   00                  Microcom HD2400
                               Modem
----------------------------------------------------------------------------------------------------
935-0306   00                  Diagnostic Modem                                  Bob Hopkins
                               Installation and
                               Operation
----------------------------------------------------------------------------------------------------
940-0001   00       6/24/93    Metro Environment       General                   Joy Tamanaha
                               Simulator (MES)         (non-technical)
                               Overview                overview of the MES,
                                                       which replaces the
                                                       need to use Los
                                                       Angeles system for
                                                       testing.
----------------------------------------------------------------------------------------------------
940-0101   review   5/3/93     Metro Environment       MES replaces the need     Joy Tamanaha
                               Simulator Software      to use Los Angeles
                               Requirements            Metro for testing.
                               Specification
----------------------------------------------------------------------------------------------------
940-2001   draft    9/11/90    VLU Automatic Test                                Richard La Porte
                               Equipment Test
                               Procedure Mitsubishi
----------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

----------------------------------------------------------------------------------------------------
DOC#       REV      DATE       TITLE                   DESCRIPTION               AUTHOR
----------------------------------------------------------------------------------------------------

970-0001   00                  Wiring List
----------------------------------------------------------------------------------------------------
</TABLE>




Draft    Never formatted by us and not formally released. Our only copy may have
         handwritten notes on it.

None     No revision was ever assigned. Usually the old documents.

Input    Have the rough input, but it needs to be formatted and edited.

NA       The document does not need a revision, like some training documents or
         collections of documents.

Review   Formatted by us and sent out for review, but not formally released.




                                   EXHIBIT C

                                ESCROW AGREEMENT


                                       12



                                ESCROW AGREEMENT

This ESCROW AGREEMENT dated as of May 10, 1996, is entered into by and among
Teletrac, Inc. a Delaware corporation (hereinafter referred to as "Teletrac" or
"Licensor"), Ituran Location and Control Ltd., a company organized under the
laws of the State of Israel (hereinafter referred to as "Ituran" or "Licensee"),
and Boatmen's Trust Company, a corporation organized under the laws of the State
of Missouri ("Escrow Agent"), with reference to the following facts:

A. Teletrac and Ituran are parties to that certain Radio Location System License
Agreement dated December 19, 1993, as amended (the "License Agreement"), a copy
of which is attached hereto as Exhibit "A," pursuant to which Teletrac has
licensed to Ituran certain computer software, including certain updates,
improvements, and enhancements thereof required to be delivered to Ituran under
the Licensee Agreement, all of which constitutes the licensed software
(collectively, the "Product").

B. It is the policy of Teletrac not to disclose the source codes for the
Product, except as provided in an applicable escrow agreement. For purposes of
this Agreement, "Source Code" shall mean the human-readable form of the computer
programming code for Product, as delivered to Ituran, that is in Teletrac's
possession or control and that Teletrac is required to disclose under certain
conditions. The material described in Exhibit "B" attached hereto constitutes
the Source Code for the Product licensed to the Ituran pursuant to the License
Agreement;

C. Teletrac and Ituran desire that upon the occurrence of certain events
described in Paragraph 3.1 below, Teletrac must deliver the Source Code to
Ituran.

THEREFORE, for valuable consideration Teletrac, Ituran, and Escrow Agent agree
as follows:

1. Deliveries to Escrow Agent.

1.1 Upon delivery of the Current Version Software, as set forth in Section
14.2.1 of the License Agreement, and upon delivery of the Final Version RLS
Licensed Software, as set forth in Section 14.2.2 of the License Agreement,
Teletrac shall deliver the Source Code to Escrow Agent. The Escrow Agent is not
required to independently verify the sufficiency of the delivery.

1.2 In addition, Teletrac shall deliver, on an annual basis, to Escrow Agent the
Source Code for any and all "RLS Licensed Software Upgrades" (as such term is
defined in Section 1.22 of the License Agreement) that Teletrac is required to
deliver to Ituran pursuant to the License Agreement (the "Upgrades").

2. Safekeeping of Source Code. The Source Code held by the Escrow Agent shall
remain the exclusive property of Teletrac, and the Escrow Agent shall not use
the source code or disclose the same to any third party except as specifically
provided for herein. The Escrow Agent shall hold the Source Code in safekeeping
at its offices indicated below unless and until the Escrow Agent is to deliver
the Source Code to Ituran or Teletrac, in which case the Escrow Agent shall
deliver the Source Code to such party, subject, however, to the provisions of
this Escrow Agreement.



3. Conditions for Release of Source Code.

3.1 The occurrence of any of the following shall constitute a "Condition of
Release" by Teletrac under this Agreement:

a. Ituran terminates the License Agreement in accordance with Section 6.3, 6.5
(provided that such termination is a result of Teletrac filing a voluntary
Chapter 7 bankruptcy petition or having an involuntary Chapter 7 bankruptcy
petition filed against it and such involuntary petition is not dismissed within
90 days) or 6.7.2 of the License Agreement and elects to continue to operate the
Radio Location System in the Territory.

b. Teletrac terminates the License Agreement in accordance with Section 6.5 of
the License Agreement and Ituran elects to continue to operate the Radio
Location System in the Territory.

c. Ituran terminates the License Agreement in accordance with Section 10.2 of
the License Agreement and elects to continue to operate the Radio Location
System in the Territory.

3.2 Ituran shall give written notice (the "Release Notice") to the Escrow Agent
of the occurrence of any Condition of Release. The Release Notice shall (a)
identify the License Agreement and this Escrow Agreement; (b) specify the
Condition of Release that has occurred; (c) identify the Source Code; and (d)
demand the delivery of the Source Code to Ituran.

3.3 Upon termination of the License Agreement for any reason other than those
specified in Section 3.1 above, Teletrac shall give written notice (the
"Termination Notice") to the Escrow Agent. The Termination Notice shall (a)
identify the License Agreement and this Escrow Agreement; (b) specify that the
License Agreement has terminated for reason other than a Condition of Release;
(c) identify the Source Code and (d) demand delivery of the Source Code to
Teletrac.

3.4 Upon receipt of the Release Notice or the Termination Notice, the Escrow
Agent shall send a copy thereof to the other party. If the other party desires
to dispute the Release Notice or the Termination Notice, such party shall,
within forty-five (45) days after the receipt of the copy of the Release Notice
or Termination Notice from the Escrow Agent, deliver to the Escrow Agent a sworn
statement (the "Affidavit") stating that the specified condition or termination
has not occurred, whereupon the provisions of Paragraph 4 below will become
applicable. If the Escrow Agent receives the Affidavit within such forty-five
(45) day period, the Escrow Agent shall send a copy thereof to the party that
sent the Release Notice or the Termination Notice, and Escrow Agent shall
continue to hold the Source Code under the terms of this Escrow Agreement. If
the Escrow Agent does not receive Affidavit within such forty-five (45) day
period, the Escrow Agent shall deliver the Source Code to the other party that
sent the Release Notice or Termination Notice.

4. Disputes.

4.1 In the event that a party files the Affidavit with the Escrow Agent in the
manner and within the time period set forth in Paragraph 3.4 above, the Escrow
Agent shall not release the Source Code to either party except (a) in accordance
with a final decision of the arbitration panel as set


                                        2



forth in Paragraph 4.2 below, or (b) upon receipt of an agreement executed by
Teletrac and Ituran, authorizing the release of the Source Code to Teletrac and
Ituran.

4.2 Disputes arising out of or relating to this Escrow Agreement, or the breach,
termination, or invalidity thereof, shall be settled in accordance with the
applicable dispute resolution provisions set forth in Section 19 of the License
Agreement. The Escrow Agent shall give prompt effect to any authenticated
arbitration award. Notwithstanding anything to the contrary contained in this
paragraph 4.2, neither party may terminate the Agreement nor pursue any remedies
for its material breach without first having given the breaching party written
notice of the material breach and an opportunity to cure such breach within
forty-five (45) days of the receipt of such written notice.

5. Payment to Escrow Agent. As payment for its services hereunder, Escrow Agent
shall receive an acceptance fee of $100.00 and an annual fee of $1,000.00, which
fees shall be shared equally by Teletrac and Ituran.

6. Termination. This Escrow Agreement shall terminate (i) upon delivery of the
Source Code to either Teletrac or Ituran in accordance with the terms of this
Agreement or (ii) upon termination of the License Agreement.

7. Modification; Severability. This Escrow Agreement shall not be waived,
amended, or modified except by the written agreement of all the parties hereto.
Any invalidity, in whole or in part, of any provision of this Escrow Agreement
shall not affect the validity of any other of its provisions.

8. Notice. All notices under this Agreement shall be in writing and shall be
effective when delivered in person to the recipient by courier.

All notices to Teletrac shall be delivered to:

Mr. Jim Queen
Chief Executive Officer
Teletrac, Inc.
8900 State Line Rd., Ste. 500
Leawood, KS 66206
Tel.: (913) 642-4799
Fax: (913) 642-4214

with a copy to:

Mr. Steve Scheiwe
General Counsel
Teletrac, Inc.
8900 State Line Rd., Ste. 500
Leawood, KS 66206
Tel.: (913) 642-4799
Fax: (913) 642-4214


                                        3



All notices to Ituran shall be delivered to:

Gideon Ezra
General Manager
Ituran Location and Control Ltd.
3a Hasikma St.
Azur, Israel
Tel.: 972-3-557-1313
Fax: 972-3-557-1391

with a copy to:

Dr. Eddo Dinstein
Cohen Lahat & Co.
155 Bialik St.
Ramat Gan, Israel
Tel.: 972-3-751-2061
Fax: 972-3-751-2066

Escrow Agent shall be sent to:

men's Trust Company
Main
as City, MO 64105
(816) 691-5230
(816) 691-5755
Attention: Corporate Trust Department

Responsibility and Liability.

Escrow Agent shall not be obligated or required to examine or inspect the Escrow
Agent shall exercise reasonable care with respect to safekeeping and shall
provide at least the same degree of care for the Source Codes its valuable
documents and those of its customers lodged in the same riate atmospheric or
other safeguards.

Escrow Agent shall be protected in acting upon any written notice, ent, receipt,
or other paper or document furnished to Escrow Agent, not due execution and the
validity and effectiveness of the provisions of the truth and acceptability of
any information therein contained, which nably and in good faith believes.

Escrow Agent shall have no duties except those which are expressly set

ac and Ituran hereby jointly and severally indemnify the Escrow Agent lity, or
damage (other than any loss, liability, or damage caused by the willful
misconduct of Escrow Agent), including reasonable costs of s' fees, arising from
and in connection with the performance of Escrow bligations under this Agreement
as such duties and obligations pertain


                                        4



parties agree that all remedies and damages that might otherwise be rac or
Ituran for claims arising out of or related to this Agreement shall ations set
forth in the License Agreement, including, but not limited to lity set forth in
Section 13 of the License Agreement.

Escrow Agent's General Terms and Conditions for Escrow Agreements, hereto as
Exhibit C, is hereby incorporated herein by reference.

This Escrow Agreement may be executed in multiple counterparts each original,
and all of which together shall constitute one and the same

12. Binding Effect. This License Agreement shall be binding on and inure to the
benefit of the respective successors and permitted assigns of the parties.

13. Entire Agreement. This Escrow Agreement, together with the License
Agreement, constitutes the entire agreement of the parties with respect to the
escrow of the Source Code, and supersedes any and all prior negotiations,
correspondence, understanding, and agreements between the parties respecting the
subject matter of this Escrow Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be
executed and delivered by their duly authorized representatives as of the year
and date first-above written.



ESCROW AGENT:                           LICENSOR:

-------------------------------------   Teletrac, Inc.


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------          ---------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------
Date:                                   Date:
      -------------------------------         ----------------------------------


                                        LICENSEE:

                                        Ituran Location and Control, Inc.


                                        By: /s/ Avner King  /s/ Sheratzki Eazi
                                            ------------------------------------
                                        Name: Avner King  Sheratzki Eazi
                                        Title: Managers
                                        Date: 5/5/96



                                        5


















                                                                    EXHIBIT 10.5

                               AMENDMENT AGREEMENT

This Amendment Agreement (this "Agreement"), is made and entered into as of this
1st day of March, 1999, by and between Teletrac, Inc., a Delaware corporation
and Ituran Location and Control, Ltd., a company organized under the laws of the
State of Israel ("Ituran").

PREMISES

1. Teletrac and Ituran are parties to a certain Assignment, Assumption, Consent
and Amendment Agreement dated April 30, 1996 (the "Assignment Agreement"),
pursuant to which Teletrac and Ituran became assignees and successors in
interest to the rights and obligations of the original parties to that certain
Radio System License Agreement dated December 16, 1993, as amended, including,
without limitation, as amended by the Assignment Agreement (the "RLS License
Agreement").

2. Ituran has requested an opportunity to forego payment of all future royalties
due under Section 4 of the RLS License Agreement effective for the periods after
September 30, 1998 and Teletrac has agreed to allow it to do so, on the terms
and conditions set forth herein.

AGREEMENTS

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:

1. Definitions. For the purposes of this Agreement, all terms not otherwise
defined herein that are defined in the RLS License Agreement shall have the
meanings given to such terms in the RLS License Agreement.

2. Payment. In consideration for the payment by Ituran to Teletrac of the sum of
One U.S. Dollar ($1.00), Teletrac agrees that Ituran shall have no further
obligation to make royalty payments to Teletrac pursuant to Section 4 of the RLS
License Agreement. All other provisions of the RLS License Agreement shall
remain in full force and effect.

3. Miscellaneous. The parties acknowledge and agree that the provisions set
forth in Sections 18, 19, 20.2, 20.3, 20.4, 20.5, 20.6, 20.7, 20.8, 20.9, 20.10,
20.11, 20.15 and 20.16 of the RLS License Agreement are incorporated herein by
reference, except that the term "License Agreement" shall be read as
"Agreement," where appropriate in such Sections.






IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the day and year first written above.

TELETRAC, INC.

By: /s/ Steven D. Scheiwe
    -------------------------------

Name:  Steven D. Scheiwe

Title: Vice President & Secretary

Date:  March 1, 1999


ITURAN LOCATION AND CONTROL LTD.

By: /s/ Easi Sherafzky
    -------------------------------

Name:  Easi Sherafzky
       --------------

Title:  CEO
        ------------------

Date:  March 1, 1999
       -------------






                                                                    EXHIBIT 10.6

                              RADIO LOCATION SYSTEM

                               LICENSE AGREEMENT

                              DATED JULY 13, 2004

                                    BETWEEN

                                 TELETRAC, INC.

                                      AND

                           TELEMATICS WIRELESS, LTD.






RADIO LOCATION SYSTEM LICENSE AGREEMENT
---------------------------------------

THIS RADIO LOCATION SYSTEM LICENSE AGREEMENT (this "License Agreement"), dated
this 13th day of July, 2004, is made by and between TELETRAC, INC., a Delaware
corporation, ("Teletrac"), and Telematics Wireless Ltd., a corporation organized
under the laws of the State of Israel ("Licensee"). Teletrac and Licensee are
sometimes individually referred to as "Party" and collectively as "Parties."

WITNESSETH:

WHEREAS, Teletrac owns or possesses rights to proprietary information,
technology and software necessary for the establishment and operation of a Radio
Location System, as defined below; and

WHEREAS, Licensee desires to establish and operate within the Territory a Radio
Location System; and

WHEREAS, subject to the terms and conditions of this License Agreement, and only
for purposes within the Territory, Teletrac desires to grant to Licensee: (i) a
non - exclusive, royalty free, perpetual, transferable right to use, construct,
maintain and provide support for a Radio Location System, and to market, sell,
promote, maintain and provide support; and (ii) a non - exclusive, royalty free,
perpetual, transferable license to use RLS Licensed Software and RLS Licensed
Technical Information, as defined below, to construct, maintain, operate and
provide support for a Radio Location System in the Territory, and Licensee
desires to acquire such right and licenses.

WHEREAS, Teletrac shall not be obliged to provide licensee any equipment
(hardware, software or firmware), knowledge or support relating to the Radio
Location System.

NOW THEREFORE, in consideration of the foregoing and the mutual premises set
forth in this License Agreement, the Parties agree as follows:

1. Definitions.

1.1 "Effective Date" shall mean the date of this Agreement.

1.2 "Radio Location System" shall mean a land-based radio location system that
uses the RLS Licensed Software and RLS Licensed Technical information for
purposes of locating animate or inanimate objects, including people, objects and
vehicles, and for ancillary activities such as data messaging or voice messages,
or both.

1.3 "RLS Coverage Area" shall mean the geographic area of desired coverage of
the Radio Location System.

1.4 "RLS Licensed Software" shall mean operational computer software or firmware
programs, or both, that are listed in Exhibit A to this License Agreement and
sublicensed by Teletrac to Licensee. The RLS Licensed Software does not include
management information software, including, but not limited to, for purposes
such as customer activation, billing and accounting.



The RLS Licensed Software programs are the programs designed to perform the
following functions for the Radio Location System:

(1) RLS Network Control Center Licensed Software. These software programs
consist of the following three categories:

(a) Real time operating software that communicates and synchronizes information
received from Location Unit radio signals to calculate locations in real time;

(b) Systems support and maintenance software that enables RLS Customers to
access a Radio Location System, forwards requests for locations to RLS
Transmission Sites and diagnoses Radio Location System malfunctions;

(c) Database services software that performs customer validation functions,
tracks or records use of the Radio Location System and performs message
management functions.

(2) RLS Transmission and RLS Receiver Sites Licensed Software. These software
programs perform calculations and act as an interface for signals from RLS
Receiver Sites and RLS Transmission Sites and the RLS Data Transmission Network.

1.5 "RLS Licensed Technical information" shall mean all tangible together with
intangible information that is proprietary to Teletrac and that was provided to
the Licensee and may assist Licensee for the purpose of designing, constructing
and operating and maintaining the RLS in the Territory.

1.6 "RLS Network Control Center" shall mean the master station that serves a RLS
Coverage Area. The RLS Network Control Center consists of a group of networked
or interconnected computers, or both, that constitute the information processing
hub of the Radio Location System.

1.7  "Territory" shall mean the countries described on Exhibit B.

2. Grant of Rights.

2.1 Radio Location System License. As of the Effective Date, and subject to the
terms and conditions of this License Agreement, Teletrac grants to Licensee a
non - exclusive, royalty free, perpetual, transferable right, solely within the
Territory, to construct, use, maintain and provide support for a Radio Location
System, and to market, sell, promote, maintain and provide support for the Radio
Location System, customer equipment and customer services, and to provide
customer maintenance, at every country within the Territory. It is agreed,
Licensee may sublicense any of its rights under this Agreement, provided
however, Licensee remains sole responsible for any payments due under this
Agreement

2.2 RLS Licensed Software and RLS Licensed Technical Information. As of the
Effective Date, and subject to the terms and conditions of this License
Agreement, Teletrac grants to Licensee a non-exclusive, royalty free, perpetual,
transferable license to use RLS Licensed Software and RLS Licensed Technical
Information solely for the purpose of operating, maintaining and providing
support for a Radio Location System in the Territory. It is agreed, Licensee may



sublicense any of its rights under this Agreement, provided however, Licensee
remains sole responsible for any payments due under this Agreement.

3. Reservation of Rights. Except as to those certain countries in which rights
and licenses expressly granted to Licensee under this License Agreement,
Teletrac reserves all proprietary rights, title and interest, including all
ownership and proprietary rights, in and to the Radio Location System, RLS
Licensed Software, RLS Licensed Technical Information and the "Teletrac" trade
name, trademark and service mark, including all designs, inventions, patents,
copyrights, trademarks, service marks, trade secrets, know-how, techniques,
engineering details, enhancements, improvements, addition, upgrades,
modifications, derivative works. Licensee acknowledges that no title to the
"Teletrac" marks, RLS Licensed Software or RLS Licensed Technical Information,
or any part thereof, has been or will be transferred to Licensee.

4. Consideration.

4.1 Fees. In consideration for the grant of rights to Licensee in this License
Agreement, Licensee will perform the obligations set forth in this License
Agreement and will pay to Teletrac the following amounts:

4.1.1 Lump Sum Payment. Licensee shall pay to Teletrac the sum of One Hundred
thousand U.S. Dollars (U.S. $100,000.00) (the "Lump Sum Payment") for each
Customer of Licensee that operates a Radio Location System in each country
within the Territory. For example, the Lump Sum Payment for the same Customer to
operate a network in two different countries would be $200,000 ($100,000 per
country); likewise, the License Fee for 2 separate Customers operating networks
in the same country would be $200,000 ($100,000 per Customer).

4.1.2 The Lump Sum Payment shall be payable by Licensee to Teletrac within
thirty (30) days following the first commercial sale of RLS services by given
Licensee customer. Licensee shall notify Teltrac the name of the country within
the Territory and the name of the customer that has started to provide
commercial RLS services.

4.2 Payments. All payment shall be due and payable in U.S. dollars. Payments
shall be inclusive of any all taxes, including deduction for Israeli withholding
taxes that apply to payments from Licensee to Teletrac. Any Lump Sum Payment not
received by Teletrac as set forth in Section 4.1.2 shall incur an administrative
fee of 10% to compensate Teletrac for administrative costs associated with such
late Lump Sum Payment. Thereafter, all outstanding amounts shall accrue interest
at a rate of 15% per annum. Licensee may pay any payments stated above, through
a subsidiary.

5. Radio System Location Equipment. Licensee acknowledges that Teletrac does not
manufacture or provide any of the equipment that will be needed in order to
construct and operate the Radio Location System in the Territory. The Parties
acknowledge and agree that Licensee is free to purchase any equipment needed for
the RLS operation and any and all other equipment and materials needed in order
to construct and operate the Radio Location System in the Territory from any
individual or entity that manufactures such equipment in accordance with the
technical and other specifications necessary to properly operate the Radio
Location System. Licensee acknowledges and agrees that Teletrac does not provide
any representation or warranty



of any kind, express or implied, including, without limitation, any implied
warranty of merchantability or fitness for a particular purpose on any equipment
or materials obtained by License from any third party.

6. Term. This License Agreement shall commence on the Effective Date and shall
remain in effect indefinite.

7. No Damages. Except for damages arising out of Licensee's failure to pay any
Lump Sum Payment as they become due, neither Licensee nor Teletrac shall, be
liable to the other for compensation, reimbursement or any damages, either
actual, consequential, incidental, special or punitive, including, but not
limited to, the loss of prospective profits on anticipated sales, or on account
of expenditures, investments, leases or commitments in connection with the
business or goodwill of Teletrac or Licensee or otherwise anticipated under this
License Agreement. In the case of failure of Licensee to pay a Lump Sum Payment,
Teletrac shall be entitled to all reasonable costs and expenses, including but
not limited to attorneys costs, including costs and expenses of obtaining legal
representation in Israel, incurred by Teletrac in collecting any outstanding
Lump Sum Payment.

8. Licensee Indemnity.

Licensee shall defend, indemnify and hold harmless Teletrac, and its directors,
officers, employees and agents from and against any and all claims, demands,
liabilities, actions, suits, proceedings or expenses (including reasonable
attorney's fees) asserted by a third party: (a) arising out of or relating to
Licensee's marketing, sale, use, design, construction, manufacture, maintenance,
repair, modification, upgrade, enhancement, improvement or support of the Radio
Location System in the Territory, or any part thereof, and Licensee agrees to
undertake the cost of defending the same, and will pay resulting costs and
damages finally awarded, provided that:

(1) Teletrac promptly notifies Licensee of the claim;

(2) Teletrac cooperates with Licensee in the defense, provided that Licensee
reimburses Teletrac for its reasonable out-of-pocket expenses (including
reasonable outside counsel's legal fees) associated with such cooperation; and

(3) Licensee has sole control of the defense and all related settlement
negotiations, using counsel reasonably satisfactory to Teletrac.

9. NO WARRANTY. TELETRAC MAKES ABSOLUTELY NO WARRANTIES, EXPRESS OR IMPLIED,
WITH RESPECT TO THE RADIO LOCATION SYSTEM OR ANY PART THEREOF, INCLUDING, BUT
NOT LIMITED TO, THE RLS COMPONENTS, RLS LICENSED SOFTWARE AND RLS LICENSED
TECHNICAL INFORMATION. BY WAY OF EXAMPLE, BUT NOT OF LIMITATION, TELETRAC MAKES
NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY
THAT THE RADIO LOCATION SYSTEM, OR ANY PART THEREOF, IS ERROR-FREE OR THAT ITS
USE WILL BE UNINTERRUPTED OR THAT THE RADIO LOCATION SYSTEM WILL BE A PROFITABLE
ENTERPRISE FOR LICENSEE. LICENSEE ACKNOWLEDGES THAT IT HAS MADE AN INDEPENDENT
INVESTIGATION OF THE RADIO LOCATION SYSTEM BUSINESS THAT IT WILL CONDUCT UNDER
THIS



LICENSE AGREEMENT. TELETRAC AND EACH OF ITS AFFILIATES EXPRESSLY DISCLAIM THE
MAKING OF, AND LICENSEE ACKNOWLEDGES THAT IT HAS NOT RECEIVED OR RELIED UPON,
ANY GUARANTEE OR REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE FEASIBILITY OF
OPERATING A RADIO LOCATION SYSTEM IN THE TERRITORY, AS TO LICENSEE'S ABILITY TO
DESIGN, CONSTRUCT, OPERATE OR MAINTAIN A RADIO LOCATION SYSTEM IN THE TERRITORY
OR AS TO THE COSTS LICENSEE MAY INCUR OR THE REVENUES IT MAY RECEIVE WITH
RESPECT TO A RADIO LOCATION SYSTEM IN THE TERRITORY. LICENSEE FURTHER
ACKNOWLEDGES THAT IT HAS NO KNOWLEDGE OF ANY REPRESENTATIONS BY ANY OFFICER,
EMPLOYEE, OR AGENT OF TELETRAC THAT ARE CONTRARY TO THIS SECTION 9.

10. Relationship of the Parties. The relationship of the parties established by
this License Agreement shall be that of independent contractors. Nothing in this
License Agreement shall be construed to create an agency, partnership, joint
venture or employment relationship between Licensee and Teletrac, nor to make
Licensee the agent of Teletrac, or Teletrac the agent of Licensee, for any
purpose. Neither party is granted authority by the other to undertake
commitments, transact business, create or assume any obligation (express or
implied) or otherwise act (or represent that it can act) in the other's name or
on the other's behalf.

11. Force Majeure. If the performance of either Party required by this License
Agreement is prevented, restricted or delayed by fire, other casualty or
accident, war or violence or serious threat of the same, arrest or restraint of
government, requisition of vessel or aircraft, explosion, governmental request,
guidance, order or regulation, or any other circumstance beyond the reasonable
control of the Party and without such Party's fault or negligence, the affected
Party, upon giving due notice to the other Party, shall be excused from such
performance, but only to the extent directly attributable to the circumstance
and the excused party shall not be liable for loss or damage or failure of or
delay in such performance.

12. Governing Law. The governing law of this License Agreement shall be that of
the State of California, U.S.A., as if both parties hereto were resident and
doing business in such state.

13. Notices. All notices under this License Agreement shall be in writing and
may be given by delivering the same by hand, or by sending the same by an
overnight courier that maintains verification of delivery, or by facsimile, to
the relevant person and address set out below or such other person and address
as either Party may notify to the other from time to time. Any such notice given
as set forth above shall be deemed to have been given or received at the time of
delivery (if delivered by hand) and upon verified receipt (if sent by post,
facsimile or overnight courier). In the case of facsimile, the transmission
report shall constitute the verified receipt. Each Party may, at any time,
change the persons or address to which its notices are to be sent by notifying
the other Party of such change in accordance with this Section 15.






Teletrac                                       Licensee
--------                                       --------
Teletrac, Inc.                                 Telematics Wireless Ltd.
7391 Lincoln Way                               26 Hamlacha
Garden Grove, CA 92841                         Holon, Israel
(714) 934-8791 (Tel)                           (972-3) 5575757 (Tel)
(714) 379-6378 (Fax)                           (972-3) 5575703 (Fax)

Attn: General Counsel                          Attn: President & CEO


14. English Language. All communications, notices and records required to be
kept under and materials provided pursuant to this License Agreement shall be in
English.

15. Scope and Amendment of License Agreement. The parties acknowledge that each
has read this License Agreement, understands it and agrees to be bound by its
terms. This License Agreement may be amended only by a subsequent writing that
specifically refers to this License Agreement and that is signed by both
Parties, and no other act, document, usage or custom shall be deemed to amend
this License Agreement.

16. Binding Effect. This License Agreement shall be binding on and inure to the
benefit of the respective successors and permitted assigns of the parties.

17. Authority. Each of the respective persons executing this License Agreement
hereby covenants and warrants that such person has full legal power, right and
authority to bind the entity on whose behalf such person is signing to each and
every term and provision herein.

18. Severability. If any provision of this License Agreement shall be held
illegal or invalid by and court, this License Agreement shall be construed and
enforced as if such illegal or invalid provision had not been contained herein
and this License Agreement shall be deemed an agreement of the Parties to the
full extent permitted by law. If any provision shall be declared invalid or
unenforceable because of its breadth, scope or duration, such provision shall be
deemed modified to the extent necessary to make it valid and enforceable and
shall remain in full force and effect as so modified, or if not so modified,
shall be severable from the rest of this License Agreement.

19. Headings. All headings are for reference only and shall not be considered in
construing this License Agreement.

20. Waiver. The failure of either Party at any time to require performance by
the other Party of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter. Nor shall the waiver by either
party of a breach of any provision hereof be a waiver of any succeeding breach
of the same or any other such provisions or be a waiver of the provision itself.

21. Entire Agreement. This License Agreement together with its Exhibits
constitute the entire agreement of the parties with respect to the license of
the RLS Licensed Software and RLS Licensed Technical Information to Licensee and
supersede any and all prior negotiations,



correspondence, understandings and agreements between the parties, and the full
understanding of the Parties is embraced herein.

22. Exhibits. The following exhibits are a part of this License Agreement:

Exhibit A - List of RLS Licensed Software

Exhibit B - Territory Description

23. Construction of Agreement. This License Agreement has been negotiated by the
Parties and their respective attorneys and the language of this Agreement shall
not be construed for or against either party.

24. Counterparts. This License Agreement may be executed in counterparts, each
of which shall be an original as against any Party whose signature appears on
such counterpart and all of which together shall constitute one and the same
instrument.

IN WITNESS WHEREOF, the Parties executed and delivered this License Agreement as
of the day and year first above written.



TELEMATICS WIRELESS, LTD.                   TELETRAC, INC


By           /s/ Eddy Kafry              By             /s/ Michael Gaddis
             ------------------------                   ------------------------

Print Name   Eddy Kafry                     Print Name     Michael Gaddis
             ----------

Title        President & CEO                Title          Secretary
             ---------------

Date:        June    , 2004                 Date:          July 13, 2004
             --------------








                                   EXHIBIT A

                             RLS LICENSED SOFTWARE

Component           O/S    Purpose
---------           ---    -------

RXIF                QNX4   Interface to Tadiran Receiver sites
TXIF                QNX4   Interface to transmit sites using Simulcast
                           Paging Controller
SOLVR               QNX4   Multilateration position determination
ITH                 QNX4   Inbound transmission handler
RMGR                QNX4   Request Manager for user service requests
TP                  QNX4   Transaction Processor to capture transaction data for
                           billing
CAM                 QNX4   Customer Access Monitor for FD3.x access lines
SCHED               QNX4   Transmission Scheduler for Simulcast Paging System
ASMGR               QNX4   Process messages initiated from mobile units
CAL                 QNX4   Calibrate receiver site timing
SF                  QNX4   Message store and forward services
Traccess            QNX4   Dial in access for FD3.x protocol
Traccess II         QNX4   TCP/IP Access for FDEE protocol
Mqueue              QNX4   Message queuing between QNX tasks on same LAN
QWIS                QNX4   Message queuing between QNX tasks on same WAN
SMC Server          QNX4   Network management server
SMC Workstation     NT4    Network management workstation
DBClient            QNX4   Route database queries from QNX to WINDOWS NT
Eventlogger         QNX4   Performance analysis database capture
Eventlogger         NT4    ODBC Interface to MS-SQL Server for Eventlogger
WDBServer           NT4    ODBC Interface to MS-SQL Server for DBCLIENT
CAB                 NT4    Customer Access Bridge
CDPDMgr*            NT4    CDPD Network Interface
CustomerDB          SQL    Customer database schema
EventLogStat        SQL    Eventlogger statistical database schema
SimonClient         W95    Data entry for MS-SQL Server



* This component is required only for CDPD network access.






                                   EXHIBIT B

TERRITORY
---------

The entire world, excluding United States and Europe.







                                                                    EXHIBIT 10.7

                                                        EXECUTION COPY
                                                        --------------

                    RADIO LOCATION SYSTEM LICENSE AGREEMENT
                    ---------------------------------------

THIS RADIO LOCATION SYSTEM LICENSE AGREEMENT (this "License Agreement"), dated
this 13th day of July, 1999, is made by and between TELETRAC, INC., a Delaware
corporation ("TI") and Teletrac License Inc., a Delaware corporation ("TLI"),
(TI and TLI are collectively referred to herein as "Teletrac"), and ITURAN USA,
INC., a Delaware corporation ("Licensee"). Teletrac and Licensee are sometimes
individually referred to as "Party" and collectively as "Parties."

WITNESSETH:

WHEREAS, Teletrac and Ituran have entered into an Asset Purchase and Option
Agreement dated as of June 9, 1999 ("Asset Purchase Agreement"), pursuant to
which Teletrac will sell and Ituran will purchase certain assets and properties
of Teletrac, including the license granted pursuant to this License Agreement,
and Licensee shall assume specified liabilities of Teletrac, on the terms and
subject to the conditions set forth in the Asset Purchase Agreement;

WHEREAS, Teletrac owns or possesses rights to proprietary information,
technology and software necessary for the operation of a Radio Location System,
as defined below;

WHEREAS, Teletrac has agreed to transfer, subject to applicable regulatory
approval, to Licensee Teletrac's Spectrum License for operation of a landbased
radio location system in the Territory, as defined below; and

WHEREAS, subject to the terms and conditions of this License Agreement and the
Asset Purchase Agreement, and only for purposes within the Territory, Teletrac
desires to grant to Licensee an exclusive (except as necessary for Teletrac to
continue to service its commercial customers on the Radio Location System in the
New York and Washington D.C. metropolitan areas that Licensee is acquiring
pursuant to the Asset Purchase Agreement) nontransfereable (except as permitted
by Section 21.6) license to use RLS Licensed Software and RLS Licensed Technical
Information, as such terms are defined below, to construct, maintain, operate
and provide support for a Radio Location System in the Territory, and Licensee
desires to acquire such right and licenses.

NOW THEREFORE, in consideration of the foregoing and the mutual premises set
forth in this License Agreement, the Parties agree as follows:

1. Definitions.

1.1 "Contract Administrator" shall mean the person designated by each Party as
the contact person at such Party for matters, other than engineering matters,
concerning the administration of this License Agreement.

1.2 "Contract Technical Coordinator" shall mean the person designated by each
Party as the contact person at such Party for engineering matters related to
this License Agreement.




1.3 "Effective Date" shall mean the date on which both Parties have executed and
delivered this License Agreement.

1.4 "RLS" shall mean Radio Location System.

1.5 "Radio Location System" shall mean a land-based radio location system that
uses the RLS Licensed Software and RLS Licensed Technical Information for
purposes of locating animate or inanimate objects, including people and
vehicles, and for ancillary activities such as data messaging.

1.6 "RLS Components" shall mean all components of the Radio Location System in
the Territory. In general, the major components are: the RLS Customer
Workstation; the RLS Network Control Center and network; the RLS Transmission
Sites; the RLS Receiver Sites; and the RLS Location Units. Each of these major
components, in turn, has a number of constituent parts, all of which are
considered "RLS Components" for purposes of this License Agreement.

1.7 "RLS Coverage Area" shall mean the geographic area of designated coverage of
the Radio Location System in the Territory.

1.8 "RLS Customer" shall mean a purchaser, renter, lessee or other end user of
any RLS Customer Equipment, RLS Customer Maintenance, RLS Customer Services or
RLS Component, that is provided with respect to the Radio Location System in the
Territory.

1.9 "RLS Customer Equipment" shall mean the equipment, including, but not
limited to, RLS Location Unit and RLS Customer Basestations, that enables an RLS
Customer to receive RLS Customer Services.

1.10 "RLS Customer Services" shall mean the services provided by means of the
Radio Location System, including, but not limited to radio location and data
messaging. RLS Customer Services do not include RLS Customer Maintenance.

1.11 "RLS Customer Workstations" shall mean a workstation installed at an RLS
Customer site that enables an RLS Customer to forward requests for locations to
the RLS Network Control Center, that receives location information from the RLS
Network Control Center and displays locations on an RLS Map. The RLS Customer
Workstation consists of hardware and software components.

1.12 "RLS Data Transmission Network" shall mean the data transmission equipment
that transports data between RLS Transmission Sites, RLS Receiver Sites and the
RLS Network Control Center.

1.13 "RLS Licensed Software Corrections" shall mean any and all technical,
functional, operational or other corrections or modifications to the RLS
Licensed Software that are designated by Teletrac, in its sole discretion, to be
minor corrections or modifications. RLS Licensed Software Corrections shall not
include any software or other proprietary data that a third party owns and that
Teletrac is not authorized to disclose. RLS Licensed Software Corrections that
Teletrac provides to Licensee during the term of this License Agreement shall be
treated as RLS Licensed Software for all purposes under this License Agreement.

                                       2


1.14 "RLS Licensed Software Upgrades" shall mean any and all technical,
functional, operational or other enhancements, improvements, additions, upgrades
or modifications to, and new versions of, the RLS Licensed Software other than
the RLS Licensed Software Corrections. RLS Licensed Software Upgrades shall not
include any software or other proprietary data that a third party owns and that
Teletrac is not authorized to disclose. RLS Licensed Software Upgrades that
Teletrac provides to Licensee during the term of this License Agreement shall be
treated as RLS Licensed Software for all purposes under this License Agreement.

1.15 "RLS Licensed Software" shall mean the executable format versions of the
operational computer software or firmware programs, or both, that are listed in
Exhibit A to this License Agreement and are commonly referred to by Teletrac as
the "SIMON software", as such programs exist and, to the extent applicable, may
be sublicensed by Teletrac to Licensee, at the time of delivery in accordance
with this License Agreement, and available documentation relating to the use of
such software or firmware. The RLS Licensed Software does not include management
information software, including, but not limited to, for purposes such as
customer activation, billing and accounting, and Licensee will be responsible
for supplying any such software. In summary, the RLS Licensed Software programs
are the programs designed to perform the following functions for the Radio
Location System:

(1) RLS Customer Workstations Licensed Software. These software programs enable
the RLS Customer to send and receive information to and from the RLS Network
Control Center and to display the location date on the RLS Map when such map is
provided as part of the RLS Customer Workstation.

(2) RLS Network Control Center Licensed Software. These software programs
consist of the following three categories:

(a) Real time operating software that communicates and synchronizes information
received from RLS Location Unit radio signals to calculate locations in real
time.

(b) Systems support and maintenance software that enables RLS Customers to
access a Radio Location System, forwards requests for locations to RLS
Transmission Sites and diagnoses Radio Location System malfunctions.

(c) Database services software that performs customer validation functions,
tracks or records use of the Radio Location System and performs message
management functions.

(3) RLS Transmission and RLS Receiver Sites Licensed Software. These software
programs perform calculations and act as an interface for signals from RLS
Receiver Sites and RLS Transmission Sites and the RLS Data Transmission Network.

1.16 "RLS Location Unit" shall mean a radio transceiver and its antenna that is
capable of receiving and sending radio signals. A RLS Location Unit enables a
Radio Location System to locate the object to which such RLS Location Unit is
attached.

1.17 "RLS Map" shall mean the digitized map of the RLS Coverage Area that
Licensee will provide and use.

                                       3


1.18 "RLS Network Control Center" shall mean the master station that serves a
RLS Coverage Area. The RLS Network Control Center consists of a group of
networked or interconnected computers, or both, that constitute the information
processing hub of the Radio Location System.

1.19 "RLS Receiver Sites" shall mean the receivers that gather RLS Location Unit
radio signals. Each RLS Receiver Site consists of equipment and software
components that capture and convert transmitter and RLS Location Unit radio
signals to a computer usable level, and calculate and transmit to the RLS
Network Control Center information about the signals received.

1.20 "RLS Licensed Technical Information" shall mean the manuals, blue prints
and other tangible data listed in Exhibit C to this License Agreement, together
with intangible information that is proprietary to Teletrac and that may assist
Licensee to use the information listed in Exhibit B for the purpose of
designing, constructing and operating and maintaining the RLS in the Territory.

1.21 "RLS Licensed Technical Information Corrections" shall mean any and all
technical, functional, operational or other corrections or modifications to the
RLS Licensed Technical Information that are designated by Teletrac, in its sole
discretion, to be minor corrections or modifications to the RLS Licensed
Technical Information, provided that RLS Licensed Software Upgrades and RLS
Licensed Software Corrections are not included in this definition. RLS Licensed
Technical Information corrections shall not include any software or other
proprietary data that a third party owns and that Teletrac is not authorized to
disclose. RLS Licensed Technical Information Corrections that Teletrac provides
to Licensee during the term of this License Agreement shall be treated as RLS
Licensed Technical Information for all purposes under this License Agreement.

1.22 "RLS Licensed Technical Information Upgrades" shall mean any and all
technical, functional, operational or other enhancements, improvements,
additions, updates or modifications to, and any new versions of, the RLS
Licensed Technical Information other than the RLS Licensed Technical Information
Corrections, provided that RLS Licensed Software Upgrades and RLS Licensed
Software Corrections are not included in this definition. RLS Licensed Technical
Information Upgrades shall not include any software or other proprietary data
that a third party owns and that Teletrac is not authorized to disclose. RLS
Licensed Technical Information Upgrades that Teletrac provides to Licensee
during the term of this License Agreement shall be treated as RLS Licensed
Technical Information for all purposes under this License Agreement.

1.23 "RLS Transmission Sites" shall mean the sites that receive location
requests from the RLS Network Control Center and transmit forward link signals
that prompt RLS Location Unit located in the RLS Coverage Area to send a
response radio signal to the RLS Receiver Sites.

1.24 "Spectrum License" shall mean the licenses and other authorization issued
by the Federal Communications Commission for grandfathered Location and
Monitoring Service ("LMS") Stations located in the Territory for the provision
of RLS.

                                       4


1.25 "Territory" shall mean the New York and Washington, D.C. metropolitan areas
and in the event the Miami Option is exercised pursuant to the Asset Purchase
Agreement, the Miami metropolitan area.

1.26 "U.S. CPI" shall mean the Consumer Price Index for Urban Wage Earners and
Clerical Workers published by the U.S. Department of Labor, Bureau of Labor
Statistics, U.S. City Average, "All Items," base year 1982-1984 = 100. If for
any reason the U.S. CPI is discontinued or does not exist, "U.S. CPI" shall mean
the official or replacement index published by the U.S. Department of Labor,
Bureau of Labor Statistics, or successor or similar governmental agency which is
most similar to the U.S. CPI. U.S. CPI dates shall mean the latest published
U.S. CPI.

2. Grant of Rights.

2.1 RLS Licensed Software Executable Format and RLS Licensed Technical
Information. As of the Effective Date, and subject to the terms and conditions
of this License Agreement, Teletrac grants to Licensee an exclusive (except as
necessary for Teletrac to continue to service its commercial customers on the
Radio Location System in the New York and Washington D.C. metropolitan areas
that Licensee is acquiring pursuant to the Asset Purchase Agreement), perpetual,
nontransferable (except as permitted by Section 21.6) license to use RLS
Licensed Software in executable format and RLS Licensed Technical Information
solely for the purpose of operating, maintaining and providing support for a
Radio Location System in the Territory. Licensee may sublicense to RLS Customers
the right to use RLS Customer Workstation Licensed Software only in executable
format and only on such RLS Customers' designated computer processing unit(s).
Licensee agrees that neither it nor its employees will use or copy RLS Licensed
Software except as authorized in this License Agreement. Other than the RLS
Customer Workstation Licensed Software in executable format, which Licensee may
sublicense to RLS Customers, Licensee may copy the RLS Licensed Software solely
for its own use and solely in connection with the performance of its obligations
under this License Agreement.

2.2 Registration of Patent and Copyrights. Each Party shall have the right in
the Territory to file and prosecute to issuance, at its own expense,
applications for letters patent and registrations of copyrights with respect to
all or any part of the RLS Licensed Software and RLS Licensed Technical
Information, but in any such event the application or registration shall be in
the sole name of Teletrac and Teletrac shall be the sole owner of any such
letters patent or copyrights, subject only to the terms of this License
Agreement, provided, however, that before taking any action under this Section
2.2, Licensee shall notify Teletrac of its intention to do so, and Teletrac
shall have the right within sixty (60) days after receipt of such notice, at its
own expense, to take such action or any other action it deems necessary or which
may be lawfully available, in which event Licensee shall not proceed to take the
proposed actions set forth in its notice. Each Party will keep the other fully
informed of its activities with respect to the filing of patent applications or
registration of copyrights hereunder. In the event that the Party taking such
action determines not to take necessary measures to maintain any letters patent,
patent application, copyright or copyright registration, such Party shall notify
the other Party of such determination in writing and, thereafter, the other
Party shall have the right, at its own expense, to take such measures as may be
deemed advisable by it to maintain such rights and coverage; provided, however,
that the other Party shall not thereafter be obligated to maintain such coverage
or rights.

                                       5


3. Reservation Of Rights. Except as to those certain rights and licenses
expressly granted to Licensee under this License Agreement, Teletrac reserves
all proprietary rights, title and interest, including all ownership and
proprietary rights, in and to the RLS Licensed Software, RLS Licensed Technical
Information and the "Teletrac" trade name, trademark and service mark, including
all designs, inventions, patents, copyrights, trademarks, service marks, trade
secrets, know-how, techniques, engineering details, enhancements, improvements,
addition, upgrades, modifications, derivative works. Licensee acknowledges that
no title to the "Teletrac" marks, RLS Licensed Software or RLS Licensed
Technical Information, or any part thereof, has been or will be transferred to
Licensee. Neither Licensee nor any Licensee affiliate will disassemble or
recompile any RLS Licensed Software.

4. Consideration.

4.1 Fees. In consideration for the grant of rights to Licensee in this License
Agreement, Licensee will perform the obligations set forth in this License
Agreement and will do the following:

4.1.1 Covenants and Agreements. The consideration for the rights granted to
Licensee pursuant to this License Agreement are the mutual covenants and
agreements of Teletrac and Licensee contained herein and in the Asset Purchase
Agreement and Ancillary Agreements (as defined in the Asset Purchase Agreement)
the sufficiency of which is hereby acknowledged.

4.1.2 Location Unit Royalty. In the event that Licensee elects to continue
maintenance of the Maintained Assets after the Maintenance Date (as such terms
are defined in the Asset Purchase Agreement) pursuant to Article VIII of the
Asset Purchase Agreement, then Licensee shall pay to Teletrac a one time royalty
of $6.00 for each RLS Location Unit on the Radio Location System in the New York
metropolitan area or the Washington D.C. metropolitan area (the "Location Unit
Royalty"). The Location Unit Royalty shall be payable at the time the RLS
Location Unit enters service during the 5 year period following the Maintenance
Date.

4.2 Late Payments. Late payments of Location Unit Royalty payments or of any
other amounts due under this License Agreement shall be subject to a late
payment charge calculated at an annual rate of eighteen percent (18%) commencing
on the date such payment or other amount was due and continuing until it has
been paid in full. If the amount of such charge exceeds the maximum charge
permitted by law, such charge shall be reduced to such maximum.

5. Radio System Location Equipment. Licensee acknowledges that Teletrac does not
manufacture or provide any of the equipment that will be needed in order to
construct and operate the Radio Location System in the Territory. Teletrac has
advised Licensee that Teletrac currently purchases most RLS Location Units and
RLS Receiver Site equipment for its operations in the United States from Tadiran
Telematics Ltd., a division of Tadiran Ltd., of Holan, Israel ("Tadiran"). The
Parties acknowledge and agree that Licensee is free to purchase RLS Location
Units, RLS Receiver Site equipment, RLS Customer Workstations, RLS Network
Control Center Equipment and any and all other equipment and materials needed in
order to construct and operate the Radio Location System in the Territory from
any individual or entity that manufactures such equipment in accordance with the
technical and other specifications necessary to properly operate the Radio
Location System. Licensee acknowledges and agrees

                                       6


that Teletrac does not provide any representation or warranty of any kind,
express or implied, including, without limitation, any implied warranty of
merchantability or fitness for a particular purpose on any equipment or
materials obtained by License from any third party, including Tadiran.

6. Term. This License Agreement shall commence on the Effective Date and shall
remain in effect until it is terminated in accordance with Section 7 below.

7. Termination. Neither Party shall be in breach of this License Agreement if
the License Agreement is terminated under Sections 7.1, 7.3, 7.4 or 7.5 below,
and the terminating Party shall not be in breach of this License Agreement if it
terminates this License Agreement under Section 7.2 or 7.6 below.

7.1 This License Agreement may be terminated by mutual written agreement.

7.2 If either Party (a) is dissolved or liquidated or otherwise ceases to
operate as a going concern or ceases to operate a Radio Location System, and (b)
does not have a successor to its rights and obligations under this License
Agreement (the "Non-operational Party"), then, at any time within ninety (90)
days from the date that the other Party (the "Operational Party") learns of the
facts referred to in subsections (a) and (b) above, the Operational Party may
elect to terminate this License Agreement upon thirty (30) days' written notice
to the Non-operational Party. If Licensee elects to terminate this License
Agreement pursuant to this Section 7.2, then Licensee also may elect to continue
to operate the Radio Location System in the Territory pursuant to Section 9.1
below.

7.3 Licensee may elect to cease operation of the Radio Location System in one or
more of the areas within the Territory at any time after the Maintenance Date
(as such term is defined in the Asset Purchase Agreement) pursuant to the term
of the Asset Purchase Agreement, and to terminate this License Agreement with
respect to such area or areas.

7.4 Teletrac may elect to cease its Radio Location System business at any time
and to terminate this License Agreement provided that Licensee is allowed to
continue to operate its Radio Location System as set forth in Section 9.1.

7.5 Either party may terminate this License Agreement if:

(1) the other Party shall file a voluntary petition pursuant to Chapter 7 of the
United States Bankruptcy Code (the "Bankruptcy Code") or commence any other
proceeding for the liquidation of its business under the laws of any state or
nation governing insolvencies, liquidation, or other similar matters; or

(2) if a person shall file an involuntary petition against the other Party
pursuant to Chapter 7 of the Bankruptcy Code or commence any other proceeding
against such other Party for the liquidation of such Party's business and a
bankruptcy or other court, tribunal or body having jurisdiction shall, by final
order no longer subject to appeal, adjudge such other Party a bankrupt under
Chapter 7 of the Bankruptcy Code or such other law or order the liquidation of
the other Party's business; or

                                       7


(3) if, pursuant to the order which shall become final and no longer subject to
appeal of a court having jurisdiction over the other Party, a receiver or
trustee, shall be appointed to liquidate the Party's business; or

(4) if the other Party shall, in fact, terminate all or substantially all of its
business;

provided, however, that notwithstanding anything in this License Agreement to
the contrary, a Party shall not be entitled to terminate this License Agreement
(i) because the other Party shall file or commence, or have filed or commenced
against it, any petition or proceeding for a reorganization of its business,
(ii) because the other Party shall transfer to any person its business, assets
or operations, provided that the transferee shall agree to be bound by the terms
of this License Agreement or (iii) if Teletrac has assumed this Agreement
pursuant to the Bankruotcy Approval Order (as defined in the Asset Purchase
Agreement).

7.6 Either Party may terminate this License Agreement by written notice to the
defaulting Party if any of the following occurs and the defaulting Party has
received written notice of the default and has failed to cure the default during
the cure period specified below:

7.6.1 A Party's failure to timely make any payment as required by this License
Agreement, and the failure to cure such default within sixty (60) days of its
receipt of written notice of such default during the first two such defaults, or
within thirty (30) days of its receipt of written notice of any payment default
after the first two events of late payment;

7.6.2 Party's breach of one or more of its material obligations under this
License Agreement, and the breaching Party's failure to cure such breach within
sixty (60) days of its receipt of written notice of such breach; or

7.6.3 An attempt to sell, transfer or assign a Party's rights or delegate its
duties under this License Agreement in violation of Section 21.6 of this License
Agreement, and the failure to cure such default within sixty (60) days of the
defaulting Party's receipt of written notice of such default.

provided, however, notwithstanding the foregoing, if the Parties are arbitrating
a dispute in good faith and the cure periods set forth herein have expired, the
License Agreement can not be terminated pursuant to this Section 7.6 until a
final arbitration decision has been reached.

8. Restrictions on Business Activities.

8.1 Except for the operation of the Radio Location System in the Territory
during the term of this License Agreement, and after the term of this License
Agreement and as specifically set forth in Section 9.1 of this License Agreement
and except as set forth in other licenses between the parties hereto and their
affiliates, neither Licensee nor any entity that Licensee controls or has the
ability to control:

8.1.1 Shall construct or operate or invest in any multi-lateration land based
radio location services designed to service the mass consumer or commercial
market anywhere in the world, during the term of this License Agreement and for
a period of three (3) years after termination of this License Agreement, that is
based or derived, in whole or in part, on any confidential or

                                       8


proprietary information of Teletrac, including, without limitation, the RLS
Licensed Software and RLS Licensed Technical Information which is the subject of
the Nondisclosure Agreement attached hereto as Exhibit B. For purposes of this
Section 8.1, "radio location service" shall mean any service which, within a
defined geographic region that (a) uses time of arrival radio measurements to
locate an object and (b) has been designed primarily for the purpose of
determining an object's location.

8.1.2 Shall operate, invest in or acquire a direct or indirect ownership
interest in any entity that operates a business that competes or will compete,
directly or indirectly, with the Radio Location System operated by Licensee in
the Territory, for a period of five (5) years after the Maintenance Date (as
such term is defined in the Asset Purchase Agreement).

8.2 Teletrac shall not unreasonably withhold its consent to allow entities that
have previously provided services to Teletrac, and have entered into
confidentiality and nondisclosure agreements with Teletrac which prohibit such
entities and their employees from disclosing confidential or proprietary
information regarding Teletrac to third parties, to provide services to
Licensee, provided that any confidential or proprietary information of Teletrac
received by Licensee from such entities shall be subject to the provisions of
the Nondisclosure Agreement attached hereto as Exhibit B to the same extent as
if Licensee had received such information directly from Teletrac.

9. Effect of Termination or Cancellation.

9.1 Circumstances Where Operations Continue -- Continued Rights. If, as set
forth in Section 7.2, 7.5 or 7.6.2, Licensee elects to terminate this License
Agreement, or as set forth in Section 7.4, Teletrac elects to terminate this
License Agreement, and Licensee elects to continue to operate the Radio Location
System in the Territory, then, solely for the purpose of such operations in the
Territory, Licensee may continue to use the RLS Licensed Software and RLS
Licensed Technical Information.

9.2 No Damages. Neither Licensee nor Teletrac shall, by reason of the
termination or cancellation of this License Agreement in accordance with the
terms of this License Agreement, be liable to the other for compensation,
reimbursement or any damages, either actual, consequential, incidental, special
or punitive, arising out of such termination or cancellation, including, but not
limited to, the loss of prospective profits on anticipated sales, or on account
of expenditures, investments, leases or commitments in connection with the
business or goodwill of Teletrac or Licensee or otherwise anticipated under this
License Agreement.

9.3 Payment Obligations. Termination or cancellation of this License Agreement
shall not relieve Licensee of any obligation to pay Teletrac any amounts due and
owing to Teletrac under this License Agreement.

9.4 Survival. After the termination or cancellation of this License Agreement by
its terms, operation of law or otherwise, all rights, privileges and obligations
arising from this License Agreement shall cease to exist; provided, however the
confidentiality requirement in Section 16.2, the obligations and limitations in
Sections 3, 4.1 (to the extent amounts are past due), 9, 10.2, 10.3, 10.5, 11,
12, 13.2, 14, 19, 20 and 21, and such other obligations which, from the

                                       9


context hereof, are intended to survive the termination of this Agreement, shall
remain in full force and effect.

10. Corrections, Upgrades and Newly Developed Equipment.

10.1 RLS Licensed Software Upgrades and Corrections.

10.1.1 RLS Licensed Software Upgrades. Licensee shall have the right to receive
any RLS Licensed Software Upgrades, at no charge, provided that Teletrac shall
have no obligation to provide Licensee any RLS Licensed Software Upgrades until
such upgrades have been installed on at least twenty-five percent (25%) of
Teletrac's Radio Location System operating in the United States. Licensee
acknowledges that Teletrac shall have no obligation to create RLS Licensed
Upgrades or to provide upgrades requested by Licensee.

10.1.2 RLS Licensed Software Corrections. During the term of this License
Agreement, Teletrac agrees that, within sixty (60) days after the release of any
RLS Licensed Software Corrections to at least fifty percent (50%) of Teletrac's
Radio Location System operating in the United States, Teletrac will deliver to
Licensee, at no charge, copies in executable format of such RLS Licensed
Software Corrections. Licensee acknowledges that Teletrac shall have no
obligation to create RLS Licensed Software Corrections or to provide corrections
requested by Licensee. Teletrac shall deliver all such corrections to Licensee's
Contract Technical Coordinator, together with a list of the corrections that
Teletrac is providing.

10.1.3 RLS Licensed Technical Information Upgrades. Licensee shall have the
right to receive any RLS Licensed Technical Information Upgrades at no charge,
provided that Teletrac shall have no obligation to provide any RLS Licensed
Technical Information Upgrades until such RLS Technical Modifications have been
installed on at least twenty-five percent (25%) of Teletrac's Radio Location
System operating in the United States. Licensee acknowledges that Teletrac shall
have no obligation to make RLS Licensed Technical Information Upgrades or to
design or implement RLS Licensed Technical Information Upgrades requested by
Licensee.

10.1.4 RLS Licensed Technical Information Corrections. During the term of this
License Agreement Teletrac agrees that, within sixty (60) days after the release
of any RLS Licensed Technical Information Corrections to at least fifty percent
(50%) of Teletrac's Radio Location Systems operating in the United States,
Teletrac will deliver to Licensee, at no charge, copies of such RLS Licensed
Technical Information Corrections. Licensee acknowledges that Teletrac shall
have no obligation to make RLS Licensed Technical Information Corrections or to
design or implement RLS Licensed Technical Information Corrections requested by
Licensee. Teletrac shall deliver all such Corrections to Licensee's Contract
Technical Coordinator, together with a list of the corrections that Teletrac is
providing.

10.2 Upgrades and Modifications to the Radio Location System Developed by
Licensee; Newly Developed Equipment.

10.2.1 RLS Licensed Software Other Than RLS Licensed Customer Workstation
Software.

(1) Authority to Make Upgrades. Licensee may make upgrades, improvements,
additions, enhancements or modifications to RLS Licensed Software other than the
RLS Licensed

                                       10


Customer Workstation Software ("Licensee Executable Software Upgrades").
Licensee shall notify the Teletrac Technical Coordinator in writing of the
Licensee Executable Software Upgrades within thirty (30) days after License
commences work on them. Licensee acknowledges and assumes all risks that
Licensee Executable Software Upgrades may affect the functionality or operation
of the RLS Licensed Software or Radio Location System, or both.

(2) Ownership and License of Upgrades. Licensee will be the sole owner of
Licensee Executable Software Upgrades.

(a) Derivative Upgrades. As to those Licensee Executable Software Upgrades that
are derived from or include any part the RLS Licensed Software, Licensee hereby
grants to Teletrac a world-wide, exclusive (except in the Territory where such
license shall be nonexclusive) perpetual, royalty free, license to use, market,
distribute, sublicense, reproduce and have reproduced such Licensee Executable
Software Upgrades solely for purposes of land-based radio location systems that
locate animate and inanimate objects, including people, and for ancillary
activities such as data messaging or voice messages. Such licenses shall not
include any portion of the Licensee Executable Software Upgrades that is owned
by a third party other than any entity that Licensee controls or has the ability
to control, and that Licensee is not authorized to disclose. Licensee shall have
no right, either during or after the term of this License Agreement, to sell or
disclose to third parties, or to use, other than as part of the Radio Location
System in the Territory, Licensee Executable Software Upgrades that are derived
from or include any part of the RLS Licensed Software. Licensee shall have no
obligation to deliver Licensee Executable Software Upgrades to Teletrac until
test versions of such Upgrades are available.

(b) Stand-alone Upgrades. As to those Licensee Executable Software Upgrades that
are neither derived from nor include any part of the RLS Licensed Software,
Licensee hereby grants to Teletrac a worldwide, nonexclusive, perpetual, royalty
free, license to use, market, distribute, sublicense, reproduce and have
reproduced such Licensee Executable Software Upgrades solely for purposes of
land-based radio location systems that locate animate or inanimate objects,
including people, and for ancillary activities such as data messaging or voice
messages. Such licenses shall not include any portion of the Licensee Executable
Software Upgrades that is owned by a third party other than any entity that
Licensee controls or has the ability to control, and that Licensee is not
authorized to disclose. Teletrac shall have no right to sell or disclose
stand-alone Licensee Executable Software Upgrades as a product independent from
its provision of a radio location service. There shall be no restrictions on
Licensee's rights with respect to Licensee Executable Software Upgrades that do
not include and are not derived from any of the RLS Licensed Software. Licensee
shall have no obligation to deliver Licensee Executable Software Upgrades to
Teletrac until test versions of such Upgrades are available.

10.2.2 RLS Licensed Technical Information.

(1) Authority to Make Modifications. Licensee may make modifications, upgrades,
additions, enhancements and improvements to the RLS Licensed Technical
Information ("Licensee Technical Modifications"). Licensee shall notify the
Teletrac Technical Coordinator in writing of the Licensee Technical
Modifications within thirty (30) days after Licensee commences work on them.
Licensee acknowledges and assumes all risks that Licensee Technical
Modifications

                                       11


may affect the functionality or operation of the RLS Licensed Software or Radio
Location System, or both.

(2) Ownership, and License of Modifications. Licensee will be the sole owner of
Licensee Technical Modifications.

(a) Derivative Upgrades. As to those Licensee Technical Modifications that are
derived from or include any part of the RLS Licensed Technical Information,
Licensee hereby grants to Teletrac a world-wide, exclusive (except in the
Territory, where such license shall be nonexclusive), perpetual, royalty free,
license to use, market, distribute, sublicense, reproduce and have reproduced
such Licensee Technical Modifications solely for purposes of land-based radio
location systems that locate animate or inanimate objects, including people, and
for ancillary activities such as data messaging or voice messages. Such licenses
shall not include any portion of the Licensee Technical Modifications that is
owned by a third party other than any entity that Licensee controls or has the
ability to control, and that Licensee is not authorized to disclose. Licensee
shall have no right, either during or after the term of this License Agreement
to sell or disclose to third parties, or to use, other than as part of the Radio
Location System in the Territory, Licensee Technical Modifications that are
derived from or include any part of the RLS Licensed Technical Information.
Licensee shall have no obligation to deliver Licensee Technical Modifications to
Teletrac until test versions of such Modifications are available.

(b) Stand-alone Upgrades. As to those Licensee Technical Modifications that are
neither derived from nor include any part of the RLS Licensed Technical
Information, Licensee hereby grants to Teletrac a worldwide, nonexclusive,
perpetual, royalty free, license to use, market, distribute, sublicense,
reproduce and have reproduced such Licensee Technical Modifications solely for
purposes of land-based radio location systems that locate animate or inanimate
objects, including people, and of ancillary activities such as data messaging or
voice messages. Such licenses shall not include any portion of the Licensee
Technical Modifications that is owned by a third party other than any entity
that Licensee controls or has the ability to control, and that Licensee is not
authorized to disclose. Teletrac shall have no right to sell or disclose
stand-alone Licensee Technical Modifications as a product independent from its
provision of a radio location service. There shall be no restrictions on
Licensee's rights with respect to Licensee Technical Modifications that do not
include and are not derived from any of the RLS Licensed Technical Information.
Licensee shall have no obligation to deliver Licensee Technical Modifications to
Teletrac until test versions of such Modifications are available.

10.2.3 Newly Developed Equipment. If Licensee develops equipment related to the
Radio Location System, Licensee shall not be required to disclose to Teletrac
the engineering and manufacturing specifications for the equipment, but Licensee
shall within sixty (60) days after the development thereof, notify and provide
to the Teletrac Technical Coordinator the performance specification and Radio
Location System interface information for such equipment, and shall offer to
Teletrac the opportunity to purchase such equipment at a reasonable price, which
shall be no higher than the lowest price at which Licensee sells such equipment
to third parties purchasing similar quantities.

10.3 Delivery, Licensee Assistance Concerning Upgrades and Modifications. As to
all Licensee Workstation Software Upgrades, Licensee Executable Software
Upgrades and Licensee

                                       12


Technical Modifications that Licensee delivers to Teletrac under this Agreement,
Licensee will deliver to Teletrac the software source code and information
concerning the source and authorship of delivered material and inventions and
copies of all printed or written materials related thereto. Licensee agrees to
make its engineering and production personnel reasonably available, at
Teletrac's cost, for consultation with Teletrac at Teletrac's facilities in the
United States of America, or at such other location selected by Teletrac, in
order to provide training, advice and assistance with respect to the Licensee
Workstation Software Upgrades, Licensee Executable Software Upgrades and
Licensee Technical Modifications.

10.4 Teletrac Obligations With Respect to Licensee Upgrades and Licensee
Modifications. Licensee's implementation of Upgrades and Modifications
authorized under Section 10.2 will not relieve Teletrac of its obligations under
this License Agreement. However, the Parties acknowledge and agree that Teletrac
will have no obligation to modify the RLS Licensed Software or to modify the
training, support and warranty provisions that it is obligated to provide under
this License Agreement, to make them compatible with the Licensee Workstation
Software Upgrades, Licensee Executable Software Upgrades or Licensee Technical
Modifications.

10.5 Protection of Licensee Upgrades and Licensee Modifications. Teletrac will
cooperate with Licensee in taking such actions as Licensee reasonably requests
for the purposes of filing, any where in the world, patent, copyright and other
intellectual property registration applications with respect to the Licensee
Workstation Software Upgrades, Licensee Executable Software Upgrades and
Licensee Technical Modifications. Such applications, shall, where applicable,
list Licensee as the author, owner or inventor. Nothing in this Section 10.5
shall limit Licensee's right to file or prosecute to issuance any such
applications with respect to the Licensee Workstation Software Upgrades,
Licensee Executable Software Upgrades or Licensee Technical Modifications, and
Licensee shall be free to file such applications, provided that (i) Licensee
notifies Teletrac in writing of such action prior to the time it is taken and
(ii) any such application by Licensee concerning rights that are derived from,
or include any part, of the RLS Licensed Software shall acknowledge and protect
Teletrac's sole ownership of, and such right's derivative use of the RLS
Licensed Software. Teletrac shall have the right, at its expense, but, except as
set forth in Section 11.2 below, no obligation, to bring, defend and maintain
any appropriate suit, action or proceeding involving the infringement or
misappropriation of the Licensee Workstation Software Upgrades, Licensee
Executable Software Upgrades or Licensee Technical Modifications. If Teletrac
finds it necessary to join Licensee in such suit, action or proceeding, Licensee
shall execute all papers and perform such other acts as may reasonably be
required and may, at its option and expense, be represented by counsel of its
choice. Should Teletrac lack standing to bring any such suit, action or
proceeding, then Licensee, at the request of Teletrac, shall do so, or, at
Teletrac's request, Licensee shall assign such rights and interest to Teletrac
as will enable Teletrac to gain such standing.

11. Teletrac Indemnity; Infringement Claims.

11.1 Indemnity. Subject to Sections 13.2 and 14 below, Teletrac will defend,
indemnify and hold harmless Licensee, and its directors, officers, employees and
agents, from and against any and all claims, demands, liabilities, actions,
suits, proceedings (including reasonable attorneys' fees) resulting from a
breach of representations, warranties, agreements or covenants of Teletrac

                                       13


contained herein or asserted by a third party arising out of or relating to
Teletrac's performance under or breach of this License Agreement, and Teletrac
agrees to undertake the cost of defending the same, and will pay resulting costs
and damages finally awarded, provided that in the case of a third party claim:

(1) Licensee promptly notifies Teletrac of the claim;

(2) Licensee cooperates with Teletrac in the defense, provided that Teletrac
reimburses Licensee for its reasonable out-of-pocket expenses (including
reasonable outside counsel legal fees) associated with such cooperation; and

(3) Teletrac has sole control of the defense and all related settlement
negotiations, using counsel reasonably satisfactory to Licensee.

11.2 Teletrac's Obligations Regarding Infringement Claims.

11.2.1 Representations and Warranties; Licensee Due Diligence. Teletrac
represents and warrants to Licensee that (i) it has the power and authority to
grant the RLS Licensed Software and RLS Licensed Technical Information to
Licensee or its permitted assigns, (ii) as of the Effective Date it has not been
notified of any claim that Teletrac's use of the RLS Licensed Software in the
United States violates the legally protected trade secret, proprietary right or
other interest of a third party, or infringes a patent, copyright or other
intellectual property right of a third party (a "Third Party Infringement
Claim"), (iii) that, on or before June 30, 1999, the RLS Licensed Software
shall, with normal use and service and assuming full operational functionality
of the RLS Licensed Software, record, store, process, and present calendar dates
falling on or after January 1, 2000, in the same manner and with the same
functionality as the RLS Licensed Software records, stores, processes, and
presents calendar dates as December 31, 1999, that the RLS Licensed Software
shall not become defective or otherwise fail functionally with respect to the
creation, recording, storage, processing, generation, application, or use of
records containing dates occurring on or after January, 1, 2000. Teletrac
strongly encourages Licensee to conduct patent and copyright searches, and other
appropriate due diligence, in the Territory to ensure that Licensee's use of the
RLS Licensed Software in the Territory will not result in a Third Party
Infringement Claim, prior to investing any substantial funds in the construction
of the Radio Location System in the Territory. Licensee acknowledges and agrees
that it is assuming all risk and liability that a Third Party Infringement Claim
may result from Licensee's use of the RLS Licensed Software in the Territory.

11.2.2 Third Party Infringement Claims. If a Third Party infringement Claim
occurs in the Territory with respect to one or more elements of the RLS Licensed
Software, or in Teletrac's opinion is likely to occur, Teletrac will use
reasonable commercial efforts, at its option and expense, either to challenge
such Third Party Infringement Claim or otherwise procure for Licensee the right
to continue to use, maintain and provide support for the Radio Location System,
or to replace or modify the alleged infringing element so that such element
becomes non-infringing, provided that such replacement or modification does not
materially affect performance of the Radio Location System. If Teletrac has
spent, or anticipates that it will be required to spend, more than U.S. $25,000
for such efforts, then Teletrac may give Licensee a ninety (90) day option to
pursue such efforts on its own and at its own expense. If Licensee

                                       14


elects to pursue such efforts on its own, then Licensee may deduct from (i) the
Location Unit Royalty payments due to Teletrac in the future or (ii) any amounts
due and owing to Teletrac pursuant to the Asset Purchase Agreement, the
reasonable expenses Licensee has incurred in obtaining noninfringing elements,
up to a maximum amount of U.S. $250,000. If Licensee has not elected to pursue
such efforts on its own within such ninety (90) day option period, then Licensee
must notify Teletrac in writing either (i) that this License Agreement shall
continue in full force and effect without regard to such Third Party
Infringement Claim and without any reduction in either the Location Unit Royalty
payment or any amounts due and owing to Teletrac pursuant to the Asset Purchase
Agreement, or (ii) that Licensee elects to terminate this License Agreement due
to such Third Party Infringement Claim, which shall be deemed to be a
termination under Section 7.1. If the use of any RLS Licensed Software is
enjoined and the foregoing remedies cannot reasonably be accomplished, or if
Licensee elects to continue this License Agreement but fails to procure the
right to use the infringing element or to replace or modify the infringing
element so that it becomes noninfringing, then Teletrac may require the return
of the infringing RLS Licensed Software, and Licensee's right to use such RLS
Licensed Software shall thereupon terminate. In no event shall Teletrac have any
obligation to repay or refund any amounts previously paid to it by Licensee.

11.2.3 Limitation on Teletrac's Obligations. Teletrac shall have no obligation,
and Licensee shall have no rights, under Section 11.2.2 if the Third Party
Infringement Claim: (a) could have been avoided by Licensee's use of the most
current, unaltered release of RLS Licensed Software; (b) resulted, in whole or
in part, from a modification to the Radio Location System made or owned by
Licensee or by one or more of its affiliates; (c) resulted, in whole or in part,
from Licensee's use, sale or modification, enhancement or improvement of RLS
Location Units, RLS Customer Workstations, RLS Network Control Center or any
equipment, software or other items not obtained from Teletrac; (d) resulted, in
whole or in part, from Licensee's combination of the RLS Licensed Software with
any other software, equipment or technology, (e) resulted, in whole or in part,
from Licensee's Workstation Software Upgrades, Licensee Executable Software
Upgrades or Licensee Technical Information Upgrades; or (f) resulted, in whole
or in part, from Licensee's breach of its obligations under this Licensed
Agreement.

11.2.4 Sole Remedy for Infringement Claims. The foregoing states the entire
obligation of Teletrac, and the sole remedies of Licensee, with respect to
infringement of patents, copyrights, trade secrets and other proprietary rights
or interests.

12. Licensee Indemnity. Licensee shall defend, indemnify and hold harmless
Teletrac, and its directors, officers, employees and agents from and against any
and all claims, demands, liabilities, actions, suits, proceedings or expenses
(including reasonable attorney's fees) asserted by a third party: (a) arising
out of or relating to the Licensee Workstation Software Upgrades, Licensee
Executable Software Upgrades or Licensee Technical Modifications, the RLS
Location Units, RLS Customer Workstations, RLS Network Control Center or any
equipment, software or other items not obtained from Teletrac, or any
combination thereof, or (b) arising out of or relating to Licensee's performance
under or breach of this License Agreement, and Licensee agrees to undertake the
cost of defending the same, and will pay resulting costs and damages finally
awarded, provided that:

(1) Teletrac promptly notifies Licensee of the claim;

                                       15


(2) Teletrac cooperates with Licensee in the defense, provided that Licensee
reimburses Teletrac for its reasonable out-of-pocket expenses (including
reasonable outside counsel's legal fees) associated with such cooperation; and

(3) Licensee has sole control of the defense and all related settlement
negotiations, using counsel reasonably satisfactory to Teletrac.

13. Teletrac Representations and Disclaimer.

13.1 Exhibits. Teletrac represents that to the best of its knowledge the RLS
Licensed Software listed on Exhibit A to this License Agreement is all of the
RLS Licensed Software that has been released to at least fifty percent (50%) of
Teletrac's U.S. Radio Location Systems as of the date of this License Agreement.
If Teletrac has omitted any such software or information, upon discovery of such
omissions, it will amend Exhibit A and deliver such software or information to
Licensee.

13.2 NO WARRANTY. EXCEPT AS PROVIDED IN SECTION 11.2.1, TELETRAC MAKES
ABSOLUTELY NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE RLS LICENSED
SOFTWARE. BY WAY OF EXAMPLE, BUT NOT OF LIMITATION, TELETRAC MAKES NO WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY THAT THE RLS
LICENSED SOFTWARE ITS SALE OR USE WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADE
SECRET, TRADEMARK, SERVICE MARK OR OTHER PROPRIETARY RIGHT.

14. LIMITATION OF LIABILITY. OTHER THAN WITH RESPECT TO CLAIMS FOR WHICH THE
PARTIES MAY BE OBLIGATED TO INDEMNIFY EACH OTHER AS SET FORTH IN SECTIONS 11 AND
12 ABOVE, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY DAMAGES
OR FOR ANY LOST REVENUES, LOST PROFITS, OR OTHER, INDIRECT, SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES CAUSED, IN WHOLE OR IN PART, BY THE RLS
LICENSED SOFTWARE, OR OTHERWISE ARISING OUT OF OR RELATING TO THIS LICENSE
AGREEMENT. NOTHING IN THIS SECTION 14 SHALL RELIEVE LICENSEE OF ANY OBLIGATION
TO PAY TO TELETRAC AMOUNTS DUE AND OWING UNDER SECTION 4 AND DEVELOPMENT,
TRAINING AND SUPPORT CHARGES UNDER SECTION 15.4.

15. Obligations and Responsibilities of Teletrac. Teletrac will have the
following obligations and responsibilities in addition to those specified
elsewhere in this License Agreement:

15.1 Compliance With Laws, Enforceability. Teletrac represents, warrants,
covenants and agrees with and to Licensee that, during the term of this License
Agreement (and thereafter with respect to those provisions which survive the
termination of this License Agreement), this License Agreement, and all
agreements executed and delivered in connection herewith, and the performance by
both Parties of their respective obligations and duties under this Agreement and
such other agreements, will not violate any law, rule or regulation in effect in
the Territory. Teletrac further represents, warrants, covenants and agrees with
and to Licensee that, during the term of this License Agreement (and thereafter
with respect to those provisions which survive the termination of this License
Agreement), all of the provisions of this License Agreement are

                                       16


fully enforceable under the laws in effect in the Territory and that each party
can fully and completely enforce the obligations, covenants, agreements and
restrictions of the other Party under this License Agreement.

15.2 Delivery of RLS Licensed Software. Teletrac will deliver the components of
the RLS Licensed Software to Licensee, as and when needed by Licensee within
thirty (30) days after receiving a written request therefor from Licensee.
Notwithstanding anything to the contrary in this License Agreement, all
deliveries of RLS Licensed Software shall be subject to Teletrac's receipt of
all necessary export licenses (to the extent such software is required to be
exported) and all required consents from third parties with proprietary rights
in such software, which Teletrac shall use reasonable efforts to acquire. If
there are delays in obtaining any such licenses or consents, Teletrac will make
partial deliveries of RLS Licensed Software, in accordance with the terms and
conditions of this License Agreement, to the extent feasible.

15.3 Delivery of RLS Licensed Technical Information. Teletrac will deliver the
RLS Licensed Technical Information to Licensee, as applicable, during the
training sessions available pursuant to Section 15.4 below. Notwithstanding
anything to the contrary in this License Agreement, all deliveries of RLS
Licensed-Technical Information shall be subject to Teletrac's receipt of all
necessary export licenses and all required consents from third parties with
proprietary rights in such information, which Teletrac shall use reasonable
efforts to acquire. If there are delays in obtaining any such licenses or
consents, Teletrac will make partial deliveries of RLS Licensed Technical
Information, in accordance with the terms and conditions of this License
Agreement, to the extent feasible.

15.4 Training and Support. In addition to Teletrac's obligations pursuant to the
Maintenance and Service Agreement dated the date hereof between Teletrac and
Licensee, Teletrac shall provide 50 hours of training and support to Licensee as
set forth in this Section 15.4. Licensee acknowledges and agrees that Teletrac
shall have an obligation to provide only the 50 hours of training and support
for Licensee and that any additional training or support shall be provided at
Teletrac's sole discretion, subject in all cases to the availability of
sufficient qualified personnel of Teletrac to provide such services to Licensee.
Notwithstanding any training or support provided to Licensee hereunder, Teletrac
shall have no responsibility or liability for the design, construction,
operation or maintenance of the Radio Location System.

15.4.1 Training. Licensee may request that Teletrac provide, at Licensee's cost
following the first 50 hours of training and support, the training courses set
forth below. The scope and subject matter to be covered by each training course
shall be determined by the mutual agreement of the parties at least thirty (30)
days in advance of the scheduled date for the training course. All training
courses shall be conducted in English at Teletrac's facilities, or at such other
location within the United States as Teletrac may specify.

15.4.1.1 The training courses available to Licensee shall be:

(1) Technician Training Courses;

(2) Master Control Center Operator Training Course;

(3) RLS Customer Support Training Course; and

                                       17


(4) RLS Customer Service Training Course.

15.4.1.2 Licensee shall provide Teletrac with at least ninety (90) days advance
notice of a requested date for a training course. If Teletrac is not able to
provide the training course, then Teletrac shall so notify Licensee.

15.4.1.3 At Licensee's request, Teletrac will prepare a non-binding estimate of
the cost for a particular training course each time it is to be provided.

15.4.1.4 Teletrac will bill Licensee monthly for the costs that Teletrac incurs
in preparing and providing each training course, each time it is provided. Such
costs shall include all of the out-of-pocket costs and expenses that Teletrac
incurs in preparing and providing such course, plus a rate of U.S. $125.00 per
person hour for time Teletrac employees or consultants spend preparing and
providing such course. Such rate shall be adjusted annually after the first year
of this Agreement to reflect percentage changes in the U.S. CPI during the
preceding year.

15.4.1.5 Licensee shall be responsible for all travel arrangements, including
obtaining all visas that may be required, and shall pay all travel costs and
expenses, including transportation, meals, lodging and any per diem pay and
other salary and benefits arrangements, for Licensee's personnel in connection
with the training courses provided under this Section 15.4. As to training
courses provided at Teletrac facilities, Licensee acknowledges that its
employees participating in such training are not employees of Teletrac, and
Licensee will obtain such insurance coverage as Teletrac may reasonably request
for such Licensee employees, including, but not limited to, workers'
compensation insurance. Licensee shall provide Teletrac with a certificate of
such insurance that names Teletrac as an additional insured.

15.4.2 Telephone Support. Licensee may request that Teletrac provide, at
Licensee's cost, telephone support to Licensee. Licensee shall pay for such
telephone support at a rate of U.S. $125.00 per person hour, with such rate to
be adjusted annually after the first year of this Agreement to reflect
percentage changes in the U.S. CPI during the preceding year. In addition,
Licensee shall be responsible for placing and paying for all telephone calls
made in connection with telephone support to be provided under this Section.

15.4.3 Payments for Training and Support. Teletrac will bill Licensee monthly
for training and support provided under this Section 15.4, and Licensee's
payments will be due and payable in U.S. dollars within thirty (30) days of
receipt of the invoice. In the event Teletrac pays overtime pay to its personnel
providing such training and support, Licensee's charges for such training and
support shall be increased accordingly.

16. Obligations and Responsibilities of Licensee. Licensee will have the
following obligations and responsibilities in addition to those specified
elsewhere in this License Agreement.

16.1 Compliance With Laws, Enforceability. Licensee represents, warrants,
covenants and agrees with and to Teletrac that, during the term of this License
Agreement (and thereafter with respect to those provisions which survive the
termination of this License Agreement), this License Agreement, and all
agreements executed and delivered in connection herewith, and the performance by
both Parties of their respective obligations and duties under this Agreement and
such other agreements, will not violate any law, rule or regulation in effect in
the Territory.

                                       18


Licensee further represents, warrants, covenants and agrees with and to Teletrac
that, during the term of this License Agreement (and thereafter with respect to
those provisions which survive the termination of this License Agreement), all
of the provisions of this License Agreement are fully enforceable under the laws
in effect in the Territory and that each party can fully and completely enforce
the obligations, covenants, agreements and restrictions of the other Party under
this License Agreement.

16.2 Confidentiality and Proprietary Protection.

16.2.1 Confidentiality and Nondisclosure Agreement. Teletrac and Licensee shall
execute and deliver, as part of this License Agreement, the Nondisclosure
Agreement that is attached as Exhibit B and incorporated by reference in this
License Agreement.

16.2.2 Proprietary Rights Reserved. It is expressly agreed that title to the RLS
Licensed Software does not pass to Licensee. This reservation of proprietary
rights survives any termination of this License Agreement

16.2.3 Copyright and Patent Registration and Notices. Licensee agrees not to
remove from view any copyright, trademark, confidentiality or other proprietary
notice, mark, or legend appearing on any of the RLS Licensed Software, on output
generated by such software and agrees to reproduce and include the same on each
copy of the RLS Licensed Software.

16.3 Insurance. Licensee agrees that at all times during the term of this
License Agreement it will maintain property and liability insurance in an amount
adequate to cover the value of and risks associated with the Radio Location
System in the Territory.

16.4 Teletrac Marks. The rights and licenses granted under this License
Agreement do not constitute a grant of any right or license to use Teletrac's
marks, including but not limited to the "Teletrac" trade name, trademark and
service mark. Licensee and Licensee's affiliates are estopped from challenging
the validity of the Teletrac mark or from setting up any claim adverse to
Teletrac with respect to the Teletrac mark, and any good will arising with
respect to such mark in the Territory shall inure solely to the benefit of
Teletrac.

16.5 Other Marks. Other than as set forth in Section 16.4 above, Licensee shall
be the sole owner of valid marks that Licensee uses to identify the Radio
Location System, or any part thereof.

16.6 Infringement by Others. Licensee agrees to inform Teletrac promptly of any
possible infringement of the RLS Licensed Software that comes to the attention
of Licensee. If Teletrac decides to take action against any such possible
infringement or act of unfair competition, Licensee agrees to assist Teletrac,
in whatever manner Teletrac may direct, and, provided that neither Licensee nor
one or more of its affiliates is, in whole or part, responsible, directly or
indirectly, for such infringement, at the expense of Teletrac.

16.7 Restriction Regarding Reverse-Engineering. Licensee agrees that it will not
derive or attempt to derive the source code or structure of all or any portion
of the RLS Licensed Software by reverse engineering, disassembly, decompilation,
or any other means, and that it will not decompile, disassemble, reverse
engineer, port, translate, modify, copy, transfer, make derivative

                                       19


works of, or otherwise use the RLS Licensed Software, except as expressly
authorized by this License Agreement,

17. Relationship of the Parties. The relationship of the parties established by
this License Agreement shall be that of independent contractors. Nothing in this
License Agreement shall be construed to create an agency, partnership, joint
venture or employment relationship between Licensee and Teletrac, nor to make
Licensee the agent of Teletrac, or Teletrac the agent of Licensee, for any
purpose. Neither party is granted authority by the other to undertake
commitments, transact business, create or assume any obligation (express or
implied) or otherwise act (or represent that it can act) in the other's name or
on the other's behalf.

18. Force Majeure. If the performance of either Party required by this License
Agreement (other than payment of amounts due under this License Agreement) is
prevented, restricted or delayed by fire, other casualty or accident, war or
violence or serious threat of the same, arrest or restraint of government,
requisition of vessel or aircraft, explosion, governmental request, guidance,
order or regulation, or any other circumstance beyond the reasonable control of
the Party and without such Party's fault or negligence, the affected Party, upon
giving due notice to the other Party, shall be excused from such performance,
but only to the extent directly attributable to the circumstance and the excused
party shall not be liable for loss or damage or failure of or delay in such
performance.

19. Governing Law. This License Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to the
choice of law principles thereof.

20. Dispute Resolution.

20.1 Good Faith and Fair Dealing. The parties intend to carry out the provisions
of this License Agreement in accordance with principles of good faith and fair
dealing and to respect and observe the spirit as well as the letter of this
License Agreement. The parties shall exercise their best efforts to settle
between themselves in an amicable way any dispute which may arise out of or in
connection with this License Agreement.

20.2 Arbitration. Except as set forth in Section 20.3 below, any controversy or
claim arising out of or relating to this License Agreement, or the breach,
termination or invalidity thereof, shall be settled by arbitration in accordance
with the rules and regulations of the American Arbitration Association for
resolving commercial disputes, as modified by this Section 20.2. The number of
arbitrators shall be three (3). The place of arbitration shall be New York, New
York and the arbitration shall be conducted in English. The arbitrators shall be
bound by stare decises, and the arbitral award shall be final and binding, shall
be rendered in writing and shall state the reasons for the award. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The costs of arbitration, including the cost of legal
counsel, shall be awarded in the discretion of the arbitrators. The arbitrators
shall have the ability to grant all relief available at law and in equity, to
the extent permitted under this License Agreement.

20.3 Legal Proceedings. Either Party may elect to initiate litigation, rather
than arbitration, but only with respect to claims for nonpayment of the Location
Unit Royalty payment; or for specific performance or injunctive relief to
enforce the terms of this Agreement or prevent a

                                       20


breach thereof. In particular, Licensee acknowledges that its failure to comply
with the provisions of this License Agreement concerning use of the RLS Licensed
Software or Teletrac's trade names, trademarks or service marks will result in
immediate and irreparable harm to Teletrac for which there is no adequate remedy
at law. Teletrac shall be entitled to bring an action or proceeding for specific
performance, injunctive relief, declaratory relief or other equitable relief to
compel Licensee to cease and desist all unauthorized use of the RLS Licensed
Software or any trade name, trademark or service mark of Teletrac, to require
Licensee to perform its obligations with respect to such software, technology
and marks, and to obtain such other relief as may be necessary and proper.
Neither party shall be required to post a bond in connection with any such
proceeding. The Parties' consent to the nonexclusive venue and jurisdiction of
the state and federal courts serving New York, New York in any legal proceeding
commenced pursuant to this License Agreement.

21. General.

21.1 Designation of Contract Administrators and Contract Technical Coordinators.
Each party shall designate a Contract Administrator and Contract Technical
Coordinator within ten (10) business days of the Effective Date. If a Party
fails to make such designation, then that Party's Contract Administrator and
Technical Coordinator shall be the person designated by such Party in Section
21.2 below, or such other person as either Party may notify to the other from
time to time.

21.2 Notices. All notices under this License Agreement shall be in writing and
may be given by delivering the same by hand, or by sending the same by an
overnight courier that maintains verification of delivery, or by facsimile, to
the relevant person and address set out below or such other person and address
as either Party may notify to the other from time to time. Any such notice given
as set forth above shall be deemed to have been given or received at the time of
delivery (if delivered by hand) and upon verified receipt (if sent by post,
facsimile or overnight courier). In the case of facsimile, the transmission
report shall constitute the verified receipt. Each Party may, at any time,
change the persons or address to which its notices are to be sent by notifying
the other Party of such change in accordance with this Section 21.2.



Teletrac                                   Licensee
--------                                   --------

Teletrac, Inc.                             Ituran USA, Inc.
Teletrac License, Inc.                     c/o Ituran Location and Control Ltd.
3220 Executive Ridge Drive                 P.O. Box 11473
Vista, CA                                  Azour, Israel
(760) 597-0500 (Tel)                       011-972-3-751-2061 (Fax)
(760) 597-9906 (Fax)
                                           Attn:  Eyal Sheratzky
Attn:  General Counsel


21.3 English Language. All communications, notices and records required to be
kept under and materials provided pursuant to this License Agreement shall be in
English.

                                       21


21.4 No Publicity. Except as required by law and except in connection with any
proceedings commenced by Teletrac pursuant to the Bankruptcy Code, each Party
agrees not to disclose the contents of this License Agreement to anyone other
than its employees and affiliates with a need to know, without the prior written
consent of the other Party. Consistent with the requirements of law and any
legal process, neither Party will issue any press or news release, make any
public disclosure with respect to the substance of this License Agreement or the
relationship of the Parties, or make any such general disclosure to either
Party's customers, or potential customers, without the prior written approval of
the other Party.

Notwithstanding the foregoing, if either Party is required, by any law or
regulation to which such Party is subject, to make any public disclosure
regarding this License Agreement, and it is impracticable to obtain written
approval of the other Party prior to making such disclosure, the Party may make
such disclosure without the other Party's approval, provided that the other
Party is provided with a copy of the news or press release or other disclosure
prior to or concurrently with the public disclosure of such information.

21.5 Scope and Amendment of License Agreement. The parties acknowledge that each
has read this License Agreement, understands it and agrees to be bound by its
terms. This License Agreement may be amended only by a subsequent writing that
specifically refers to this License Agreement and that is signed by each of the
Parties, and no other act, document, usage or custom shall be deemed to amend
this License Agreement.

21.6 Assignment. None of the Parties may assign or delegate any of its rights,
duties or obligations under this License Agreement in whole or in part without
the other Party's written consent. Any attempt by a Party to assign or delegate
any rights, duties or obligations which arise under this License Agreement,
without the other Party's written consent, shall be void. Teletrac may, however,
upon notice to Licensee, assign or delegate, or both, its rights, duties and
obligations under this License Agreement to an entity: (a) that Teletrac
controls or has the ability to control, or that controls or has the ability to
control Teletrac and that receives and assumes all of Teletrac's rights and
obligations under this License Agreement; or (b) that has purchased all or
substantially all of the assets of Teletrac utilized in connection with its
Radio Location Systems, and receives and assumes all of Teletrac's rights and
obligations under this License Agreement, provided that, in either case, the
same entity provides engineering support to Radio Location Systems located in
the United States, and also will be available to provide to Licensee the
engineering support that Teletrac is required to provide under this License
Agreement. Notwithstanding the foregoing, Licensee may sublicense its rights
hereunder to one or more entities (a "Sublicensee") for the purpose of
permitting the Sublicensee to operate a Radio Location System hereunder within
the Territory, provided that (i) the Sublicensee is an entity organized and
existing under the laws of, and authorized to operate a Radio Location System
under a Spectrum License in the United States, (ii) the Sublicensee shall agree
in writing to comply with all of the terms and conditions of this License
Agreement and that Teletrac shall have the right to enforce its rights hereunder
directly against the Sublicensee as if the Sublicensee was the licensee
hereunder and (iii) Licensee shall guarantee all obligations of Sublicensee.
Notwithstanding the foregoing, any assignment by Licensee to any Sublicensee
shall not relieve Buyer of any of its obligations hereunder.

                                       22


21.7 Binding Effect. This License Agreement shall be binding on and inure to the
benefit of the respective successors and permitted assigns of the parties.

21.8 Authority. Each of the respective persons executing this License Agreement
hereby covenants and warrants that such person has full legal power, right and
authority to bind the entity on whose behalf such person is signing to each and
every term and provision herein.

21.9 Severability. If any provision of this License Agreement shall be held
illegal or invalid by any court, this License Agreement shall be construed and
enforced as if such illegal or invalid provision had not been contained herein
and this License Agreement shall be deemed an agreement of the Parties to the
full extent permitted by law. If any provision shall be declared invalid or
unenforceable because of its breadth, scope or duration, such provision shall be
deemed modified to the extent necessary to make it valid and enforceable and
shall remain in full force and effect as so modified, or if not so modified,
shall be severable from the rest of this License Agreement.

21.10 Headings. All headings are for reference only and shall not be considered
in construing this License Agreement.

21.11 Expenses of Litigation. In case of litigation arising out of or in
connection with this License Agreement, the substantially prevailing Party shall
be entitled to recover its reasonable attorneys' fees, costs and expenses from
the other Party. In case of arbitration or Neutral Accountant proceedings, such
fees, costs and expenses shall be recovered as set forth in Section 20.2 above.

21.12 Waiver. The failure of either Party at any time to require performance by
the other Party of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter. Nor shall the waiver by either
party of a breach of any provision hereof be a waiver of any succeeding breach
of the same or any other such provisions or be a waiver of the provision itself

21.13 Entire Agreement. This License Agreement together with its Exhibits and
the Nondisclosure Agreements constitute the entire agreement of the parties with
respect to the license of the RLS Licensed Software to Licensee and supersede
any and all prior negotiations, correspondence, understandings and agreements
between the parties respecting the subject matter of this License Agreement, and
the full understanding of the Parties is embraced herein.

21.14  Exhibits.  The following exhibits are a part of this License Agreement:

Exhibit A - List of RLS Licensed Software
Exhibit B - Nondisclosure Agreement
Exhibit C - RLS Licensed Technical Information

21.15 Construction of Agreement. This License Agreement has been negotiated by
the Parties and their respective attorneys and the language of this Agreement
shall not be construed for or against either party.

                                       23


21.16 Counterparts. This License Agreement may be executed in counterparts, each
of which shall be an original as against any Party whose signature appears on
such counterpart and all of which together shall constitute one and the same
instrument.














                                       24


IN WITNESS WHEREOF, the Parties executed and delivered this License Agreement as
of the day and year first above written.

TELETRAC, INC.

By: /s/ Steven D. Scheiwe
    -----------------------------------
Print Name  Steven D. Scheiwe
Title  Secretary
Date:  7/12/99

TELETRAC LICENSE, INC.

By: /s/ Steven D. Scheiwe
    -----------------------------------
Print Name  Steven D. Scheiwe
Title  Secretary
Date:  7/12/99


ITURAN USA, INC.

By: /s/ Easi Sheratzki
    -----------------------------------
Print Name  Easi Sheratzki
Title  President
Date:  12/7/99






                                       25




EXHIBIT A

RLS LICENSED SOFTWARE

<TABLE>

Component            O/S         Purpose
---------            ---         -------

RXIF                 QNX4        Interface to Tadiran Receiver sites
TXIF                 QNX4        Interface to transmit sites using Simulcast Paging
                                 Controller
SOLVR                QNX4        Multilateration position determination
ITH                  QNX4        Inbound transmission handler
RMGR                 QNX4        Request Manager for user service requests
TP                   QNX4        Transaction Processor to capture transaction data for billing
CAM                  QNX4        Customer Access Monitor for FD3.x access lines
SCHED                QNX4        Transmission Scheduler for Simulcast Paging System
ASMGR                QNX4        Process messages initiated from mobile units
CAL                  QNX4        Calibrate receiver site timing
SF                   QNX4        Message store and forward services
Traccess             QNX4        Dial in access for FD3.x protocol
TraccessII           QNX4        TCP/IP Access for FDEE protocol
Mqueue               QNX4        Message queuing between QNX tasks on same LAN
QWIS                 QNX4        Message queuing between QNX tasks on same WAN
SMC Server           QNX4        Network management server
SMC Workstation      NT4         Network management workstation
DBClient             QNX4        Route database queries from QNX to WINDOWS NT
Eventlogger          QNX4        Performance analysis database capture
Eventlogger          NT4         ODBC Interface to MS-SQL Server for Eventlogger
WDBServer            NT4         ODBC Interface to MS-SQL Server for DBCLIENT
CAB                  NT4         Customer Access Bridge
CDPDMgr*             NT4         CDPD Network Interface
CustomerDB           SQL         Customer database schema
EventLogStat         SQL         Eventlogger statistical database schema
SimonClient          W95         Data entry for MS-SQL Server
Pasmdb               W95         Performance analysis user interface (MSACCESS)
EMSDatabase          SQL         Critical Event database schema
EMSAgent             NT4         Notify operators of events
EMSlncipient         NT4         Episode generator
EMSScheduler         NT4         Schedule events to operator
EMSVerifier          NT4         Customer Verification
EMSUser/GUI          W95         Operator Graphical User Interface
Services
Wintrak              W95         Episode location workstation
</TABLE>



* This component is required only for CDPD network access.

                                       26


EXHIBIT B

NONDISCLOSURE AGREEMENT

between

ITURAN USA, INC.

and

TELETRAC, INC.

THIS NONDISCLOSURE AGREEMENT ("Agreement") is entered into between Ituran USA,
Inc., a Delaware corporation ("Ituran"), and Teletrac, Inc., a Delaware
corporation ("Teletrac"). This Agreement shall be effective on the Effective
Date of the License Agreement, as defined in Paragraph 1 below.

NOW, THEREFORE, it is hereby agreed as follows:

1. In connection with the exercise and implementation of those rights and
obligations set forth in that certain Radio Location System License Agreement
between Ituran and Teletrac, dated July 13, 1999 (the "License Agreement"),
which License Agreement pertains to the (i) licensing of certain software and
technical information to Ituran and (ii) development of a radio location system
in a certain geographic area described therein (hereinafter the "Project"), each
party may disclose to the other certain confidential or proprietary information
(hereinafter "Information") which may include, but is not limited to, (1) trade
secrets, discoveries, ideas, concepts, know-how, techniques, designs,
specifications, drawings, blue prints, diagrams, flow charts data computer
programs, and other technical information; (2) certain information and analyses
concerning the relevant marketplaces; (3) certain operations, data including
internal marketing, sales information, customer services, engineering and
support services, financial data (including revenues, overhead expenses,
profitability, and other like financial information); and (4) certain
information regarding future product and technology plans as well as market
development plans and vendor information. Information shall include the items in
(1) through (4) that are provided by or are regarding the disclosing company,
its present or future divisions, parents, subsidiaries, and/or affiliates.

2. With respect to Information to be disclosed in either oral or written form
pursuant to this Agreement or already disclosed in anticipation of this
Agreement, the recipient shall:

a. hold such Information in confidence, using the same degree of care the
recipient uses for its own information of the same materiality;

b. restrict disclosure of the Information solely to those of its employees and
employees of its present or future divisions, parents, subsidiaries, and
affiliates (hereinafter "employees") with a need to know, solely to advance the
Project, and not disclose it to any other third persons;

                                       27


c. advise those employees of their binding obligations with respect to such
Information and take such measures to protect the confidentiality of such
Information as is commensurate with recipient's liability with regard to the
same; and

d. use the Information only as needed to advance the Project, except as may
otherwise be mutually agreed upon in writing, and in particular, will not employ
the Information in competition with the disclosing party nor will it use it in
any unlawful manner.

3. As part of recipient's obligations under Paragraph 2.c. above, (i) recipient
shall ensure that each of its employees, directly or indirectly involved in the
Project, executes a written nondisclosure agreement with recipient (in the form
attached hereto as Exhibit "A" for Ituran, and as Exhibit "B" for Teletrac)
prior to such employee's receipt of the Information; and (ii) recipient shall
provide to each such employee written notice of such employee's obligations
under the recipient/employee nondisclosure agreement, with a specific reference
in such notice being made to the applicability of said nondisclosure agreement
to the Project.

If there is any violation of this Agreement by any current or former employee of
recipient, recipient shall immediately notify the other party and shall, at
recipient's sole cost and expense, pursue the enforcement of the
recipient/employee nondisclosure agreement against any such current or former
employee. The recipient shall be fully liable to the other party for any damages
caused to the other party as a result of the breach of a recipient/employee
nondisclosure agreement by a current or former employer of recipient, provided
that recipient's negligence contributed to the breach by the current or former
employee.

4. The recipient of Information shall not copy, reproduce, or reverse engineer
any hardware, computer program, tape, disk, or other Information which may be
provided pursuant to this Agreement other than as expressly authorized in the
License Agreement.

5. The recipient of Information under this Agreement shall have no obligation to
preserve the confidential or proprietary nature of any Information which:

a. was previously known to the recipient free of any obligation to keep it
confidential/proprietary; or

b. is disclosed to third persons by the disclosing party without restriction; or

c. is or becomes publicly available by other than unauthorized disclosure; or

d. is independently developed by the recipient, except when such development is
prohibited by the terms of the License Agreement.

6. Nothing contained herein shall be construed to preclude the recipient from
disclosing any Information pursuant to a lawful subpoena or other civil process
having the compulsion of law, except that in such case the recipient shall
promptly notify the disclosing party prior to such disclosure or submission so
that it may appear and defend its interests in a timely manner.

7. The Information shall be deemed the property of the party which provides it,
and unless the recipient is permitted by the License Agreement to retain said
Information, the recipient shall,

                                       28


upon request, promptly return to the providing party all Information in its
possession that is in a tangible form and will not retain copies, extracts,
plans, schematics, or other reproductions in whole or in part of such
Information. Unless based on Information that may be retained by recipient
pursuant to the License Agreement, all documents, memoranda, notes, and other
writings whatsoever prepared by the recipient based on the Information shall be
destroyed and such destruction shall be certified in writing to the providing
party by an authorized officer supervising such destruction.

8. Nothing contained in this Agreement shall be construed as granting or
conferring any rights by license or otherwise in any Information disclosed to
either party.

9. All Information disclosed in the course of the Project will be provided under
the terms of the License Agreement. Each party agrees that all remedies and
damages that night otherwise be available to a party for claims arising out of
or related to this Agreement or to the use of the Information shall be subject
to the limitations set forth in the License Agreement, including, but not
limited to the limitation of liability set forth in Section 14 of the License
Agreement.

10. Information provided to either party hereunder does not, and is not intended
to, represent a commitment by the other party to license, purchase, or sell any
products or services or enter into a business relationship. If any party desires
to pursue business opportunities stemming herefrom, the parties will execute a
separate written agreement to govern such business relationship.

11. Section 18, 21.1.2, 21.3 through 21.11, 21.13, 21.14, 21.15, and the
applicable dispute resolution provisions of Section 19 of the License Agreement
are hereby incorporated by reference in this Agreement, and all references to
the "License Agreement" in such Sections shall be deemed to be references to
this "Agreement" for purposes of this Agreement.

12. This Agreement, together with the License Agreement, constitutes the entire
agreement of the parties with respect to the matters that are the subject of
this Agreement and supersede any and all prior negotiations, correspondence,
understandings, and agreements between the parties with respect to the subject
matter of this Agreement.

13. This Agreement shall continue until termination of the License Agreement;
provided however, that all obligations hereunder with respect to Information
received prior to termination of cancellation shall survive the termination or
cancellation of this Agreement for a period of five (5) years from such
termination or cancellation.

14. Notwithstanding anything to the contrary contained herein, nothing in this
Nondisclosure Agreement shall prevent the parties from disclosing any of the
terms or conditions or substance of the Licensing Agreement or related
agreements or transactions to any third parties; provided that such terms,
conditions and/or substance are not confidential or proprietary information as
provided in paragraph 1 hereto.

15. This Nondisclosure Agreement may be executed in counterparts, each of which
shall be an original as against any Party whose signature appears on such
counterpart and all of which together shall constitute one and the same
instrument.

                                       29


IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective duly authorized representatives.

ITURAN USA, INC.

By:
   -----------------------------------
Name:
     ---------------------------------
Title:
      --------------------------------
Date:
     ---------------------------------


TELETRAC, INC.

By:
   -----------------------------------
Name:
     ---------------------------------
Title:
      --------------------------------
Date:
     ---------------------------------









                                       30


                                   EXHIBIT A
                                   ---------

                    ITURAN EMPLOYEE NONDISCLOSURE AGREEMENT
                    ---------------------------------------

                     UNDERTAKING CONCERNING CONFIDENTIALITY
                     --------------------------------------

I, the undersigned, ________________, I.D.____________ of _______________ hereby
covenant towards Ituran USA, Inc., and towards any corporation controlled by it
(hereinafter "Ituran") as follows:

1. To keep absolutely secret, and, during the period of my employment and/or the
provision by me of services to Ituran as well as subsequent thereto, to not
disclose and not convey at any time whatsoever -- to any person and/or body
whatsoever, any information, knowledge and confidential documents concerning
Ituran's plans and/or activities, and/or manufacturing procedures used therein,
and/or concerning its products and/or the development thereof and/or any
defense, commercial or industrial information owned by it and/or any
professional secret whatsoever (all the foregoing being hereinafter referred to
as the "Information"), coming to my knowledge, directly and/or indirectly,
during the course of and in consequence of my employment and/or the provision of
my services to Ituran.

2. Not to make any use of and not to convey the Information and/or any part
thereof in any form and manner either personally or through others, directly or
indirectly, at any time, and, not to make use of nor convey all or any of the
Information now and/or hereafter reaching my knowledge in the circumstances
detailed above, without receiving the prior written consent of Ituran thereto.
In the event I wish to use the Information or any part thereof, I shall apply
Ituran with a request to grant me permission to do so in consideration of such
payment and on the terms as shall be agreed upon between us in writing. Nothing
herein contained shall affect my obligations under paragraph 6 hereof.

3. Not, after my employment and/or the performance of my task and/or providing
the services provided by me to Ituran have been completed, to keep in my
possession any document, instrument or item given to me and/or which has reached
me by reason of my employment, performance of such task and/or provision of my
services to Ituran.

4. a. I have read the section annexed hereto taken from the Penal Law Revision
(State Security, Foreign Relations and Official Secrets) Law, 3717-1957
(hereinafter "the Law") from which my obligation to keep information and secrets
connected with the security of the State and reaching me either in writing or
orally following the performance of my function is clear to me, and to refrain
from conveying the same to the knowledge of any unauthorized person and/or body
unless and to the extent that the performance of my task with which I am charged
obliges me to do.

b. It is clear to me that if I fail to obey all or any of the provisions of the
Law, I shall be liable to prosecution and to the penalties prescribed in the
Law.

5. I am aware that the breach of my obligations under this Affidavit will cause
damage to Ituran and which shall be entitled to obtain any legal remedy against
me including for damages and compensation.

                                       31


6. As an integral part of these obligations by me to keep the Information
absolutely secretly, I hereby undertake not, for a period of two years at least
after the completion of my employment at Ituran, to work in those enterprises in
the Netherlands which engage in the manufacture of products of the type in which
I engage in Ituran and which are in competition with Ituran.

7. I hereby confirm that I have read and understood the contents of this
Undertaking.


-----------------                   --------------------------
Date                                Signature



                                       32


                                   EXHIBIT B
                                   ---------

                   TELETRAC EMPLOYEE NONCOMPETITION AGREEMENT
                   ------------------------------------------

                    CONFIDENTIALITY AND INVENTIONS AGREEMENT
                    ----------------------------------------

In consideration of your employment by Teletrac, Inc., its affiliates,
successors, or assigns (collectively referred to herein as the "Company"), or
your being retained on a temporary basis to do work on behalf of the Company,
either as an independent contractor or as an agency employee on assignment at
the Company, you hereby enter into the following Confidentiality and Inventions
Agreement (the "Agreement").

1. Confidentiality.

(a) Confidential Information. You agree that the Company's business and success
depend upon the development, use and protection of confidential and proprietary
information (hereinafter referred to as "Confidential Information"), including,
but not limited to, information relating to (i) the Company's trade secrets,
products, equipment, inventions, discoveries, ideas, designs, processes,
research, manufacturing techniques, production methods, technical, professional
or scientific know-how, drawings, sketches, layouts, formulas, specifications,
reports, software systems and processes, customer, vender or supplier lists,
addresses, telephone numbers, contact persons, product or pricing information,
methods of doing business or the like, (ii) information that is classified for
purposes of national security, (iii) information that is the property of a
client or any other person or entity that has a business relationship with the
Company, (iv) information that is designated by the Company as "Limited",
"Private" or "Confidential" or similarly designated, (v) marketing research and
the Company's corporate and financial structure and operations and (vi)
communications by or to attorneys (including attorney-client privileged
communications) and memos and other material prepared by attorneys or under
their direction (including attorney work product).

(b) Non-Disclosure. You acknowledge that the Confidential information is secret,
confidential and proprietary to the Company and will be (or has been) disclosed
to you or obtained, discovered, created or developed by you in confidence and
trust for the sole purpose of using the same for the sole benefit of the Company
and its customers. You agree to hold such Confidential information in the
strictest confidence in accordance with the provisions of this Agreement, and
agree not to take or use for your own purposes or for the purposes of others, or
to disclose or permit to be disclosed to any other person or entity for its own
use or the use of any other persons or entities, any of the Confidential
Information either during your employment or after the termination of your
employment (whether voluntary or involuntary), except as authorized in writing
by the Company.

(c) Confidential Materials. You agree that all records, books, documents,
materials and other media containing or relating to the Confidential
Information, or any copy thereof (the "Confidential Materials") are and will
remain the Company's sole and exclusive property and that you will make no
copies of them except as required in the course of your employment by the
Company. You agree to deliver immediately to the Company all property belonging
to the

                                       33


Company, including Confidential Materials, in your possession or control in the
event of the termination of your employment, whether voluntary or involuntary.

2. Inventions and Discoveries.

(a) Disclosure of Inventions and Discoveries, Grant of Rights to the Company.
You agree, without further consideration other than reimbursement of expenses to
the extent hereinafter provided, to disclose in writing and assign to the
Company, and hereby grant to the Company the sole and exclusive ownership of,
including the sole and exclusive right to reproduce, use, or disclose for any
purpose, all right, title and interest in all ideas, designs, improvements,
works of authorship, inventions and discoveries (including, without limitation,
all reports, drawings, blueprints, data, software, writings, technical
information or discoveries devised or conceived by you or by you jointly with
others during any past, current or future employment with the Company), whether
or not such inventions or discoveries are patentable or protectable by
copyright, which relate at the time of conception or reduction to practice of
the invention, to the Company's business or to actual or demonstrably
anticipated research of the Company ("Inventions and Discoveries").

(b) Certain Inventions Excluded. The term "Inventions and Discoveries" does not
include any ideas, designs, improvements, work of authorship, inventions or
discoveries for which no equipment, supplies, facility or Confidential
Information or Confidential Materials was used and which was developed entirely
on your own time, and which neither (a) relates to the business of the Company
or to the Company's actual or demonstrably anticipated research or development,
nor (b) results from any work you performed for the Company. In addition, the
provisions of this Section 2 do not apply to the list of patented or unpatented,
copyrighted or copyrightable inventions owned or controlled or conceived by you
on the date of your entering employment, which inventions (including a
description of any documents relating to the same or evidencing your rights
therein) are specified on Exhibit A annexed hereto. If no such Exhibit is
attached to this Agreement, you represent that no such inventions have been made
by you on or prior to the date of this Agreement

(c) Company Property. You acknowledge that all Inventions and Discoveries are
the sole and exclusive property of the Company and that you are required to
disclose in writing and assign to the Company all Inventions and Discoveries.
All Inventions and Discoveries are the Company's property whether or not they
are disclosed.

(d) Assignments. You agree to execute, acknowledge and deliver assignments,
affidavits and other instruments prepared by the Company or its nominee and do
such other things as will assist the Company or its nominee in obtaining, for
the benefit of the Company or its nominee, ownership rights in Inventions and
Discoveries (including, without limitation, patents or copyrights relating to
Inventions and Discoveries) during the term of your employment and after
termination of your employment (whether voluntary or involuntary). The expenses
for which the Company or its nominee shall be obligated to reimburse you shall
be limited to mailing charges and notary fees and to such payments to others
that the Company or its nominee have given prior written authorization. You
hereby irrevocably designate and appoint the Company and its duly authorized
officers and agents as your agents and attorney-in-fact to act for and on your
behalf to

                                       34


execute any applications and documents required to obtain, renew or enforce
copyrights, mask work rights, or patents for the Inventions and Discoveries.

3. Conflicting Agreements.

You have not entered into any assignment of inventions, confidentiality, or
similar agreement other than those specified in Exhibit B annexed hereto (copies
of which have been provided to the Company). You represent that your performance
of all the terms of this Agreement and that your employment by the Company does
not and will not breach any agreement to keep in confidence proprietary
information acquired by you in confidence or trust prior to your employment to
the Company. You have not brought and will not bring with you to the Company or
use in performance of your responsibilities at the Company any equipment,
supplies, or trade secret information of any former employer, which are not
generally available to the public, unless you have obtained written
authorization for their possession and use.

4. Non-competition During Employment.

You understand that the Company expects you to devote your full energies,
efforts, and abilities to your employment with the Company. During your
employment you shall not, without the express written consent of the Company,
either as an independent contractor, employee, employer, consultant, agent,
principal, partner, stockholder (holding shares representing more than ten
percent of the voting control of a corporation), corporate officer, director, or
in any other individual or representative capacity, engage or participate in any
business that is in competition in any manner whatsoever with the business of
the Company.

5. Unfair Competition; Non-Solicitation.

(a) Unfair Competition. You acknowledge and agree that the names and addresses
of the Company's customers constitute Confidential Information and that the sale
or unauthorized use or disclosure, either during or after the termination of
your employment (whether voluntary or involuntary), of any of the Confidential
Information that you obtained during the course of your employment will
constitute unfair competition. You agree not to engage in any unfair competition
with the Company.

(b) Non-Solicitation. You agree that you will not, for a period of two years
immediately following the termination of your employment, whether voluntary or
involuntary, directly or indirectly, either (i) recommend that a competitor of
the Company solicit for employment (or solicit for employment on behalf of a
competitor of the Company) any employee of the Company or (ii) call on or
solicit, or attempt to call on or solicit, any of the Company's customers with
whom you become acquainted during the course of your employment by the Company
in order to offer such customers products or services that compete with products
or services being sold to such customers by the Company.

6. General Provisions.

(a) Breaches. You acknowledge that your failure to adhere to the terms of this
Agreement will cause the Company irreparable damage for which the monetary
damages alone would be inadequate compensation. If there is a breach or
threatened breach of any provision of this

                                       35


Agreement, you agree that the Company is entitled to injunctive relief without
posting a bond or other security, in addition to all other remedies. If any
legal action is brought to enforce the terms of this Agreement, the prevailing
party shall be entitled to recover reasonable attorney's fees from the other
party, in addition to any other relief to which the prevailing party may be
entitled.

(b) Changes. All changes to this Agreement will be effective only if they are in
writing and signed by you and the Company's Chief Executive Officer.

(c) Governing Law. This Agreement shall be governed by the laws of the State in
which you are employed without regard to the choice of law provisions thereof.

(d) Entire Agreement. This Agreement is our entire agreement and understanding
and superseded all other agreements, whether written, oral express or implied
concerning the subject matter of this Agreement. Neither you nor the Company has
made any representation to the other relating to the matters covered by this
Agreement that are not set forth in this Agreement. No waiver by you or the
Company of any failure to perform any obligation under this Agreement shall
constitute a waiver of further obligations.

(e) Severability. If any provision of this Agreement is held to be invalid,
illegal or unenforceable, all other provisions, sections or parts of this
Agreement that can be effective without such invalid, illegal or unenforceable
provision shall, nevertheless, remain in full force and effect to the extent
permitted by law of the state in which you are employed.

(f) Binding Effect; Assignment. This Agreement shall be binding upon you, your
heirs, executors and administrators, and shall inure to the benefit of the
Company, its successors and assigns. This Agreement (i) shall not be assignable
by you without the Company's prior written consent and (ii) may be assigned by
the Company without your consent to any successor in interest to substantially
all of the assets or business of the Company (whether by merger, sale of stock
or assets or otherwise.)

(g) Review. You agree that you have had a full opportunity to discuss the terms
and conditions of this Agreement, that you have had the opportunity to review
and analyze this Agreement, that you have been advised to have independent
counsel to do so, that you fully and completely understand all of the terms and
conditions of this Agreement and that you are signing this Agreement
voluntarily, freely and knowingly.

                                       36


(h) Effective Date. This Agreement shall be effective as of the first day of
your employment with the Company.





ACCEPTED AND AGREED                         Very truly yours,
                                            TELETRAC, INC.

-----------------------------------
Print employee name                         By:
                                               ---------------------------------
                                            Title:
                                                  ------------------------------

                         /                  Dated:
-----------------------------------               ------------------------------
Signature                Date












                                       37


                    CONFIDENTIALITY AND INVENTIONS AGREEMENT
                    ----------------------------------------

                                  EXHIBIT "A"

                              EXCLUDED INVENTIONS























ACCEPTED AND AGREED                          TELETRAC, INC.

                                             By:
--------------------------------------          --------------------------------
Employee Signature

                                             Title:
--------------------------------------             -----------------------------
Print Employee Name

Dated:                                       Dated:
      --------------------------------             -----------------------------





                                       38


                                   EXHIBIT C

                       RLS LICENSED TECHNICAL INFORMATION

A brief description of Teletrac's radio location system technical information
library is attached. The description sets out the format of the information as
being either HC (hard copy) EC (electronic copy or both. The assigned document
number is indicated as is the status on the current revision, if any. The title,
use description, author and other comments are also indicated.




                                       39




<TABLE>

------------------------------------------------------------------------------------------------------------------------------------
HC      EC         Doc          Rev        Date           Type           Title
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
X       X          900-0003     00         10/18/91                      Teletrac Technical Glossary
------------------------------------------------------------------------------------------------------------------------------------
X                  900-0004     00                                       Teletrac Writers' Style Guide
------------------------------------------------------------------------------------------------------------------------------------
X                  900-0101     00         12/08/90                      Standard Format for Internal Documentation
------------------------------------------------------------------------------------------------------------------------------------
X       X          900-0103     D0         1/4/93                        Software Requirements Specification Document Preparation
                                                                         Description
------------------------------------------------------------------------------------------------------------------------------------
X                  900-0106     Input      7/27/92                       Software Quality Assurance Manual
------------------------------------------------------------------------------------------------------------------------------------
X                  900-0107     Input      7/28/92                       Software Configuration Management Manual
------------------------------------------------------------------------------------------------------------------------------------
X                  900-0109     B0         9/14/93        System Spec    Horizon System Specification
------------------------------------------------------------------------------------------------------------------------------------
        X          900-0110     review     7/1/93                        Simon RF Software Detailed Design Specification
------------------------------------------------------------------------------------------------------------------------------------
X       X          900-0111     01         7/1/92                        Software Standards and Guidelines
------------------------------------------------------------------------------------------------------------------------------------
        X          900-0119     review     9/1/93                        Horizon II Proposal
------------------------------------------------------------------------------------------------------------------------------------
X       X          900-0123     A0         11/11/94       System Spec    RCM_B and Long Inbound Messaging Analysis and System
                                                                         Specification
------------------------------------------------------------------------------------------------------------------------------------
X       X          900-0125     00         3/17/97        System Spec    Specification for Inbound Messaging
------------------------------------------------------------------------------------------------------------------------------------
        X          905-0107     prelim     7/15/94        Software Req   Simon-RF Software Requirements Specification
------------------------------------------------------------------------------------------------------------------------------------
X       X          905-0109     00         4/16/98                       Air Interface Specification and Subscriber Unit Minimum
                                                                         Requirements
------------------------------------------------------------------------------------------------------------------------------------
        X          905-0408     00         1/20/97        Install        WINSMC Installation & Operations Guide
------------------------------------------------------------------------------------------------------------------------------------
        X          905-0409     00         3/2/98         Operations     Adding Reciever Sites with QNX
------------------------------------------------------------------------------------------------------------------------------------
        X          905-0410     00         3/6/98         Operation      Adding Transmit Sites with QNX
------------------------------------------------------------------------------------------------------------------------------------
X                  905-0605     00         2/7/92         Training       Quser Training Guide
------------------------------------------------------------------------------------------------------------------------------------
        X          906-0115     00         1/11/93        Software Req   Message Manager Software Requirements Specification
------------------------------------------------------------------------------------------------------------------------------------
        X          905-0623     00         9/28/96                       Simon-RF Subsystem Overview
------------------------------------------------------------------------------------------------------------------------------------
        X          906-0108     A0         2/11/93        Software Req   Quser Software Requirements Specification
------------------------------------------------------------------------------------------------------------------------------------
        X          910-0102     D0         11/2/94                       VLS-Quser Communication Protocol
------------------------------------------------------------------------------------------------------------------------------------
        X          910-0104     00         5/24/94        I/F Spec       CVLS-Quser Interface Specification
------------------------------------------------------------------------------------------------------------------------------------
        X          910-0401     M0         2/16/94                       ETAK Mapbases
------------------------------------------------------------------------------------------------------------------------------------
        X          912-0105     Draft      10/18/96       Software Spec  WinFleet 1.0 Feature Requirement Specifications
------------------------------------------------------------------------------------------------------------------------------------
        X          913-0604     00         9/18/96                       Fleet Reporter Service Guide
------------------------------------------------------------------------------------------------------------------------------------
X                  915-0303     draft      11/15/90                      GPS Site Survey Procedure
------------------------------------------------------------------------------------------------------------------------------------
X                  915-0304     none       1/29/91                       GPS Site Survey Procedures (Short Version)
------------------------------------------------------------------------------------------------------------------------------------
X                  915-0305     none       1/28/91                       GPS Antenna Installation
------------------------------------------------------------------------------------------------------------------------------------
X                  915-0306     draft      8/30/90                       Grounding, Lightning and AC Surge Protection
------------------------------------------------------------------------------------------------------------------------------------
X                  915-0608     00         9/18/92                       How to Conduct a GPS Survey for Project Managers and
                                                                         Field Engineers
------------------------------------------------------------------------------------------------------------------------------------
X                  916-0102     00         2/14/97        Software Req   RSSW Software Requirements Specification
------------------------------------------------------------------------------------------------------------------------------------
        X          916-0103     H2         9/15/94                       RSSW Communication Protocol
------------------------------------------------------------------------------------------------------------------------------------
        X          916-0104     00         10/13/94                      Universal Message Receiver Unit (UMR) Technical Definition
------------------------------------------------------------------------------------------------------------------------------------
        X          916-0202     none       9/1/93         Test           Base Station Test Procedure
------------------------------------------------------------------------------------------------------------------------------------
X                  916-0401     review     5/27/93        References     RSSW User Reference
------------------------------------------------------------------------------------------------------------------------------------
X                  915-0501     none       2/92                          RSU Field Technicians Guide
------------------------------------------------------------------------------------------------------------------------------------
        X          916-0503     00         11/30/93                      Base Station Lightening Protection Modification Procedures
------------------------------------------------------------------------------------------------------------------------------------
X                  917-0102     draft      8/24/90                       Simulcast Network Specification
------------------------------------------------------------------------------------------------------------------------------------
        X          917-0303     01         3/3/96         Installation   SPCU Setup Procedure
------------------------------------------------------------------------------------------------------------------------------------
X                  917-0601     00         2/7/92         Training       GPS Receiver, Odolics Model 325 SATSYNC Training Guide
------------------------------------------------------------------------------------------------------------------------------------
X                  917-0602     00         4/6/92         Training       Transmitter and Controller Training Guide
------------------------------------------------------------------------------------------------------------------------------------
X                  917-0603     00         2/14/92        Test           Simulcast Test Software SPX Training Guide
------------------------------------------------------------------------------------------------------------------------------------
X                  917-0504     00         ?              Training       Simulcast Paging Network
------------------------------------------------------------------------------------------------------------------------------------
X                  921-0102     00         9/5/94                        Multi-Zone Calibration Normalization Software Design Spec
------------------------------------------------------------------------------------------------------------------------------------
X                  921-0202     none       9/91           Test           Calibration Transmitter Unit Installation and Test
                                                                         Procedure
------------------------------------------------------------------------------------------------------------------------------------
        X          921-0302     A0         9/1/31         Upgrade        CTU Metro Code Upgrade Instructions
------------------------------------------------------------------------------------------------------------------------------------
        X          925-0101     11.C       6/30/93        Requirements   VLU Second Generation Requirements
------------------------------------------------------------------------------------------------------------------------------------
        X          925-0102     00         9/14/94        I/F            Peripheral Equipment Interface Requirements Specification
                                                          Requirement
------------------------------------------------------------------------------------------------------------------------------------
X                  925-0205     none       3/91           Test           Antenna Return Loss Test Acceptance Test
------------------------------------------------------------------------------------------------------------------------------------
X                  927-0102     00                        Hardware Spec  Status Messaging Terminal Requirements
------------------------------------------------------------------------------------------------------------------------------------
X                  927-0103     00                        Hardware Spec  Display Messaging Terminal Requirements
------------------------------------------------------------------------------------------------------------------------------------
        X          927-0104     01         6/16/93        I/F Req        MDT Interface Preprocessor User Interface Reqmt Specs
------------------------------------------------------------------------------------------------------------------------------------
        X          927-0106     Draft      4/19/98        Hardware Spec  Vehicle Location Transceiver Corporate Application (CVLU)
------------------------------------------------------------------------------------------------------------------------------------
X                  927-0201     00         9/18/96        Test           Status Messaging Terminal Test Procedures
------------------------------------------------------------------------------------------------------------------------------------
                   927-0308     00         1/12/98        Installation   SMT II Installation and Operation Guide
------------------------------------------------------------------------------------------------------------------------------------
        X          927-0401     00         6/23/93        Programming    Message Display Terminal Programming Guide
------------------------------------------------------------------------------------------------------------------------------------
        X          927-0402     00         6/23/93        Programming    CVLU Programming Guide
------------------------------------------------------------------------------------------------------------------------------------
        X          927-0403     00         10/3/96        Installation   Status Messaging Terminal (SMT) Operation and
                                                                         Installation Instructions
------------------------------------------------------------------------------------------------------------------------------------
                   928-0101     00         5/6/97                        Personal Location Unit
------------------------------------------------------------------------------------------------------------------------------------
        X          928-0102     00         6/22/94                       Personal Locator Monitor Functional Spec
------------------------------------------------------------------------------------------------------------------------------------
                   930-0401     00         2/10/99        User Manual    SimonClient User Manual
------------------------------------------------------------------------------------------------------------------------------------
X                  931-5002     A          5/92                          Base Station Tester Operators Guide
------------------------------------------------------------------------------------------------------------------------------------
        X          1000-0101    00         4/6/95                        Simon 2000 System Specifications
------------------------------------------------------------------------------------------------------------------------------------
X                  1000-0201    00         7/10/97        Test           Communications and Messaging Test Plan for the Teletrac
                                                                         Simon System
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
        X          1110-0101    00         8/14/95                       Traccess Requirements Specification Doo
------------------------------------------------------------------------------------------------------------------------------------
        X          1111-0101    00         11/14/95       SRS            Traccess II Connection Specification
------------------------------------------------------------------------------------------------------------------------------------
        X          1140-0101    00         4/12/95        SRS            QNX Wan Interface Server (QWIS) Software Requirements
                                                                         Specification
------------------------------------------------------------------------------------------------------------------------------------
        X          1210-0101    00                        SRS            Request Manager Software Design Specification
------------------------------------------------------------------------------------------------------------------------------------
X                  1220-0101    00         7/12/95        SDS            Scheduler Software Design Specification
------------------------------------------------------------------------------------------------------------------------------------
X                  1240-0101    00         7/12/95        SDS            Recieve Site Interface Software Design Specification
------------------------------------------------------------------------------------------------------------------------------------
X                  1250-0101    00         7/12/95        SDS            Inbound Transmission Handler Software Design Specification
------------------------------------------------------------------------------------------------------------------------------------
        X          1280-0101    00                        SDS            Post Processor Software Design Specification
------------------------------------------------------------------------------------------------------------------------------------
        X          1310-0101    00         2/23/99        SRS            SQL Database QNX API
------------------------------------------------------------------------------------------------------------------------------------
        X          1310-0102    00         2/17/99                       Current Schema for MSSQL Current Database
------------------------------------------------------------------------------------------------------------------------------------
X                  1330-0101    00         2/17/99        SRS            Software Requirements Spec for Performance Analysis System
------------------------------------------------------------------------------------------------------------------------------------
X                  1340-0101    00         8/4/96         SRS            Event Logger - QNX to Windows Interface
------------------------------------------------------------------------------------------------------------------------------------
        X          1410-0201    00         9/97                          MRPF ATP
------------------------------------------------------------------------------------------------------------------------------------
        X          1420-0202    00         7/17/97                       TOA Processor ATP
------------------------------------------------------------------------------------------------------------------------------------
        X          1420-0203    00         7/7/97                        GMIO ATP
------------------------------------------------------------------------------------------------------------------------------------
                   1420-0204    00         7/27/97                       GGSP - MPRF Communication Protocol ATP
------------------------------------------------------------------------------------------------------------------------------------
        X          1420-0401    00         3/24/97                       Integrated Base Station Software User Interface Design
                                                                         Document (IBSSW User's Guide)
------------------------------------------------------------------------------------------------------------------------------------
        X          1510-0101    00         4/14/98                       COPD Manager Functional Requirements for OpenTrac
------------------------------------------------------------------------------------------------------------------------------------
X                  1520-0101    00         12/28/96       SRS            Episode Management System Requirements
------------------------------------------------------------------------------------------------------------------------------------
        X          1540-0001    00         3/24/98                       Recommendations on Differential GPS Implementations for
                                                                         OpenTrac
------------------------------------------------------------------------------------------------------------------------------------
        X          1540-0201    00         10/6/98                       Engineering Test Plan - OpenTrac System
------------------------------------------------------------------------------------------------------------------------------------
X                  1610-0101    00         11/19/98       SRS            Software Requirements Specification for the OpenTrac
                                                                         Mobile Unit (OMU)
------------------------------------------------------------------------------------------------------------------------------------
X                  1610-0102    00         5/29/97                       Hardware Requirements Specification for the Pilot HVLU
------------------------------------------------------------------------------------------------------------------------------------
X                  1610-0103    00         12/15/98                      OMU Sleep Mode Requirements
------------------------------------------------------------------------------------------------------------------------------------
        X          1610-0104    00         7/16/98                       Requirement Specification for the Production OMU
------------------------------------------------------------------------------------------------------------------------------------
        X          1610-0105    00         10/4/98                       Hardware Requirement Specification for the OpenTrac
                                                                         Mobile Unit (OMU)
------------------------------------------------------------------------------------------------------------------------------------
        X          1610-0106    00         5/12/98                       Communication Interface Specification for the OpenTrac
                                                                         Mobile Unit
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>



                                       40




<TABLE>

----------------------------------------------------------------------------------------------------
Description                               Comments                           Author
----------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------
                                                                             Drew Bradford
----------------------------------------------------------------------------------------------------
Shows usage of commonly used ambiguous                                       Drew Bradford
terms.
----------------------------------------------------------------------------------------------------
                                                                             Natalie/Drew
----------------------------------------------------------------------------------------------------
Defines and describes the standard                                           Joy Tamanaha
format for Software Requirements
Specification Documents
----------------------------------------------------------------------------------------------------
                                          no electronic copy                 Joy Tamanaha
----------------------------------------------------------------------------------------------------
                                          no electronic copy                 Joy Tamanaha
----------------------------------------------------------------------------------------------------
                                                                             Joy Tamanaha
----------------------------------------------------------------------------------------------------
                                                                             Joy Tamanaha
----------------------------------------------------------------------------------------------------
                                                                             Joy Tamanaha
----------------------------------------------------------------------------------------------------
Engineering document describing           Later revision in the EWP.         Joy Tamanaha
resources needed, schedule, etc.
----------------------------------------------------------------------------------------------------
                                                                             Emmanuel
----------------------------------------------------------------------------------------------------
                                                                             Darwin Thompson
----------------------------------------------------------------------------------------------------
                                                                             Joy Tamanaha
----------------------------------------------------------------------------------------------------
Originally produced in 8/16/94                                               Darwin Thompson
----------------------------------------------------------------------------------------------------
WinSMC Workstation setup and howto guide                                     Ed Peterson
----------------------------------------------------------------------------------------------------
                                                                             Fred Anderson
----------------------------------------------------------------------------------------------------
                                                                             Fred Anderson
----------------------------------------------------------------------------------------------------
Training course for PTT FEs.  Bullets                                        Rex Frye
ideas to be covered by an experienced
Quser user.  Also includes information
for trainee.
----------------------------------------------------------------------------------------------------
                                                                             Joy Tamanaha
----------------------------------------------------------------------------------------------------
Overview/Background of Simon Rack                                            Barry Atkinson, Ed
                                                                             Hurst, Jim Nie, Jim
                                                                             Forman, Alice Kwok
----------------------------------------------------------------------------------------------------
                                                                             Joy Tamanaha
----------------------------------------------------------------------------------------------------
                                                                             Joy Tamanaha
----------------------------------------------------------------------------------------------------
Version of the VLS-Quser Protocol Jeff
updated to give to outsiders.
----------------------------------------------------------------------------------------------------
Gives the name and latitude/longitude                                        Joy Tamanaha
coordinates of each mapbase, for use
with VLS software, includes Atlanta,
Chicago, Dallas/Fort Worth, Detroit,
Hong Kong, Houston, Los Angeles, Miami,
New York, Nordrhein Region - West
Germany, Phoenix, Riverside
----------------------------------------------------------------------------------------------------
                                                                             Chuyen Dong
----------------------------------------------------------------------------------------------------
Training guide for CC members to run                                         Joe Crevino
Winfax machine
----------------------------------------------------------------------------------------------------
                                                                             Ray/Florin
----------------------------------------------------------------------------------------------------

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

----------------------------------------------------------------------------------------------------
                                                                             Ray Campbell
----------------------------------------------------------------------------------------------------
Training course for PTT FEs.                                                 Florin Stelzer
----------------------------------------------------------------------------------------------------
                                                                             Ed Hurst
----------------------------------------------------------------------------------------------------
                                                                             Joy Tamanaha
----------------------------------------------------------------------------------------------------
                                                                             Gary Russel
----------------------------------------------------------------------------------------------------
                                          .                                  Richard La Porte
----------------------------------------------------------------------------------------------------
Describe displays and controls of RSSW                                       Joy Tamanaha
and fields, as used in the Control
Center.
----------------------------------------------------------------------------------------------------
                                          JDs, numbered 931-5001             Richard La Porte
----------------------------------------------------------------------------------------------------
                                                                             Bill Koppel
----------------------------------------------------------------------------------------------------
                                                                             Bob Hopkins
----------------------------------------------------------------------------------------------------
                                                                             Fred Anderson
----------------------------------------------------------------------------------------------------
Training course for PTT FEs.                                                 Abel Monies
----------------------------------------------------------------------------------------------------
Training course for PTT FEs.                                                 Norm Leggett
----------------------------------------------------------------------------------------------------
Training course for PTT FEs, includes                                        Bill Goshay
discussion topics to be covered by
experienced user.
----------------------------------------------------------------------------------------------------
A training document - describes the                                          ?
Simulcast Paging Network in some
technical detail, at the level of a
Field Engineer or a Software Engineer.
----------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------
                                          JDs
----------------------------------------------------------------------------------------------------
Provides instruction to Metros on how                                        Joy Tamanaha
to perform a hardware upgrade at the
sites.
----------------------------------------------------------------------------------------------------
Requirement specification for second      There is a memo about voice
generation VLU - includes both SVLU and   requirements that goes along
CVLU requirements.                        with this.  Hard copy in library.
----------------------------------------------------------------------------------------------------
                                                                             Darwin Thompson
----------------------------------------------------------------------------------------------------
Acceptance test for hidden antenna.       JDs                                Richard La Porte
----------------------------------------------------------------------------------------------------
(I think it should be "Status Message                                        Joy Tamanaha (Massoud)
Terminal requirements")
----------------------------------------------------------------------------------------------------
(I think should be "Data Message                                             Joy Tamanaha (Massoud)
Terminal Requirements")
----------------------------------------------------------------------------------------------------
Describes user interface requirements                                        Joy Tamanaha
for s/w used by customer to program
Message Display Terminal.
----------------------------------------------------------------------------------------------------
                                                                             Darwin Thompson
----------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------
Installation & Operation guide                                               Mike Case
----------------------------------------------------------------------------------------------------
How to program the MDT                                                       Florin Stelzer
----------------------------------------------------------------------------------------------------
For use by Product Support personnel to                                      Joy Tamanaha
enable certain CVLU programming options.
----------------------------------------------------------------------------------------------------
                                                                             Michael Case
----------------------------------------------------------------------------------------------------
                                                                             Darwin Thompson
----------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------
Instructions on how to use the Simon      Bill Goshay
Client Database
----------------------------------------------------------------------------------------------------
                                          JDs, misnumbered.
----------------------------------------------------------------------------------------------------
                                                                             Technocom
----------------------------------------------------------------------------------------------------
Outline a plan for testing the                                               Technocom
messaging and end to end communications
of the Teletrac Simon system
----------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------
                                                                             Chuyen Dong
----------------------------------------------------------------------------------------------------
                                                                             Chuyen Dong
----------------------------------------------------------------------------------------------------
                                                                             Chuyen Dong
----------------------------------------------------------------------------------------------------

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

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

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

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

----------------------------------------------------------------------------------------------------
                                                                             Mark Sasson
----------------------------------------------------------------------------------------------------
                                                                             Chuyen Dong
----------------------------------------------------------------------------------------------------
                                                                             David Wiley
----------------------------------------------------------------------------------------------------
                                                                             Mark Sasson
----------------------------------------------------------------------------------------------------
This document contains procedures for                                        Tadiran
testing of MPRF unit (RF portion of the
IBSU vehicle location system).
----------------------------------------------------------------------------------------------------
This document defines the TOA processor                                      Tadiran
tests procedures that should verify the
performance TOA board.  The UMR test
procedure is divided to some tests
groups.  This partition is matched to
the functionality structure of the TOA
processor.
----------------------------------------------------------------------------------------------------
This document defines the GMIO tests                                         Tadiran
procedures that verify the performance
of GMIO board.
----------------------------------------------------------------------------------------------------
This document defines the GGSP-MPRF
tests procedures that should verify the
performance of GGSP-MPRF Communication
Channel.
----------------------------------------------------------------------------------------------------
                                                                             Ed Hurst
----------------------------------------------------------------------------------------------------
                                                                             Technocom
----------------------------------------------------------------------------------------------------
                                                                             David Wiley
----------------------------------------------------------------------------------------------------
                                                                             Technocom
----------------------------------------------------------------------------------------------------
                                                                             Technocom
----------------------------------------------------------------------------------------------------
                                                                             Technocom
----------------------------------------------------------------------------------------------------
                                                                             Technocom
----------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------
                                                                             Technocom
----------------------------------------------------------------------------------------------------
                                                                             Technocom
----------------------------------------------------------------------------------------------------
                                                                             Technocom
----------------------------------------------------------------------------------------------------
</TABLE>




Draft    Never formatted by us and not formally released. Our only copy may
         have handwritten notes on it.
None     No revision was ever assigned. Usually the old documents.
Input    Have the rough input, but it needs to be formatted and edited.
NA       The document does not need a revision, like some training documents or
         collections of documents.
Review   Formatted by us and sent out for review, but not formally released.


                                       41






                                                                    EXHIBIT 10.8

                               AMENDMENT NO. 1 TO
                     RADIO LOCATION SYSTEM LICENSE AGREEMENT
                     ---------------------------------------

THIS AMENDMENT NO. 1 TO RADIO LOCATION SYSTEM LICENSE AGREEMENT (this
"Amendment"), dated this [  ] day of May, 2000, is made by and between TELETRAC,
INC., a Delaware corporation ("TI") and Teletrac License Inc., a Delaware
corporation ("TLI"), and ITURAN USA, INC., a Delaware corporation ("Licensee").
THIS AMENDMENT NO. 1 amends the RADIO LOCATION SYSTEM LICENSE AGREEMENT (the
"License Agreement"), dated the 13th day of July, 1999, made by and between TI,
TLI and Licensee.

WHEREAS, Licensee desires to purchase TI's vehicle location services business in
the Orlando and Miami metropolitan areas.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:

1. Section 1.25 of the License Agreement is hereby amended to read in its
entirety as follows:

"1.25 "Territory" shall mean the New York, Washington D. C., Miami and Orlando
metropolitan areas."

2. This Amendment is made part of the License Agreement and is subject to the
terms thereof. The terms of the License Agreement are, other than set forth
herein, in all respects ratified and affirmed by the parties hereto.

                                       2




IN WITNESS WHEREOF, the Parties executed and delivered this Amendment as of the
day and year first above written.

                               TELETRAC, INC.

                               By:      /s/ Steven D. Scheiwe
                                        --------------------------

                                        Print Name: Steven D. Scheiwe
                                                    -----------------

                                        Title: Secretary
                                               ---------

                               Date:    May 8, 2000
                                        --------------------------

                               TELETRAC LICENSE, INC.

                               By:      /s/ Steven D. Scheiwe
                                        --------------------------

                                        Print Name: Steven D. Scheiwe
                                                   ------------------

                                        Title: Secretary
                                               ---------

                               Date:    May 8, 2000
                                        --------------------------

                               ITURAN USA, INC.

                               By:      /s/ Easi Sheratzki
                                        --------------------------

                                        Print Name: Easi Sheratzki
                                                   -----------------

                                        Title: President
                                               ----------------

                               Date:    May 8, 2000
                                       --------------------


                                       3






                                                                    EXHIBIT 10.9

                          INTEGRATED BASE STATION UNIT
                             DEVELOPMENT AGREEMENT

                                    between

                                 TELETRAC, INC.

                                      and

                            TADIRAN TELEMATICS LTD.

                            Dated: December 13, 1996







<TABLE>

TABLE OF CONTENTS

1. DEFINITIONS ....................................................................................      1
2. DEVELOPMENT OF THE IBSU  .......................................................................      2
3. MANAGEMENT AND OVERSIGHT RESPONSIBILITIES  .....................................................      3
4. TRAINING  ......................................................................................      4
5. TELETRAC OBLIGATIONS  ..........................................................................      4
6. PAYMENT OBLIGATIONS  ...........................................................................      4
7. PURCHASE COMMITMENT  ...........................................................................      6
8. PROPRIETARY RIGHTS  ............................................................................      6
9. NONCOMPETITION AND EXCLUSIVITY OBLIGATIONS  ....................................................      7
10. REPRESENTATIONS AND WARRANTIES  ...............................................................      7
11. INDEMNIFICATION  ..............................................................................      9
12. CONFIDENTIALITY  ..............................................................................      9
13. DISPUTE RESOLUTION  ...........................................................................      10
14. DEFAULT .......................................................................................      11
15. NOTICES  ......................................................................................      13
16. MISCELLANEOUS  ................................................................................      13


SCHEDULES
---------

1.4  INTERFACE PROTOCOLS
1.6  PROJECT SCHEDULE
1.9  SPECIFICATIONS
2.2  TESTING AND ACCEPTANCE
6.1  DEVELOPMENT PAYMENTS
6.2  PURCHASE PAYMENTS


EXHIBITS
--------

2.3  ESCROW AGREEMENT
</TABLE>



                                       i



INTEGRATED BASE STATION UNIT DEVELOPMENT AGREEMENT
--------------------------------------------------

This Integrated Base Station Unit Development Agreement ("Agreement") is made
and entered into December 13, 1996 (the "Effective Date") by and between
Teletrac Inc., a Delaware Corporation, ("Teletrac") with a place of business at
8900 State Line Road, Suite 500, Leawood, Kansas 66206, and Tadiran Telematics
Ltd., an Israeli corporation, ("Tadiran") with a place of business at 26
Hashoftim Street, Holon, Israel.

RECITALS
--------

Teletrac is a provider of location information and associated wireless messaging
products and services, and Tadiran is a leading international electronics firm.
Under an existing agreement, Tadiran has been producing for Teletrac a number of
"Basestations" (as defined in that agreement). Tadiran and Teletrac now wish to
enter into a new agreement, unrelated to the prior agreement, for the
development of a second-generation Integrated Base Station Unit, or IBSU
(defined below), that differs from the Basestations produced under the existing
agreement. The IBSU is intended to be the site receiver and signal processing
subsystem for use in the Teletrac Markets (defined below).

NOW THEREFORE, In consideration of the promises and covenants contained herein,
the receipt, sufficiency, and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:

GENERAL TERMS AND CONDITIONS
----------------------------

1. DEFINITIONS

For the purposes of this Agreement, the following terms shall have the meanings
indicated below:

1.1. Agreement. "Agreement" shall mean the Recitals, these General Terms and
Conditions, and the Schedules that are attached hereto or incorporated herein by
reference, all of which must be read together as a single document.

1.2. Existing Markets. "Existing Markets" shall mean those cities in which
Teletrac currently provides location and wireless services and products pursuant
to licenses granted by the FCC to utilize 6 Mhz of spectrum in the Location and
Monitoring Services frequency band, i.e., Los Angeles, Chicago, Detroit,
Houston, Dallas, and Miami.

1.3. IBSU. "IBSU" shall mean the new site receiver and signal processing
subsystem to be developed by Tadiran pursuant to this Agreement that will
operate in the Teletrac Markets, and which will include but not be limited to:
(a) a modular and programmable RF unit assembly; (b) a control, communications,
and signal processing unit.

1.4. Interface Protocols. "Interface Protocols" shall mean the signal and other
protocols described in Schedule 1.4 with which the IBSU will be compatible.



1.5. Project Completion Date. "Project Completion Date" shall mean the date upon
which it is established, pursuant to the testing and acceptance procedures of
Section 2.2, that the Prototypes operate in conformance with the Specifications
(defined below).

1.6. Project Schedule. "Project Schedule" shall mean the schedule for Tadiran's
development of the IBSU, including milestone data and benchmarks, as set forth
in Schedule 1.6.

1.7. Prototypes. "Prototypes" shall mean the initial, working IBSU prototypes
delivered pursuant to this Agreement.

1.8. Service. "Services" shall mean the development services and other tasks and
obligations to be performed by Tadiran pursuant to this Agreement.

1.9. Specifications. "Specifications" shall mean the requirements and
specifications for the IBSU, as set forth in Schedule 1.9, as amended from time
to time by the written agreement of the parties.

1.10. Tadiran's Project Manager. "Tadiran's Project Manager" shall mean Ben Zion
Beiski, or such other individual designated pursuant to the terms and conditions
of this Agreement.

1.11. Teletrac's Project Manager. "Teletrac's Project Manager" shall mean Darwin
Thompson, or such other individual designated pursuant to the terms and
conditions of this Agreement.

1.12. Teletrac Markets. "Teletrac Markets" shall mean the Existing Markets and
any cities or areas in the future in which Teletrac provides location and
wireless Services and products in accordance with the Interface Protocols.

2. DEVELOPMENT OF THE IBSU

2.1. Development of IBSU. Subject to the full and timely discharge of Teletrac's
obligations under Section 6.1 hereof, Tadiran shall develop the IBSU in
accordance with the Specifications and shall meet the deadlines set forth in the
Project Schedule. Tadiran shall generate for the developed assemblies detailed
technical and operational documentation in accordance with Tadiran standards,
which Tadiran represents and warrants to be commercially reasonable
documentation standards, including detailed and understandable comments and all
developed source code, for all software and firmware for the IBSU except the
RSSW software being provided by Teletrac for integration with the IBSU ("RSSW").
On or before each milestone date set forth in the Project Schedule, Tadiran
shall deliver to Teletrac such deliverables (if any) as are required, under the
Project Schedule, to be completed by such milestone date.

2.2. Testing and Acceptance. Promptly after the respective milestone dates set
forth in the Project Schedule for prototype testing, Tadiran and Teletrac shall
jointly test the completed Prototype of the IBSU in accordance with the
acceptance testing procedures specified in Schedule 2.2 hereto, to determine
whether it conforms to the Specifications. If the Prototype does not conform to
the Specifications, Tadiran will have an additional thirty (30) days to correct
the Prototype and submit it for re-testing. If the Prototype does not confirm to
the Specifications on the third such submission, then Tadiran shall be
considered in Material Default.

                                       2


2.3. IBSU Production Package. After acceptance of the last of the Prototypes,
and at least 30 days before shipment of the first production order, Tadiran
shall deliver to Data Securities International, Inc., as Escrow Holder pursuant
to the form of Escrow Agreement attached hereto as Exhibit 2.3 (which agreement
has been executed concurrently with this Agreement), the "IBSU Production
Package," which shall consist of all information necessary for the manufacture
of the IBSU (but not including RSSW) including but not limited to: (a) schematic
or other drawings or diagrams representing the circuitry of the IBSU, with
devices and parts with part numbers cross-referenced to the bill of materials
and with all respective connections shown; (b) a bill of materials that lists
all parts and devices with part numbers and where appropriate specific
electronic values for components such as resistors and capacitors; (c)
documentation of mechanical drawings with specifications for any unique plastic
parts; (d) master artwork, drill charts, packaging and fabrication notes for
printed circuit boards; and (e) complete object code for all computer programs
that are a part of, or are used in connection with, the IBSU, along with all
associated technical documentation. At the same time as the delivery of the IBSU
Production Package, Tadiran shall deliver to an Israeli escrow holder that has
been approved in advance by Teletrac (the "Source Code Escrow Holder"), pursuant
to an escrow agreement substantially the same as the agreement attached as
Exhibit 2.3, complete source code files for all computer programs that are a
part of, or used in connection with, the IBSU, along with all associated
technical documentation.

2.4. Changes. At any time or times after delivery of the last of the Prototypes
and during the period of ten (10) years thereafter, Tadiran, at the request of
Teletrac (or of any vendor Teletrac may identify), shall produce and provide any
reasonable, requested changes to the Prototypes requiring the use of source code
files, at a price equal to Tadiran's cost (including overhead but excluding
profit), and will deliver a copy of the modified source code to the Source Code
Escrow Holder, to be held pursuant to the source code escrow agreement.

3. MANAGEMENT AND OVERSIGHT RESPONSIBILITIES

3.1. Project Manager and Key Personnel. Tadiran represents that Tadiran's
initial Project Manager and other key personnel who will provide the Services
will be primarily dedicated to providing the Services and are experienced
personnel who are, or will endeavor to become, knowledgeable as to the
Specifications and the Interface Protocols. If Tadiran's Project Manager or any
of the other key personnel fail to perform their roles, or their employment with
Tadiran is terminated or they are re-assigned, Tadiran shall promptly replace
such person with another person who is at least equally as qualified and is
approved by Teletrac (which approval shall not be unreasonably withheld or
delayed). Tadiran's Project Manager shall have overall responsibility for
directing all of Tadiran's activities hereunder and shall be vested with all
necessary authority to fulfill that responsibility. Tadiran's Project Manager
will also: (a) supervise and monitor Tadiran's performance under this Agreement;
and (b) attempt to resolve "Problems" (defined in Section 3.3) with Teletrac's
Project Manager. Teletrac's Project Manager shall have overall responsibility
for directing all of Teletrac's activities hereunder and shall be vested with
all necessary authority to fulfill that responsibility.

3.2. Reports; Meetings. Tadiran will deliver to Teletrac a written report not
less than once every month. Tadiran's report will include, among other items
reasonably requested by Teletrac from time to time: (a) a summary of Tadiran's
activities since the last report; (b) a list of special


                                       3



activities contemplated for the following period; (c) a detailed report on
Tadiran's development of the IBSU (until Project Completion Date); and (d)
matters relevant to the performance of Tadiran's obligations hereunder.
Tadiran's report will also specifically identify Problems to be resolved. On a
mutually agreed upon date, but not less frequently than once per quarter, or
immediately upon the request of either party, the Project Managers, and other
appropriate personnel, will meet in person, or via telephone conference, to
discuss any element of such reports or other matters.

3.3. Problems. A "Problem," as that term is used herein, shall mean any problem
or circumstance that results from: (a) an alleged failure by either party to
perform its obligations under this Agreement; (b) the alleged inadequacy of
either party's performance; (c) a request for products, services or resources
where the parties disagree whether such products, services or resources are
within the scope of this Agreement; or (d) any event described in Section 14.1
or 14.2. If a Problem arises, the complaining party shall promptly notify the
other party of such Problem, with a detailed description of the circumstances
relating to that Problem. The parties shall promptly discuss and make all
reasonable efforts to resolve such Problem.

3.4. Changes. Teletrac may at any time propose changes in the IBSU, by written
request to Tadiran. Tadiran, upon receipt of any such written request, shall
analyze the proposal and respond, in writing, within 30 days, providing
specifications of the impact of the changes on pricing and on production
scheduling, and, if the parties reach mutual written agreement, Tadiran shall
implement the proposed changes.

4. TRAINING

Tadiran shall provide to Teletrac, at no additional cost, implementation,
training and consulting services related to the IBSUs delivered pursuant to this
Agreement.

5. TELETRAC OBLIGATIONS

5.1. Assistance. Teletrac shall make reasonable Teletrac resources and personnel
available at no cost to Tadiran to assist in the development and integration of
the IBSU. Tadiran shall provide accommodations, namely office space, personal
computers, and use of phones and e-mail at Tadiran premises in Holan, to
Teletrac personnel working at any Tadiran facility commensurate with those
afforded Tadiran's own employees.

5.2. Tadiran Responsibility. Subject to the performance of Teletrac's
obligations under Section 6.1 below, Tadiran shall have the sole and exclusive
responsibility to develop the IBSU in accordance with the Specifications, to
provide the Services, and to fulfill all other obligations of Tadiran under the
terms and conditions of this Agreement.

6. PAYMENT OBLIGATIONS

6.1. Development Payments.

The price payable by Teletrac to Tadiran for all of the Services (including but
not limited to the production and delivery of the Prototypes) shall not exceed a
total of $4,550,000, shall be based upon Tadiran's normal rates and charges for
similar projects to similarly situated customers, and



                                       4






shall be payable in progress payments related to achievement of specific
milestones, as set forth in Schedule 6.1 hereto. The parties acknowledge that,
prior to the execution of this Agreement, Teletrac has paid Tadiran $300,000 of
the foregoing amount. Upon execution of this Agreement, Teletrac shall pay to
Tadiran the additional sum of $701,000. Subject to the timely and complete
achievement by Tadiran of each milestone related to the particular invoice, and
the delivery to Teletrac of a written certification of the achievement of the
milestone related to the invoice, each such invoice shall be payable by Teletrac
within thirty (30) days of receipt of the invoice.

6.2. Purchase Payments. The price payable by Teletrac to Tadiran for IBSU units,
and associated modules, and the arrangements for invoicing and payment, shall be
as set forth on Schedule 6.2 hereto.

6.3. Disputed Amounts.

If Teletrac, in good faith, disputes any invoice, in whole or in part, either as
to the fees and charges set forth therein or on account of the failure of such
invoice to give Teletrac the full amount of any credits or set-offs to which
Teletrac believes it is entitled, Teletrac shall not be deemed in breach or
default or Material Default under this Agreement, provided that: (a) Teletrac
shall pay to Tadiran the undisputed net amount; (b) Teletrac shall pay the
balance of the invoice into an escrow account with an independent third party,
to be held pending resolution of the dispute; (c) Teletrac shall give Tadiran a
reasonably detailed written explanation as to the reasons for the withheld
amount; and (d) Teletrac and Tadiran shall meet and confer in good faith
regarding such amount to resolve such dispute. In the event (or to the extent)
such disputed amount(s) are determined to have been properly charged by Tadiran,
the escrowee shall promptly remit to Tadiran such disputed amount, plus any
interest earned thereon while in escrow. Notwithstanding the foregoing, Teletrac
shall not dispute any invoice, nor pay any amounts thereof unto escrow rather
than to Tadiran, on the basis of a claim of defect as to any Prototype that has
already been accepted by Teletrac pursuant to Section 2.2, and all amounts
already paid into escrow on account of such dispute shall be released to Tadiran
upon such acceptance.

6.4. Taxes and Duties.

Tadiran shall be responsible for payments of all taxes, duties, customs, etc.
payable in Israel in respect of this Agreement or the transactions hereunder.
Teletrac shall be responsible for payments of all taxes, duties, customs, etc.
payable in the U.S.A. in respect of this Agreement or the transactions
hereunder, provided, however, that each party shall be responsible for
presenting to the other copies of the invoices for all such taxes and duties and
shall cooperate with the other's legal efforts to minimize any such taxes,
customs, and duties. Further, each party shall defend and indemnify the other
against all claims in respect of any taxes, customs, and duties for which it is
responsible.

6.5. Delay.

In the event that Teletrac fails to make any payment to Tadiran (or into escrow,
in the case of disputed payments) within the time frame specified in this
Agreement, then, in addition to any other remedies available to Tadiran,
Tadiran's deadlines and milestones under the Project

                                       5


Schedule shall be automatically extended for a period equal to the delay (beyond
the permitted time frame) in Teletrac's making the required payment.

6.6. Interest.

In the event that either Party fails to make any undisputed payment to the other
Party within the time frame specified in this Agreement, then, in addition to
any other remedies available in respect of such failure, such Party shall pay
the other Party interest on the unpaid amount calculated at a rate equal to one
percent (1%) per month, beginning on the date on which such amount became due
and payable. In the event and to the extent that any disputed payment allegedly
owed by either party is determined to be properly due and owing, then such party
shall promptly remit the disputed amount to the other party, plus interest
calculated at a floating rate equal to two percent (2%) plus the "prime rate"
(calculated per annum) as published in the "Wall Street Journal" on the first
business day of each month during which such amount remains unpaid, beginning
with the month in which such disputed amount was properly invoiced.

7. PURCHASE COMMITMENT

Tadiran shall be capable of delivering the IBSU's to Teletrac in production
quantities within sixty (60) days after acceptance by Teletrac of the Prototypes
provided Teletrac, based upon scheduling requirements specified by Tadiran, has
ordered IBSU units sufficiently in advance in order to provide commercially
reasonable lead times for procurement of materials. From and after the date upon
which Tadiran is able to begin full production of the IBSU, provided that
Tadiran has timely performed all of its obligations under this Agreement at such
time and that all of Prototypes of the components have been accepted by
Teletrac, Teletrac will purchase from Tadiran all of the units (including all
desired associated modules) that Teletrac may require, until Teletrac has
acquired 1,500 units or (if occurring later) until the end of the 22nd calendar
month after the month in which Tadiran delivered the first production units to
Teletrac. Thereafter, Teletrac may purchase its requirements from other
suppliers than Tadiran, provided that:

(a) Teletrac shall give Tadiran the opportunity to bid on any such requirements;
and
(b) on purchases from other suppliers, Teletrac shall pay to Tadiran a royalty
of $2,500 U.S. per IBSU unit (including any modules) produced from Tadiran's
IBSU Production Package.

In furtherance of the above, upon the later to occur of the two events described
above (the acquisition of 1,500 units or the end of said 22nd calendar month):
(i) Tadiran shall provide Teletrac (and Teletrac may provide other suppliers it
may designate) the production license as may be needed, including the IBSU
Production Package and all other documents and specifications necessary, for the
manufacturing of IBSUs for Teletrac (but for no other purposes); and (ii) the
IBSU Production Package shall be delivered to Teletrac by the Escrow Holder.

8. PROPRIETARY RIGHTS

8.1. Pre-existing Components. Tadiran shall continue to own all right, title,
and interest in all pre-existing information, and materials presently owned by
Tadiran that are to be included in the IBSU (the "Tadiran Components"). Teletrac
shall continue to own all right, title and interest in all pre-existing, data,
information and materials presently owned by Teletrac that are to be

                                       6




included in the IBSU (the "Teletrac Components"). Tadiran hereby grants Teletrac
the perpetual worldwide royalty-free (subject to the provisions of Section 7),
and exclusive right and license, under all applicable intellectual property
laws, to distribute, copy and use the Tadiran Components, as incorporated in or
integrated with the IBSU. Teletrac hereby grants Tadiran the limited,
non-transferable, and non-exclusive right and license, under all applicable
intellectual property rights, to use and copy the Teletrac Components, solely in
order to fulfill Tadiran's obligations under this Agreement.

8.2. IBSU Ownership. Except as set forth in Section 8.1, the IBSU and all
components thereof shall be owned by Tadiran. Tadiran shall be financially
responsible for, and have sole control over: (a) the filing and prosecution of
applications for intellectual property rights covering the IBSU or any component
thereof, and (b) the enforcement and maintenance of all such intellectual
property rights throughout the world. Teletrac shall have the right to file, at
its own expense and in its discretion, applications in behalf of Tadiran for
intellectual property rights covering the IBSU or any component thereof, as to
which Tadiran has declined to file an application for an intellectual property
right, or in such countries or regions as Tadiran has declined to file an
application for an intellectual property right, provided that Teletrac has given
prior written notice of its intent to Tadiran, and Tadiran has not initiated
such applications within thirty (30) days after such notice. In the event that
Teletrac files any such application in behalf of Tadiran, Tadiran shall be the
registered owner but Teletrac shall be entitled to any and all damages recovered
by it in enforcing the intellectual property rights covered by said application.

8.3. Cooperation. The parties shall cooperate with one another in the
prosecution and enforcement of intellectual property rights relating to the
IBSU.

9. NONCOMPETITION EXCLUSIVITY OBLIGATIONS

From the date of this Agreement until 10 years after the delivery of the last of
the Prototypes, Tadiran will sell and distribute the IBSU only and exclusively
to Teletrac. Any other sale or distribution of the IBSU shall require the prior
written consent of Teletrac. At all times until 10 years after the discovery of
the last of the Prototypes, Tadiran shall not provide IBSU, or any equipment or
technology that is based upon the IBSU technology and performs time
determination of arrival location, to any person or entity in the location
technology market.

Unless otherwise agreed upon in writing, neither party shall solicit, hire or
enter into any arrangement for employment or any other arrangement for the
provision of product or services similar to those furnished hereunder, with any
person or entity employed or retained by the other party to perform work in
connection with this Agreement during that person's or entity's participation in
the performance of this Agreement, and for one (1) year after the termination of
that person's or entity's participation in the performance of this Agreement.

10. REPRESENTATIONS AND WARRANTIES

10.1. Tadiran's Warranties.

Tadiran represents and warrants (hereinafter the "Warranties") that:

                                       7


10.1.1. Legal and Corporate Authority. Tadiran is a duly formed corporation in
good standing under the laws of Israel. Tadiran has all necessary rights, power
and authority to enter into and perform this Agreement, and the execution,
delivery and performance of this Agreement by Tadiran has been duly authorized
by all necessary corporate action, the execution and performance of this
Agreement by Tadiran does not violate any law, statute, or regulation and does
not breach any other agreement or covenant to which Tadiran is a party or by
which it is bound. Tadiran has the right to provide the Services and Tadiran
owns, free and clear of all liens and encumbrances (save for the floating charge
by Tadiran's lender on all Tadiran assets, which charge does not affect any of
Tadiran's other representations or its ability and right to perform its
obligations under this Agreement). All right, title and interest in and to the
tangible property and technology and the like, that Tadiran intends to use to
provide the Services and in and to the related patent, copyright, trademark,
trade secret and other proprietary rights, or has otherwise received appropriate
licenses or leases from third parties to do so.

10.1.2. Development of the IBSU. Tadiran can and will develop the IBSU in
accordance with the Specifications and Project Schedule. Tadiran will perform
the Services in a timely, professional, workpersonlike manner, in accordance
within industry-standards.

10.1.3. Proprietary Rights Infringement. Neither the IBSU nor any of its
components will infringe upon any third party's patent, trademark, copyright,
trade secret or other intellectual property right.

10.1.4. Compatibility. All IBSUs supplied under this Agreement shall be 100%
plug compatible and shall be 100% interchangeable at the board level.

10.1.5. Merchantability and Fitness. The IBSUs supplied under this Agreement
will be merchantable and fit for use within the Specifications.

10.1.6. Obligation to Meet Legal Standards. Tadiran shall at all times perform
its obligations under this Agreement as a manufacturer in accordance with, and
shall ensure that the IBSU complies with, all of the standards set forth by each
law, regulation, or any governmental agency that regulates Tadiran or is
applicable to the manufacture of products that are exported into the U.S.A.
Without limiting the generality of the foregoing, Tadiran shall be responsible
for obtaining all FCC-type acceptances necessary for the operation of the IBSU's
in the U.S.A.

10.2. Teletrac's Warranty.

Teletrac represents and warrants that it is a duly formed corporation in good
standing (under the laws of the State of Delaware; that it has full power and
authority to enter into and perform this Agreement; that the execution, delivery
and performance of this Agreement by Teletrac have been duly authorized by all
necessary corporate action; that the execution and performance of this Agreement
by Teletrac do not violate any law, statute or regulation and do not breach any
other agreement or covenant to which Teletrac is a party or by which it is
bound. Teletrac warrants that it has all funds necessary to fulfill all its
obligations under Section 6 above.

                                       8


11. INDEMNIFICATION

11.1. Tadiran's Obligations.

11.1.1. Tadiran shall defend (or at its option settle), indemnify and hold
Teletrac harmless from and shall pay any and all liabilities, losses, costs, and
expenses (including reasonable attorneys' fees) associated with any claim
against Teletrac, arising out of bodily injury (including death) or damage to
property (including loss of use of property and down time) that occurs in
connection with the performance by Tadiran of Services, to the extent that such
injury or damage is caused by the negligence or willful misconduct of Tadiran's
personnel, agents or subcontractors.

11.1.2. Tadiran shall defend (or, at its option, settle) and hold Teletrac
harmless and shall pay any and all liabilities, losses, costs, damages, and
expenses (including reasonable attorneys' fees), arising out of any claim
brought by any third party against Teletrac for actual or alleged infringement
of any patent, trademark, copyright or other intellectual property right
(including, but not limited to, misappropriation of trade secrets) by the IBSU
or any component thereof, except for the Teletrac Components.

11.2. Teletrac's Obligations.

Teletrac shall defend (or at its option settle), indemnify and hold Tadiran
harmless from and shall pay any and all liabilities, losses, costs, damages, and
expenses (including reasonable attorneys' fees) associated with any claim
against Tadiran, arising out of bodily injury (including death) or damage to
property (including loss of use of property and down time) that occurs in
connection with the performance by Teletrac of its obligations under this
Agreement, to the extent that such injury or damage is caused by the negligence
or willful misconduct of Tadiran's personnel, agents or subcontractors.

12. CONFIDENTIALITY

12.1. Confidential Information. For the purpose of this Agreement, "Confidential
Information" means any information or data (including but not limited to any
technical or non-technical data, and any formula, pattern, compilation, program,
device, method, technique, or process) that derives economic value, actual or
potential, from not being generally known to other persons. To the extent
consistent with this definition, Confidential Information includes the terms of
this Agreement, the Specifications, the source code, structure, organization,
design, algorithms, methods, flow charts, and logic flow associated with any
software or firmware included with the IBSU; Teletrac's pricing, sales and
training materials and procedures, and any other information marked as
confidential by Teletrac or Tadiran. Confidential Information does not include
information that has become publicly known or available without breach of this
Agreement.

12.2. Nondisclosure. Each party agrees: (a) to exercise the same degree of care
and protection (but no less than a reasonable degree of care and protection)
with respect to the other party's Confidential Information as such party
exercises with respect to its own confidential information; and (b) except as
expressly authorized by this Agreement, not to, directly or indirectly,
disclose, copy, transfer or allow access to the Confidential Information.

                                       9


12.3. Injunctive Relief. Each party acknowledges and agrees that any violation
of this Section 12 would cause irreparable injury for which the injured party
would have no adequate remedy at law, and that the injured party shall be
entitled to preliminary and other injunctive relief against the other party for
any such violation. Such injunctive relief shall be in addition to, and in no
way in limitation of, any and all other remedies or rights that the injured
party shall have at law or in equity. The provisions of this Section 12 shall
survive any termination of this Agreement.

13. DISPUTE RESOLUTION

13.1. Escalation Procedures.

Except for Problems that are governed by Section 12.3 hereof, to the extent
practical and not as a limitation to either parties' rights under Section 14
below, if any dispute arises between the parties, and after good faith
negotiations, the parties disagree as to the existence or its solution, the
party raising the issue shall promptly provide written notice to the other. Each
party shall promptly forward the disputed matter to an executive officer of such
party that is not otherwise directly associated with this Agreement (the
"Executive Team"). All decisions of the Executive Team shall be made on a
unanimous basis, and shall be binding with Tadiran and Teletrac. If the
Executive Team cannot resolve a dispute within fifteen (15) days after having
been referred such dispute (and without regard to whether either party has
contested whether these procedures, including the duty of good faith, have been
followed), each party shall have the right to commence an arbitration, as set
forth in Section 13.2. No party shall be obligated to this provision for
breaches of Section 12 hereof.

13.2. Arbitration. In the event of any dispute, controversy or disagreement
regarding performance under or interpretation of this Agreement that is not
resolved pursuant to Section 13.1, the Parties agree that the dispute,
controversy or disagreement shall be submitted to arbitration using the
then-current Commercial Arbitration Rules of the American Arbitration
Association (the "AAA Rules"); provided, however, that disputes, controversies
or disagreements regarding Section 12 shall not be subject to arbitration.
Notwithstanding the foregoing, and the then-current AAA Rules: (a) the
arbitration proceeding shall be conducted by a single arbitrator, to be chosen
by mutual agreement of a designee chosen by Teletrac and a designee chosen by
Tadiran (if such designees are unable to agree on the choice of an arbitrator,
then such arbitrator shall be selected in accordance with the then-current AAA
Rules); (b) in order to be eligible to serve as an arbitrator, the arbitrator
must have a minimum of five years experience in telecommunications activities
during the eight years immediately preceding the dispute; (c) the existence,
subject, evidence, proceedings, and ruling resulting from the arbitration
proceeding shall be deemed Confidential Information, and shall not be disclosed
by either party, their representatives or the arbitrators (except as may be
necessary to enforce the arbitration award by the court); (d) the proceedings
shall take place in New York, New York; (e) the arbitrator shall be required to
prepare written findings of fact, together with a written award specifying its
ruling; and (f) subject to the terms and conditions of this Agreement, the
arbitrator's award may grant any remedy or relief which the arbitrator deems
just and equitable. Each party shall bear its own arbitration costs and
expenses, (including without limitation the costs and expenses of the arbitrator
selected by it and fifty percent (50%) of the costs and expenses of a third
arbitrator), provided, however, that the arbitrators may modify the allocation
of fees, costs and expenses in the award in those cases where fairness dictates
other than an equal

                                       10



allocation between the parties. The award shall be final and binding on the
parties, and judgment on the award may be entered in and enforced by any court
of competent jurisdiction.

13.3. No Termination or Suspension of Services.

Notwithstanding anything to the contrary contained herein, if any Problem or
dispute arises between the parties, whether or not it requires at any time the
use of the escalation procedures described above, in no event nor for any reason
and unless and until authorized by a court of competent jurisdiction, shall
Tadiran stop performing its obligations hereunder, disable the IBSU or any other
equipment or software, or perform any other action that prevents, slows down, or
reduces in any way the performance of the IBSU or any of Tadiran's obligations
hereunder or Teletrac's ability to perform its business; provided, however, that
the foregoing shall not apply if Teletrac fails to make any payment as and when
due hereunder (subject to the provisions of Section 6.3 hereof), and fails to
cure such failure within thirty (30) days after the due date of the invoice.

14.  DEFAULT

14.1  Material Default.  A "Material Default" shall be deemed to have occurred
under this Agreement if:

14.1.1. Failure to Develop IBSU. Tadiran fails to meet its obligations to
develop the IBSU in accordance with the Specifications or the Project Schedule,
on the terms and conditions set forth in Section 3 (subject to the provisions
for cure and re-submission under Section 2.2).

14.1.2. Failure to Make Payments. Teletrac fails to make any payment as and when
due hereunder (subject to the provisions of Section 6.3 hereof), and fails to
cure such failure within thirty (30) days after the due date of the invoice.

14.1.3. Breach of Confidentiality. Either party breaches its obligation to the
other party under Section 12, and fails to cure such breach within five (5) days
after the party has received notice of such breach (if capable of cure).

14.1.4. Other Failures to Perform. Either party fails, neglects or refuses to
duly observe or perform any other material obligation, covenant or condition
under this Agreement and, in cases where the breach does not involve the
violation of a law, the breaching party fails to cure such breach within thirty
(30) days after the breaching party has received notice of such breach.

14.1.5. Breach of Representation or Warranty. Any representation or warranty
made in this Agreement by any party is discovered to be materially false.

14.1.6. Insolvency. A party becomes insolvent, generally fails to pay its debts
as they become due, enters into receivership or any arrangement or composition
with creditors generally, is the subject of a voluntary or involuntary petition
or other action or proceeding for bankruptcy or reorganization or dissolution or
winding-up or makes an assignment for the benefit of creditors, or ceases to do
business as a going concern, or, a substantial part of a party's property is, or
becomes, subject to any levy, seizure, assignment or sale, for or by any
creditor or governmental agency without being released or satisfied within
thirty (30) days thereafter. For purposes of this

                                       11




Section 14.1, references to "a party" shall, in the case of Tadiran, be deemed
references to Tadiran Ltd. (the parent corporation of Tadiran), rather than to
Tadiran Telematics Ltd.

14.2. Force Majeure. Neither party shall be liable for delays or failure in
performance that result from acts of God, acts of governmental or military
authority, fires, floods, epidemics, riot, war, terrorist or enemy act, strikes,
labor disturbances, or general call-up of military reserves ("Force Majeure
Event"), provided that the party experiencing the delay immediately notifies the
other party of the delay and its anticipated duration. If a party suffers a
Force Majeure Event, its affected obligations shall be deemed suspended until
the Force Majeure Event has ended and a reasonable period of time for overcoming
the effects thereof has passed. Both parties shall use reasonable efforts to
minimize delays that occur due to a Force Majeure Event.

14.3. Remedies.

14.3.1. Teletrac's Remedies. If Tadiran shall commit a Material Default under
this Agreement, or in the event that the delay or interruption of performance
resulting from a Force Majeure Event, as provided in Section 14.2, exceeds
ninety (90) days, Teletrac, subject to the provisions of Section 13 hereof,
shall have the following rights and remedies, none of which is exclusive and any
or all of which may be pursued:

(a) Teletrac shall be entitled to terminate this Agreement, by providing Tadiran
with a written notice to this effect.

(b) In case of a Material Default, Teletrac shall be entitled to suspend payment
of any fees due and owing to Tadiran for up to ninety (90) days or until Tadiran
earlier cures such Default or until Teletrac shall earlier elect to terminate
this Agreement, and Teletrac shall be entitled to all other remedies that may be
available to it under law or in equity. Teletrac's damages shall be limited to a
refund of the development price paid to Tadiran and shall not include any
incidental, exemplary, punitive or consequential damages (including lost
profits); provided, however that: (i) these limitations on the amount and the
types of Teletrac's damages shall not apply in the event that Tadiran has acted
in a commercially unreasonable manner, with negligence in the performance of its
obligation, or in bad faith, nor shall they apply to claims based upon Section
12 hereof; (ii) said limitations on the amounts and types of damages shall not
apply to claims based upon the provision of IBSUs in violation of the provisions
of Section 9 hereof; and (iii) with respect to breaches of Section 11 hereof,
the amount of damages shall be limited to $4,550,000 but there shall be no
limitations upon the types of damages and, in the event of a breach of Section
11.1.2, Tadiran shall promptly make appropriate modifications to the subject
properties to make them non-infringing.

14.3.2. Tadiran's Remedies. If Teletrac shall commit a Material Default under
this Agreement, Tadiran, subject to Section 13 hereof, shall be entitled to
terminate this Agreement, by providing Teletrac with a written notice to this
effect, and Tadiran shall have all the other remedies that may be available to
it under law or in equity.

14.4. Termination Obligations. Upon termination of this Agreement for a Material
default by Tadiran, Tadiran, and the Escrow Holder under the Escrow Agreement
described in Section 2.3, shall each promptly deliver to Teletrac a copy of the
IBSU Production Package (at whatever state

                                       12


of completion, if not completed). In the case of a Material Default of a type
identified in Section 14.1.6., Tadiran and the Source Code Escrow Holder shall
each deliver to Teletrac a copy of the IBSU source code (at whatever state of
completion) held by said escrow holder pursuant to Section 2.3.

15. NOTICES

Except as expressly stated herein, all notices, requests or communications
provided for, or given under this Agreement, shall be in writing, and will be
made by one of the fallowing methods: (a) personally, or (b) via certified mail
(postage prepaid and returned receipt requested), or (c) by facsimile, provided
that a confirming copy with evidence of successful facsimile transmission is
sent by one of the other methods herein, or (d) by an internationally recognized
overnight courier to the parties, at the addresses or facsimile numbers set
forth below or at such addresses or facsimile numbers as may be communicated in
writing by either party to the other in accordance with this Section. All
notices will be deemed given when actually received, or within ten (10) days
after being sent, whichever occurs first.

Notices to Teletrac shall be delivered to Teletrac as follows:

Alan B. Howe
Teletrac, Inc.
8900 State Line Road
Suite 500
Leawood, Kansas  66206
Facsimile No.:  913-642-4214
cc:  Steven Scheiwe

Notices to Tadiran shall be delivered to Tadiran as follows:

Roman Sternberg
Tadiran Ltd.
26 Hashoftim Street
Holon, Israel
Facsimile No.:  972-3-557-4490

Any notice to be given, consent to be expressed, or other action to be taken by
a party to this Agreement shall require a written document executed by an
executive officer of such party (i.e., the chairman of the board of directors,
the president, or a vice president, of the corporation) or a person expressly
authorized in writing by such person to provide such notices.

16. MISCELLANEOUS

16.1. Entire Agreement. Except as expressly stated herein, this Agreement
constitutes the entire understanding and agreement between the parties with
respect to the transactions contemplated herein, and supersedes any and all
prior or contemporaneous, oral or written communication with respect to the
subject matter hereof, all of which are merged herein. No usage of trade, or
other regular practice or method of dealing between the parties hereto or
others, will be used to

                                       13


modify, interpret, supplement, or alter in any manner the express terms of this
Agreement. Neither party shall be deemed the draftsperson of this Agreement, for
the purpose of the rule that the ambiguities in a contract shall be construed
against the draftsperson.

16.2. Governing Law. This Agreement and the performance of the parties hereunder
shall be governed and construed in accordance with the substantive laws of the
State of New York, without regard to any conflict of laws.

16.3. Captions; Counterparts; Section Numbers. Captions, Tables of Contents, and
Schedule Titles are used herein for convenience only and will not be used in the
construction or interpretation of this Agreement. This Agreement may be executed
in more than one counterpart, in which case all of them shall be deemed one and
the same Agreement (provided that there exists at least one counterpart that has
been executed by both parties). Any reference herein to a particular Section
number (e.g., "Section 5.2"), shall be deemed a reference as well to all
Sections that bear sub-numbers to the number of the referenced Section (e.g.,
Sections 5.2.1, 5.2.2.1, etc.).

16.4. Non-Assignment.

16.4.1. Teletrac
This Agreement and any interest therein, and any of the rights and obligations
of Teletrac hereunder, may be directly or indirectly assigned, sold or otherwise
disposed of by Teletrac without the prior written consent of Tadiran; provided,
however, that no such assignment, sale, or other disposition shall release or
discharge Teletrac from any of its duties and obligations hereunder. No such
assignment, sale, or disposition shall be valid unless the transferee agrees in
writing to be bound by this Agreement.

16.4.2.  Tadiran

Neither this Agreement, nor any interest in the rights of Tadiran hereunder, may
be directly or indirectly assigned, sold or otherwise disposed of by Tadiran.
Tadiran may not directly or indirectly subcontract or delegate any of its
obligations under this Agreement to third parties, except with Teletrac's prior
written approval, which shall be given only in the exercise of Teletrac's sole
discretion. If such consent is granted, Tadiran shall be responsible for
supervising the activities and performance of each subcontractor and shall be
jointly and severally responsible with each subcontractor for any act or failure
to act of such subcontractor. If Teletrac determines that the performance or
conduct of any Tadiran subcontractor is unsatisfactory, Teletrac shall notify
Tadiran of its determination in writing, indicating the reasons therefor.
Tadiran shall promptly take all necessary actions to immediately remedy the
performance or conduct of such contractor or to replace such contractor by
another third party or by Tadiran personnel.

16.5. Amendments; Waivers. Except as provided expressly herein, this Agreement
shall not be modified, amended or in any way altered except by written document
signed by both of the parties hereto. No waiver of any provision of this
Agreement, or of any rights or obligations of any party hereunder, shall be
effective unless in writing and signed by the party waiving compliance, and such
waiver shall be effective only in the specific instance, and for the specific


                                       14


purpose, stated in such writing. No waiver of breach of, or default under, any
provision of this Agreement shall be deemed a waiver of any other provision, or
of any subsequent breach or default of the same provision, of this Agreement.

16.6. Legal Status of Parties. This Agreement shall not be construed to
constitute any of the parties as a representative, agent, employee, partner, or
co-venturer of any other party. Tadiran shall be an independent contractor for
the performance under this Agreement. Tadiran shall not have the authority to
enter into any agreement, or to assume any liability, on behalf of Teletrac, or
to bind or commit Teletrac in any manner. Teletrac shall have no power to
supervise, give directions, or otherwise regulate, Tadiran's operations or its
employees. Tadiran shall assume full responsibility for payment of all federal,
state, local, and other taxes or contributions imposed or required under
unemployment insurance, social security, income tax, or similar laws with
respect to such persons.

16.7. Severability. If any provision of this Agreement is determined to be
invalid or unenforceable, that provision shall be deemed stricken, and the
remainder of the Agreement shall continue in full force and effect insofar as it
remains a workable instrument to accomplish the intent and purposes of the
parties. The parties further agree to replace the severed provision with the
provision that will come closest to reflecting the intention of the parties
underlying the severed provision but that will be valid, legal and enforceable.

16.8. Survival of Rights and Obligations. To the extent appropriate in context,
the rights and obligations of the parties under this Agreement shall survive and
continue after the termination of this Agreement for any reason, and shall bind
the parties and their legal representatives, successors, heirs, and assigns.

16.9. Schedules. The Schedules attached hereto or incorporated herein by
reference are an integral part of the Agreement. To the extent that there are
any conflicts between the terms and conditions in the Schedules and those
contained herein, the terms and conditions set forth herein shall control.

16.10. Expenses. Each party will bear all of its own costs and expenses
(including attorneys' fees) incurred in connection with this Agreement and the
transactions contemplated hereby.

16.11. Remedies. Time is of the essence of this Agreement.


                                       15



IN WITNESS THEREOF, the parties hereunder have caused this Agreement to be
executed and delivered by their respective duly authorized representatives,
effective as of the date and year first set forth above.

ACCEPTED and executed this 13th day of December, 1996.

TELETRAC, INC.

By:  /s/ Alan B. Howe
     ----------------------------------

Name:  Alan B. Howe
       --------------------------------

Title:  Vice President - Finance
        -------------------------------

TADIRAN TELEMATICS LTD.

By:  /s/ Eddy Kafry
     -----------------------------------------------

Name:  Eddy Kafry
     -----------------------------------------------

Title:  General Manager
     -----------------------------------------------

                                       16




                                    GUARANTY
                                    --------

In consideration of the benefits to be realized from the foregoing agreement by
Tadiran Ltd., as the sole owner of all of the outstanding stock of Tadiran
Telematics Ltd. ("Telematics"), Tadiran Ltd., an Israeli corporation located at
26 Hashoftim Street, Holon, Israel, does hereby unconditionally, continuingly,
irrevocably, and without limitation, guaranty the performance by Telematics of
all of Telematic's duties and obligations under the Integrated Base Station Unit
Development Agreement to which this Guaranty is suffixed and does hereby waive
any and all defenses to the enforcement of such Guaranty based upon the failure
of Teletrac, Inc. to pursue or exhaust any remedies against Telematics, or upon
the failure of Tadiran Ltd. to consent or agree to any amendment, modification,
or other change to such agreement, or upon any other defense or claim not
available to Telematics itself, it being the intention of Tadiran Ltd. to bind
itself as fully as though it were a joint obligor under said agreement.

Dated:  December 13, 1996

TADIRAN, LTD.

By:  /s/ Eddy Kafry
     ---------------------------------


                                       17




                                  Schedule 1.4
                                  ------------

                              INTERFACE PROTOCOLS

To be provided by December 27, 1996 based on CCSP ICD Specification

Draft Rev. A dated November 25, 1996


                                       18






                                  Schedule 1.6
                                  ------------

                                PROJECT SCHEDULE

IBSU Major Milestones

IBSU - Development phase, major milestones for payment.

<TABLE>

---------------- ---------------------------------------------------------- ----------------------- -----------------
Number           Description                                                Due Date                Payment %
                                                                                                          (A)
---------------- ---------------------------------------------------------- ----------------------- -----------------

1)               PDR                                                        October 20, 1996                     22%
---------------- ---------------------------------------------------------- ----------------------- -----------------
2)               Module Level Specifications                                December 27, 1996                    10%
                 Interface Control Document
---------------- ---------------------------------------------------------- ----------------------- -----------------
3)               CDR                                                        January 23, 1997                      8%
---------------- ---------------------------------------------------------- ----------------------- -----------------
4)               1. Pre Assembly RFFE PCB                                   February 17, 1997                    14%
                 2. Pre-assembly PSK Wide-Wide PCB
                 3. Assembled UMR PCB
                 4. Pre-assembly GMI/O PCB
                 5. MPRF - complete mechanical drawings
---------------- ---------------------------------------------------------- ----------------------- -----------------
5)               1. Pre-assembly PSK Narrow-Narrow PCB                      April 15, 1997                       12%
                 2. Pre-assembly FSK PCB
                 3. Pre-assembly DDS PCB
                 4. Assembled TOA PCB
                 5. Assembled GMI/O
                 6. Prototype of UMR board with ECM firmware
                 7. MPRF mechanical prototypes
                 8. CCSP - mechanical drawings
                 9. ATP - First draft
---------------- ---------------------------------------------------------- ----------------------- -----------------
6)               1. MPRF - assembled controller PCB                         June 16, 1997                        12%
                 2. ATP - final version
                 3. Prototype of GMI/O board
---------------- ---------------------------------------------------------- ----------------------- -----------------
7)               1. IBSU - Prototype (both MPRF & CCSP)                     August 17, 1997                       8%
                 2. Beginning of factory acceptance tests 5 units
---------------- ---------------------------------------------------------- ----------------------- -----------------
8)               1. Beginning of site acceptance tests 5 units              September 15, 1997                   14%
---------------- ---------------------------------------------------------- ----------------------- -----------------
</TABLE>


The percents listed in column (A) apply to the $4.55 mm total IBSU development
contract.


                                       19





                                  Schedule 1.9
                                  ------------

                                 SPECIFICATIONS

The attached document represents the Integrated Base Station Specifications Rev.
C dated December 1, 1996. On December 13, 1996, Teletrac's engineers provided
comments to Tadiran to incorporate certain changes to conform the Specification
to Teletrac's requirements. Tadiran believes all such comments or agreed upon
alternatives will be incorporated in the Specification at the time of the CDR.



                                       20




                                  Schedule 2.2
                                  ------------

                             TESTING AND ACCEPTANCE

First draft to be submitted by April 15,1997 and final version by June 16, 1997
as per Schedule 1.6 Project Schedule.



                                       21






                                  Schedule 6.1
                                  ------------

                              DEVELOPMENT PAYMENTS

IBSU Major Milestones

IBSU - Development phase, major milestones for payment.

<TABLE>

---------------- ---------------------------------------------------------- ----------------------- -----------------
Number           Description                                                Due Date                Payment %
                                                                                                          (A)
---------------- ---------------------------------------------------------- ----------------------- -----------------

1)               PDR                                                        October 20, 1996                     22%
---------------- ---------------------------------------------------------- ----------------------- -----------------
2)               Module Level Specifications                                December 27, 1996                    10%
                 Interface Control Document
---------------- ---------------------------------------------------------- ----------------------- -----------------
3)               CDR                                                        January 23, 1997                      8%
---------------- ---------------------------------------------------------- ----------------------- -----------------
4)               1.  Pre Assembly RFFE PCB                                  February 17, 1997                    14%
                 2.  Pre-assembly PSK Wide-Wide PCB
                 3.  Assembled UMR PCB
                 4.  Pre-assembly GMI/O PCB
                 5.  MPRF - complete mechanical drawings
---------------- ---------------------------------------------------------- ----------------------- -----------------
5)               1.  Pre-assembly PSK Narrow-Narrow PCB                     April 15, 1997                       12%
                 2.  Pre-assembly FSK PCB
                 3.  Pre-assembly DDS PCB
                 4.  Assembled TOA PCB
                 5.  Assembled GMI/O
                 6.  Prototype of UMR board with ECM firmware
                 7.  MPRF mechanical prototypes
                 8.  CCSP - mechanical drawings
                 9.  ATP - First draft
---------------- ---------------------------------------------------------- ----------------------- -----------------
6)               1.  MPRF - assembled controller PCB                        June 16, 1997                        12%
                 2.  ATP - final version
                 3.  Prototype of GMI/O board
---------------- ---------------------------------------------------------- ----------------------- -----------------
7)               1.  IBSU - Prototype (both MPRF & CCSP)                    August 17, 1997                       8%
                 2.  Beginning of factory acceptance tests 5 units
---------------- ---------------------------------------------------------- ----------------------- -----------------
8)               1.  Beginning of site acceptance tests 5 units             September 15, 1997                   14%

---------------- ---------------------------------------------------------- ----------------------- -----------------
</TABLE>


The percents listed in column (A) apply to the $4.55 mm total IBSU development
contract.

                                       22




                                  Schedule 6.2
                                  ------------

                       IBSU PRICES AND PURCHASE PAYMENTS

1. 50 Units Order

a) Unit Price 20% higher than listed in item 2(a)

b) 25% down payment. Balance on deliveries.

c) Monthly deliveries 15, 15, 20 units

2. 700 Unit Order



a)

              MPRF (excluding receivers)                           $12.0K
              FSK RCVR                                              $1.5K
              Dual PSK RCVR                                         $3.0K

              CCSP (excluding boards)                               $2.5K
              GMIO                                                  $2.5K
              TOA                                                   $4.0K
              UMR                                                   $2.5K
              DSS (dual)                                            $2.5K

b)    Payments: ARO - $500K
                Months 1-7 $500K per month

c)    Credits:

1.    First two monthly production deliveries $500K per delivery

2.    Last four monthly deliveries $750K per delivery


d)    Payment Terms: First Delivery of 350 units - payment upon shipment
      Balance of 700 units - net 30 days

e)    Monthly deliveries of 50 - 60 units


                                       23




                                  EXHIBIT 2.3
                                  -----------

                           PREFERRED ESCROW AGREEMENT

                        Account Number _________________

This Agreement is effective ________________, 19___ among Data Securities
International, Inc. ("DSI"), Tadiran Telematics Ltd. ("Depositor") and Teletrac
Inc. ("Preferred Beneficiary"), who collectively may be referred to in this
Agreement as "the parties."

A. Depositor and Preferred Beneficiary have entered or will enter into an
Integrated Base Station Unit Development Agreement regarding certain proprietary
technology of Depositor (referred to in this Agreement as "the license
agreement").

B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.

C. The availability of the proprietary technology of Depositor is critical to
Preferred Beneficiary in the conduct of its business and, therefore, Preferred
Beneficiary needs access to the proprietary technology under certain limited
circumstances.

D. Depositor and Preferred Beneficiary desire to establish an escrow with DSI to
provide for the retention, administration and controlled access of the
proprietary technology materials of Depositor.

E. The parties desire this Agreement to be supplementary to the license
agreement pursuant to 11 United States [Bankruptcy] Code, Section 365(n).

ARTICLE 1 -- DEPOSITS

1.1 Obligation to Make Deposit. After acceptance of the last of the Prototypes,
and at least thirty (30) days before shipment of the first production order,
Depositor shall deliver to DSI the IBSU Production Package, which shall consist
of all information necessary for the manufacture of the IBSU not including RSSW,
including but not limited to: (a) schematic or other drawings or diagrams
representing the circuitry of the IBSU, with devices and parts with part numbers
cross-referenced to the bill of materials and with all respective connections
shown; (b) a bill of materials that lists all parts and devices with part
numbers and where appropriate specific electronic values for components such as
resistors and capacitors; (c) documentation of mechanical drawings with
specifications for any unique plastic parts; (e) master artwork, drill charts,
packaging and fabrication notes for printed circuit boards; and (f) complete
object code files, except RSSW, for all computer programs that are a part of, or
are used in connection with, the IBSU, along with all associated technical
documentation.

1.2 Identification of Tangible Media. Prior to the delivery of the deposit
materials to DSI, Depositor shall conspicuously label for identification each
document, magnetic tape, disk, or other tangible media upon which the deposit
materials are written or stored. Additionally, Depositor shall complete Exhibit
A to this Agreement by listing each such tangible media by the item label
description, the type of media and the quantity. The Exhibit A must be signed by


                                       24



Depositor and delivered to DSI with the deposit materials. Unless and until
Depositor makes the initial deposit with DSI, DSI shall have no obligation with
respect to this Agreement, except the obligation to notify the parties regarding
the status of the deposit account as required in Section 2.2 below.

1.3 Deposit Inspection. When DSI receives the deposit materials and the Exhibit
A, DSI will conduct a deposit-inspection by visually matching the labeling of
the tangible media containing the deposit materials to the item descriptions and
quantity listed on the Exhibit A.

1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
determines that the labeling of the tangible media matches the item descriptions
and quantity on Exhibit A, DSI will date and sign the Exhibit A and mail a copy
thereof to Depositor and Preferred Beneficiary. If DSI determines that the
labeling does not match the item descriptions or quantity on the Exhibit A, DSI
will (a) note the discrepancies in writing on the Exhibit A; (b) date and sign
the Exhibit A with the exceptions noted; and (c) provide a copy of the Exhibit A
to Depositor and Preferred Beneficiary. DSI's acceptance of the deposit occurs
upon the signing of the Exhibit A by DSI. Delivery of the signed Exhibit A to
Preferred Beneficiary is Preferred Beneficiary's notice that the deposit
materials have been received and accepted by DSI.

1.5  Depositor's Representations.  Depositor represents as follows:

a. With respect to all of the deposit materials, Depositor has the right and
authority to grant to DSI and Preferred Beneficiary the rights as provided in
this Agreement;

b. The deposit materials are not subject to any lien or other encumbrance.

1.6 Inspection. At the time Depositor shall notify Preferred Beneficiary that
the IBSU Production Package is ready for deposit with DSI, Depositor shall allow
Preferred Beneficiary to inspect the IBSU Production Package prior to the
deposit, so as to allow Preferred Beneficiary to ascertain that said package
conforms to the provisions of Section 2.3 of the License Agreement.

1.7 Removal of Deposit Materials. The deposit materials may be removed and/or
exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.

ARTICLE 2 - CONFIDENTIALITY AND RECORD KEEPING

2.1 Confidentiality. DSI shall maintain the deposit materials in a secure,
environmentally safe, locked facility which is accessible only to authorized
representatives of DSI. DSI shall have the obligation to protect the
confidentiality of the deposit materials. Except as provided in this Agreement,
DSI shall not disclose, transfer, make available, or use the deposit materials.
DSI shall not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or other order of a court or other judicial tribunal
pertaining to the disclosure or release of the deposit materials, DSI will
immediately notify the parties to this Agreement. It shall be the responsibility
of Depositor and/or Preferred Beneficiary to challenge any such order; provided,
however, that DSI does not waive its rights to present its position with respect
to any such order. DSI will not be required to disobey any court or other
judicial tribunal order. (See Section 7.5 below for notices of requested
orders.)

                                       25


2.2 Status Reports. DSI will issue to Depositor and Preferred Beneficiary a
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request of
any party to this Agreement.

2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred
Beneficiary shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.

ARTICLE 3 -- GRANT OF RIGHTS TO DSI

Depositor hereby grants to DSI the right to transfer the deposit materials to
Preferred Beneficiary upon any release of the deposit materials for use by
Preferred Beneficiary in accordance with Section 4.5. Except upon such a release
or as otherwise provided in this Agreement, DSI shall not transfer the deposit
materials.

ARTICLE 4 -- RELEASE OF DEPOSIT

4.1 Release Conditions. As used in this Agreement, "Release Conditions" shall
mean the following:

a. Termination of the License Agreement by the Preferred Beneficiary for
Material Default in accordance with Section 14.3(a) of the License Agreement; or

b. Completion of the purchase of 1,500 Base Station Units or (if occurring
later) until the end of the 22nd calendar month after the month in which
Depositor delivered the first production units to Preferred Beneficiary.

4.2 Filing For Release. If Preferred Beneficiary believes in good faith that a
Release Condition has occurred, Preferred Beneficiary may provide to DSI written
notice of the occurrence of the Release Condition and a request for the release
of the deposit materials. Upon receipt of such notice, DSI shall provide a copy
of the notice, to Depositor, by certified mail, return receipt requested, or by
commercial express mail.

4.3 Contrary Instructions. From the date DSI mails the notice requesting release
of the deposit materials, Depositor shall have ten business days to deliver to
DSI Contrary Instructions. "Contrary Instructions" shall mean the written
representation by Depositor that a Release Condition has not occurred or has
been cured. Upon receipt of Contrary Instructions, DSI shall send a copy to
Preferred Beneficiary by certified mail, return receipt requested, or by
commercial express mail. Additionally, DSI shall notify both Depositor and
Preferred Beneficiary that there is a dispute to be resolved pursuant to the
Dispute Resolution section (Section 7.3) of this Agreement. Subject to Section
5.2, DSI will continue to store the deposit materials without release pending
(a) joint instructions from Depositor and Preferred Beneficiary; (b) resolution
pursuant to the Dispute Resolution provisions; or (e) order of a court.

4.4 Release of Deposit. If DSI does not receive Contrary Instructions from the
Depositor, DSI is authorized to release the deposit materials to the Preferred
Beneficiary or, if more than one beneficiary is registered to the deposit, to
release a copy of the deposit materials to the Preferred

                                       26


Beneficiary. However, DSI is entitled to receive any fees due DSI before making
the release. This Agreement will terminate upon the release of the deposit
materials held by DSI.

4.5 Right to Use Following Release. Unless otherwise provided in the license
agreement, upon release of the deposit materials in accordance with this Article
4, Preferred Beneficiary shall have the right to use the deposit materials for
the sole purpose of continuing the benefits afforded to Preferred Beneficiary by
the license Agreement. Preferred Beneficiary shall be obligated to maintain the
confidentiality of the released deposit materials.

ARTICLE 5 -- TERM AND TERMINATION

5.1 Term of Agreement. The initial term of this Agreement is for a period of one
year. Thereafter, this Agreement shall automatically renew from year-to-year
unless (a) Depositor and Preferred Beneficiary jointly instruct DSI in writing
that the Agreement is terminated; or (b) the Agreement is terminated by DSI for
nonpayment in accordance with Section 5.2. If the deposit materials are subject
to another escrow agreement with DSI, DSI reserves the right, after the initial
one year term, to adjust the anniversary date of this Agreement to match the
then prevailing anniversary date of such other escrow arrangements.

5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to
DSI, DSI shall provide written notice of delinquency to all parties to this
Agreement. Any party to this Agreement shall have the right to make the payment
to DSI to cure the default. If the past due payment is not received in full by
DSI within one month of the date of such notice, then DSI shall have the right
to terminate this Agreement at any time thereafter by sending written notice of
termination to all parties. DSI shall have no obligation to take any action
under this Agreement so long as any payment due to DSI remains unpaid.

5.3 Disposition of Deposit Materials Upon Termination. Upon termination of this
Agreement by joint instruction of Depositor and Preferred Beneficiary, DSI shall
destroy, return or otherwise deliver the deposit materials in accordance with
Depositor's instructions. Upon termination for nonpayment, DSI may, at its sole
discretion, destroy the deposit materials or return them to Depositor. DSI shall
haves no obligation to return or destroy the deposit materials if the deposit
materials are subject to another escrow agreement with DSI.

5.4 Survival of Terms Following Termination. Upon termination of this Agreement,
the following provisions of the Agreement shall survive:

a. Depositor's Representations (Section 1.5);

b. The obligations of confidentiality with respect to the deposit materials;

c. The rights granted in the sections entitled Right to Transfer Upon Release
(Section 3) and Right to Use Following Release (Section 4.5), If a release of
the deposit materials her occurred prior to termination;

d. The obligation to pay DSI any fees and expenses due;

e. The provisions of Article 7; and

                                       27


f. Any provisions in this Agreement which specifically state they survive the
termination or expiration of this Agreement.

ARTICLE 6 -- DSI'S FEES

6.1 Fee Schedule. DSI is entitled to be paid its standard fees and expense
applicable to the services provided. Depositor and Preferred Beneficiary shall
each pay 50% of such fees and expenses during the first 36 month of this
Agreement; thereafter, Preferred Beneficiary shall pay 100% of such fees. DSI
shall notify the party responsible for payment of DSI's fees at least 90 days
prior to any increase in fees. For any service not listed on DSI's standard fee
schedule, DSI will provide a quote prior to rendering the service, if requested.

6.2 Payment Terms. DSI shall not be required to perform any service unless the
payment for such service and any outstanding balances owed to DSI are paid in
full. All other fees are due upon receipt of invoice. If invoiced fees are not
paid, DSI may terminate this Agreement in accordance with Section 5.2. Late fees
on past due amounts shall accrue at the rate of one and one-half percent per
month (18% per annum) from the date of the invoice.

ARTICLE 7 - LIABILITY AND DISPUTES

7.1 Right to Rely on Instructions. DSI may act in reliance upon any instruction,
instrument, or signature reasonably believed by DSI to be genuine. DSI may
assume that any employee of a party to this Agreement who give any written
notice, request, or instruction has the authority to do so. DSI shall not be
responsible for failure to act as a result of causes beyond the reasonable
control of DSI.

7.2 Indemnification. DSI shall be responsible to perform its obligations under
this Agreement and to act in a reasonable and prudent manner with regard to this
escrow arrangement. Provided DSI has acted in the manner stated in the preceding
sentence, Depositor and Preferred Beneficiary each agree to indemnify, defend
and hold harmless DSI from any and all claims, actions, damages, arbitration
fees and expenses, costs, attorney's fees and other liabilities incurred by DSI
relating in any way to this escrow arrangement.

7.3 Dispute Revolution. Any dispute relating to or arising from this Agreement
shall be resolved by arbitration under the Commercial Rules of the American
Arbitration Association. Unless otherwise agreed by Depositor and Preferred
Beneficiary, arbitration will take place in San New York City, New York, U.S.A.
Any court having jurisdiction over the matter may enter judgment on the award of
the arbitrator(s). Service of a petition to confirm the arbitration award may be
made by First Class mail or by commercial express mail, to the attorney for the
party or, if unrepresented, to the party at the last known business address.

7.4 Controlling Law. This Agreement is to be governed and construed in
accordance with the laws of the State of California, without regard to its
conflict of law provisions.

7.5 Notice of Requested Order. If any party intends to obtain an order from the
arbitrator or any court of competent jurisdiction which may direct DSI to take,
or refrain from taking any action, that party shall:

                                       28


a. Give DSI at least two business days' prior notice of the hearing;

b. Include in any such order that, it a precondition to DSI's obligation, DSI be
paid in full for any past due fees and be paid for the reasonable value of the
services to be rendered pursuant to such order; and

c. Ensure that DSI not be required to deliver the original (as opposed to a
copy) of the deposit materials if DSI may need to retain the original in its
possession to fulfill any of its other duties.

ARTICLE 8 -- GENERAL PROVISIONS

8.1 Entire Agreement. This Agreement, which includes the Exhibits described
herein, embodies the entire understanding among the parties with respect to its
subject matter and supersedes all previous communications, representations or
understandings, either oral or written. No amendment or modification of this
Agreement shall be valid or binding unless signed by all the parties hereto;
except that Exhibit A need not be signed by DSI Preferred Beneficiary and
Exhibit D need not be signed.

8.2 Notices. All notices, invoices, payments, deposits and other documents and
communications shall be given to the parties at the addresses specified in the
attached Exhibit B. It shall be the responsibility of the parties to notify each
other as provided in this Section in the event of a change of address. The
parties shall have the right to rely on the last known address of the other
parties. Unless otherwise provided in this Agreement, all documents and
communications may be delivered by First Class mail.

8.3 Severability. In the event any provision of this Agreement is found to be
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
avoidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining provisions herein, and the provision in question
shall be deemed to be replaced with a valid and enforceable provision most
closely reflecting the intent and purpose of the original provision.

8.4 Successors. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties. However, DSI shall have no
obligation in performing this Agreement to recognize any successor or assign of
Depositor or Preferred Beneficiary unless DSI receives clear, authoritative and
conclusive written evidence of the change of parties.

                                       29







-----------------------                     ----------------------
Depositor                                   Preferred Beneficiary
By: ____________________                    By: ___________________

Name: __________________                    Name: _________________

Title: ___________________                  Title: _________________

Date:  ___________________                  Date:  ________________


                       Data Securities International, Inc.

                                    By: ________________________

                                    Name:  _____________________

                                    Title:  ______________________

                                    Date:  ______________________


                                       30





                                   EXHIBIT A

                        DESCRIPTION OF DEPOSIT MATERIALS

Depositor Company Name  _______________________________________
Account Number ________________________________________________

PRODUCT DESCRIPTION:

Product Name  __________________________ Version ______________
Operating System   ____________________________________________
_______________________________________________________________
Hardware Platform   ___________________________________________
_______________________________________________________________




DEPOSIT COPYING INFORMATION:

Hardware required:   __________________________________________
_______________________________________________________________
Software required:  ___________________________________________
_______________________________________________________________





DEPOSIT MATERIAL DESCRIPTION:

<TABLE>


Qty                  Media Type & Size                Label Description of Each Separate Item
                                                      (excluding documentation)
____                 Disk 3.5" or ___
____                 DAT tape ____ mm
____                 CD-ROM
____                 Data cartridge tape ___
____                 TK 70 or ___ tape
____                 Magnetic tape ____
____                 Documentation
____                 Other _____________
</TABLE>




<TABLE>


I certify for Depositor that the above described deposit     DSI has inspected and accepted the above materials (any
materials have been transmitted to DSI:                      exceptions are noted above):
Signature  _______________________                           Signature _________________
Print Name ______________________                            Print Name  _______________
Date  ___________________________                            Date Accepted _____________
                                                             Exhibit A# ________________
</TABLE>


Send materials to: DSI, 9555 Chesapeake Dr. #200, San Diego, CA 92123


                                       31




<TABLE>


                                   EXHIBIT B

                               DESIGNATED CONTACT

                      Account Number ____________________

Notices, deposit material returns and communications to      Invoices to Depositor should be addressed to:
Depositor should be addressed to:
Company Name: _____________________                          ______________________________
Address: __________________________                          ______________________________
Designated Contact: _______________                          Contact: _____________________
Telephone:  _______________________                          ______________________________
Facsimile:   ______________________                          ______________________________

Notices and communications to Preferred Beneficiary should   Invoices to Preferred Beneficiary should be addressed
be addressed to:                                             to:

Company Name: _____________________                          ______________________________
Address: __________________________                          ______________________________
Designated Contact:  ______________                          Contact:  ____________________
Telephone:  _______________________                          ______________________________
Facsimile:  _______________________                          ______________________________

Requests from Depositor or Preferred Beneficiary to change the designated contact should be given in writing by
the designated contact or an authorized employee of Depositor or Preferred Beneficiary.

Contracts, deposit materials and notices to DSI should be Invoice inquiries and fee remittances to DSI should be
addressed to: addressed to:

DSI                                                          DSI
Contract Administration                                      Accounts Receivable
Suite 200                                                    Suite 1450
9555 Chesapeake Drive                                        425 California Street
San Diego, CA 92123                                          San Francisco, CA 94104

Telephone: (619) 694-4900                                    Telephone:  (415) 398-7900
Facsimile: (619) 694-1919                                    Facsimile:  (415) 398-7914

Date:  ________________
</TABLE>


                                       32






                                                                   EXHIBIT 10.10

                        LICENSE AND OWNERSHIP AGREEMENT
                        -------------------------------

The License Agreement (the "Agreement") is made and entered into as of September
29, 1999 (the "Effective Date") by and between Tadiran Telematics Ltd.
("Tadiran"), an Israeli corporation with a place of business at 26 Hashoftun
Street, Holon, Israel, and Teletrac, Inc. ("Teletrac"), a Deleware corporation
with a place of business at 3220 Executive Ridge Suite 100, Vista, CA 92083.

RECITALS
--------

An integrated base station unit was developed in connection with the Integrated
Base Station Unit Development Agreement dated December 13, 1996, between Tadiran
and Teletrac (the "IBSU Agreement"). Tadiran desire to Markey and sell this
integrated base station unit to third parties and accordingly, and to the extent
necessary, wishes to have a license from Teletrac to so market and sell the
integrated base station unit. Teletrac desires that Tadiran market and sell the
unit to third parties, and, accordingly, and to the extent necessary, wishes to
have a license from Teletrac to so market and sell the integrated base station
unit. Teletrac desires that Tadiran market and sell the unit to third parites,
and, accordingly, and to the extent necessary, wishes to grant Tadiran a license
to do some.

In consideration of the promises and covenants contained herein, the receipt,
sufficiency and adequacy of which are herby acknowledged, and intending to be
legally bound, the parties hereto agree as follows:

1. DEFINITIONS.

A. "ISBU" means the integrated base station unit developed pursuant to the IBSU
Agreement, including, without limitation, all copyright, patent, and other
intellectual proprietary rights in the IBSU and related to the IBSU, which
comprises Teletrac Contributions and Tadiran Contributions, and which is
described as set forth in Schedule 1.A. to this Agreement. "IBSU" also includes
integrated base station units: (i) that are substantially and functionally the
same in configuration, design, specifications, modules, and component make-up,
among others, as the unit described in Schedule 1.A., and (ii) the components
and modules of which are substantially and functionally the same in
configuration, design, specifications, and make-up, among others, as the
components and modules of the unit described in Schedule 1.A.

B. "Tadiran Components" means all hardware, software, equipment, circuits,
boards, computers, modems, assemblies, firmware, receivers, transmitters, and
other components manufactured, produced, sold, delivered, or provided by
Tadiran.

C. "Tadiran Contributions" means any and all know-how inventions, developments,
concepts, ideas, processes, methods, discoveries, works of authorship, data,
information, and materials provided, delivered, or made available by Tadiran and
included in the IBSU. Tadiran Contributions do not include Tadiran Components.

D. "Teletrac Components" means all hardware, software, equipment, circuits,
boards, computers, modems, assemblies, firmware, receivers, transmitters, and
other components manufactured, produced, sold, delivered, or provided by
Teletrac.


E. "Teletrac Contributions" means any and all know-how inventions, developments,
concepts ideas, processes, methods, discoveries, works of authorship, data,
information, and materials provided, delivered, or made available by Teletrac
and included in the IBSU. Teletrac Contributions do not include Teletrac
Components.

F. "Third Party" means any corporation, general partnership, limited
partnership, limited liability partnership, joint-venture, firm, company,
limited liability company, or other enterprise, association, organization, or
entity (other than Tadiran or any successor in interest) that, at the time of
receipt and acceptance of the IBSU, has a license from Teletrac to deploy
Tadiran immediately as to whether a particular prospective purchaser of the IBSU
has received such a license.

2. TELETRAC OWNERSHIP. Teletrac represents, warrants, and covenants that it
shall own all right, title and interest in and to the Teletrac Contributions and
Teletrac Components.

3. LICENSE TO TADIRAN.

A. Teltrac hereby grants Tadiran an exclusive (even as to Teletrac), perpetual,
irrevocable, worldwide, and transferable right and license to use, exploit,
commercialize, reproduce, distribute, perform, display, prepare derivative works
based upon, and exercise any and all rights in and to the Teletrac
Contributions, in any format, or medium now known or later developed in
connection with the IBSU.

B. Teltrac hereby grants Tadiran an exclusive (even as to Teletrac), perpetual,
irrevocable, worldwide, and transferable right and license to incorporate and
use the Teletrac Components, in any form, format, or medium now known or later
developed, in the making, production, manufacturing, marketing, promotion, sale,
maintenance, support and servicing of the IBSU.

4. ROYALTIES. Tadiran shall pay Teletrac, by wire transfer to such account as
Teletrac shall from time to time notify Tadiran in writing at least fifteen (15)
days in advance, a royalty fee of five thousand U.S. dollars ($5,000 U.S.) for
each IBSU sold and delivered by Tadiran to, and received and accepted by, a
Third Party after the Effective Date. Any royalties due and owing to Teletrac
shall be paid by Tadiran within thirty (30) days after the end of the Gregorian
calendar year quarter during which the IBSU was received and accepted by the
Third Party; provided, however, that the payment of royalties due in connection
with IBSUs received and accepted by Third Parites during any and all Gregorian
calendar year quarters preceding the Gregorain calendar year quarter during
which the last party year to execute this Agreement executes this Agreement
shall be paid by Tadiran within thirty (30) after the end of the Gregorian
calendar year quarter during which the last party to execute this Agreement
executes this Agreement.

A. Tadiran shall sell the IBSU only to Third Parties.

B. Under this Agreement, Teletrac shall be entitled to the royalty fee described
above in connection with the sale of only the IBSU. No royalty fee shall be due
or payable under this Agreement for the sale of any other unit or product.

C. Nothing in this Agreement shall be considered, construed, interpreted, or
deemed:


(i) To require Tadiran to use, exploit, commercialize, reproduce, distribute,
perform, display, prepare derivative works based upon, or exercise any or all
rights in or to the Teletrac Contributions or Teletrac Components, in any form,
format, or medium now known or later developed, in connection with the IBSU or
any other product.

(ii) To require Tadiran to sell or deliver or do any other thing regarding the
IBSU.

(iii) To prohibit, limit, or restrict Tadiran from developing, conceiving,
reducing to practice, making, manufacturing, selling, reproducing, copying,
distributing, delivering, or doing any other thing regarding any other unit or
product, or to have such done.

D. For purposes of this Paragraph 4, the word "sold" shall include the words
"leased," "traded/bartered" and "transferred by installment sale."

5. TADIRAN OWNERSHIP.

A. Teletrac acknowledges and agrees that, as between it and Tadiran, Tadiran
owns any and all right, title, and interest in and to the Tadiran Contributions
and Tadiran Components. In addition, except as set forth in Paragraph 3.A,
Teletrac acknowledges and agrees that, as between it and Tadiran, Tadiran owns
any and all right, title, and interest in and to the IBSU, as well as to any and
all improvements, modifications, additions and deletions to, and derivatives of
the IBSU.

B. Tadiran shall be financially responsible for, and have sole interest over:

(i) The filing and prosecution of applications, anywhere in the world, for
intellectual property and other protectable rights covering the IBSU, the
Tadiran Contributions, the Tadiran Components, and the Teletrac Components
incorporated into the IBSU.

(ii) The enforcement and maintenance of all such intellectual property rights
throughout the world.

C. Teletrac shall have the right to file, at its own expense and in its
discretion, applications on behalf of Tadiran for intellectual property rights
covering the IBSU, any Teletrac Component, or any Teletrac Contribution
described in Paragraph 3.A., as to which Tadiran has declined to file an
application or in such countries or regions as Tadiran has declined to file an
application, provided that Teletrac has given prior written notice of its intent
to Tadiran, and Tadiran has not initiated such applications, or has not advised
Teletrac not to proceed, within thirty (30) days after such notice.

(i) In the event Teletrac files any such application on behalf of Tadiran: (a)
Tadiran shall be the registered owner but Teletrac shall be entitled to any and
all damages recovered through the enforcement of the intellectual property
rights covered by said application, and (b) any and all documents,
correspondence, materials, and filings made or submitted in connection therewith
shall be submitted to Tadiran for review and approval prior to being made or
submitted to the appropriate party or regulatory body.


(ii) Any enforcement or prosecution action taken with respect to the IBSU, any
Tadiran Contribution or any Tadiran Component shall be taken by Tadiran, in its
sole discretion.

(iii) If Teletrac files or pursues any application for any intellectual property
right on behalf of Tadiran or in connection with the IBSU, any Teletrac
Component, or any Teletrac Contribution, Teletrac shall exercise best and
diligent efforts at all times.

(iv) The parties hereto shall cooperate with one another in the prosecution and
enforcement of intellectual property rights relating to the IBSU.

6. TAXES AND DUTIES. Tadiran shall be responsible for payment of all taxes,
duties, customs, etc., payable in Israel in respect of this Agreement or the
transactions hereunder. Teletrac shall be responsible for payments of all taxes,
duties, customs, etc., payable in the United States of America in respect of
this Agreement or the transactions hereunder, provided, however, that each party
shall be responsible for presenting to the other copies of the invoices for all
such taxes and duties and shall cooperate with the other's legal efforts to
minimize any such taxes, customs, and duties. Further, each party shall defend
and indemnify the other against all claims in respect of any taxes, duties and
customs for which it is responsible.

7. Indemnification.

A. Tadiran shall defend (or, at its option, settle), indemnify and hold Teletrac
harmless from and shall pay any and all liabilities, losses, costs, damages and
expenses (including reasonable attorneys' fees) associated with any claim
against Teletrac, arising out of bodily injury (including death) or damage to
property (including loss of use of property and down time) that occurs in
connection with the performance by Tadiran of Services, to the extent that such
injury or damage is caused by the negligence or willful misconduct of Tadiran's
personnel, agents or subcontractors. For purposes of this Agreement, "Services"
shall be defined as manufacture or sale of the IBSU.

B. Tadiran shall defend (or, at its option settle) and hold Teletrac harmless
and shall pay any and all liabilities, losses, costs, damages and expenses
(including reasonable attorneys' fees), arising out of any claim, brought by any
third party against Teletrac, for actual or alleged infringement of any patent,
trademark, copyright or other intellectual property right (including, but not
limited to, misappropriation of trade secrets) by the IBSU or any Tadiran
Component thereof, except to the extent that such liabilities, losses, costs,
damages, expenses, or claim arise from, are based upon, or relate to any
Teletrac Component or Teletrac Contribution.

C. Teletrac shall defend (or, at its option settle), indemnify and hold Tadiran
harmless from and shall pay any and all liabilities, losses, costs, damages and
expenses (including reasonable attorneys' fees) associated with any claim
against Tadiran, arising out of bodily injury (including death) or damage to
property (including loss of use of property and down time) that occurs in
connection with the performance by Teletrac of its obligations under this
Agreement to the extent that such injury or damage is cause by the negligence or
willful misconduct of Teletrac's personnel, agents or subcontractors.

D. Teletrac shall defend (or, at its option settle) and hold Tadiran harmless
and shall pay any and all liabilities, losses, costs, damages and expenses
(including reasonable attorneys' fees), arising



from, based on, or related to any breach by Teletrac of any duty or obligation
set forth in Paragraph 5 or arising out any claim, brought by any third party
against Tadiran, for actual or alleged infringement of any patent, trademark,
copyright or other intellectual property right (including, but not limited to,
misappropriation of trade secrets) by any Teletrac Contribution or Teletrac
Component, by any use thereof, or by the IBSU in connection with, based upon, or
related to any Teletrac Contribution or Teletrac Component therein.
Notwithstanding the foregoing, if any claim of infringement of any patent,
trademark, copyright, or other intellectual property right (including, but not
limited to, misappropriation of trade secrets) is initiated or is likely to be
initiated in connection with, based upon, or related to a Teletrac Contribution
or Teletrac Component, then Teletrac promptly shall either: (i) modify or
replace all, or the infringing part, of the Teletrac Contribution or Teletrac
Component so that it is no longer infringing, provided that the functionality of
the Teletrac Component or Teletrac Contribution, as applicable, and the IBSU
does not change in any material adverse respect, or (ii) procure for Tadiran the
right to continue using the infringing part of the Teletrac Component or
Teletrac Contribution as applicable.

8. CONFIDENTIALITY.

A. For purposes of this Agreement, "Confidential Information" means any
information or data (including but not limited to any technical or nontechnical
data, and any formula, pattern, compilation, program, device, method, technique
or process) that derives economic value (actual or potential) from not being
generally known to other persons. To the extent consistent with this definition,
Confidential Information includes the terms of this Agreement; the
specifications and requirements for the IBSU; the source code, structure,
organization, design, algorithms, methods flow charts, and logic flow associated
with any software or firmware included with the IBSU; Teletrac's and Tadiran's
pricing, sales, and training materials; and any other information marked as
confidential by Teletrac or Tadiran. Confidential information does not include
information that has become publicly known or available, absent a breach of this
Agreement.

B. Each party agrees, except as authorized by this Agreement (including, but not
limited to, in connection with the sale of the IBSU or other exercise of rights
under Paragraph 3 by Tadiran):

(i) To exercise the same degree of care and protection (but no less than a
reasonable degree of care and protection) with respect to the other party's
Confidential Information as such party exercises with respect to its own
Confidential Information, and

(ii) Not to, directly or indirectly, disclose, copy, transfer or allow access to
the Confidential Information.

9. DISPUTE RESOLUTION.

A. Escalation Procedures. If any dispute arises between the parties, and, after
good faith negotiations, the parties disagree as to the existence of a dispute
or its solution, the party raising the issue shall promptly provide written
notice to the other. Each party shall promptly forward the disputed matter to an
executive officer of such party that is not otherwise directly associated with
this Agreement ( the "Executive Team"). All decisions of the Executive Team
shall be made on a unanimous basis, and shall be binding on Tadiran and
Teletrac. If the Executive



Team cannot resolve a dispute within fifteen (15) days after having been
referred such dispute (and without regard to whether either party has contested
whether these procedures, including the duty of good faith, have been followed),
each party shall have the right to commence an arbitration, as set forth in
Section 9.B. No party shall be obligated to comply with this provision for
breaches of Section 8 hereof.

B. Arbitration. In the event of any dispute, controversy or disagreement
regarding performance under or interpreting of this Agreement that is not
resolved pursuant to Section 9.A., the parties agree that the dispute,
controversy or disagreement shall be submitted to arbitration using the
then-current Commercial Arbitration Rules of the American Arbitration
Association (the "AAA Rules"), provided, however, that disputes, controversies
or disagreements regarding Section 8 shall not be subject to arbitration.
Notwithstanding the foregoing, and the then-current AAA Rules: (i) the
arbitration proceeding shall be conducted by a single arbitrator, to be chosen
by mutual agreement of a designee chosen by Teletrac and a designee chosen by
Tadiran (if such designees are unable to agree on the choice of arbitrator, then
such arbitrator shall be selected in accordance with the then-current AAA
Rules); (ii) in order to be eligible to serve as an arbitrator, the arbitrator
must have a minimum of five years experience in telecommunications activities
during the eight years immediately preceeding the dispute; (iii) the existence,
subject, evidence, proceedings and ruling resulting from the arbitration
proceeding shall be deemed Confidential Information, and shall not be disclosed
by either party, their representative or the arbitrators (except as may be
necessary to enforce the arbitration award by the court); (iv) the proceedings
shall take place in New York, New York; (v) the arbitrator shall be required to
prepare written findings of fact, together with a written award specifying its
ruling; and (vi) subject to the terms and conditions of this Agreement, the
arbitrator's award may grant any remedy or relief which the arbitrator deems
just and equitable. Each party shall bear its own arbitration costs and
expenses, including without limitation the costs and expenses of the arbitrator
selected by it and fifty percent (50%) of the costs and expenses of a third
arbitrator; provided, however, that the arbitrators may modify the allocation of
fees, costs and expenses in the award in those cases where fairness dictates
other than an equal allocation between the parties. The arbitration award shall
be final and binding on the parties, and judgment on the award may be entered in
and enforced by any court of competent jurisdiction.

10. REPORTS. Tadiran will deliver to Teletrac a written report every quarter,
within twenty-five (25) days after the end of the quarter; provided, however,
that the reports otherwise due for any and all calendar year quarters preceding
the calendar year quarter during which the last party to execute this Agreement
executes this Agreement shall be delivered by Tadiran within twenty-five (25)
days after the end of the calendar year quarter during which the last party to
execute this Agreement executes this Agreement. The report shall set forth: (A)
the identities of Third Parties who received and accepted the IBSU during the
particular quarter; and (B) the number of IBSUs received and accepted by such
Third Parties during the particular quarter. If no Third Parties received and
accepted the IBSU during the particular quarter, no written report shall be due
from Tadiran.

11. INTEREST. In the event Tadiran fails to make any undisputed payment to
Teletrac within the time frame specified above, in addition to any other
remedies available in respect of such failure, Tadiran shall pay Teletrac
interest on the unpaid amount calculated at a rate equal to one percent (1%) per
month beginning on the date on which such amount became due and payable. In the



event and to the extent that any disputed payment alleged to be owed by Tadiran
is determined to be properly due and owing, then Tadiran shall promptly remit
the disputed amount to Teletrac, plus interest calculated at a floating rate
equal to two percent (2%) of the "prime rate" (calculated per annum) as
published in the "Wall Street Journal" on the first business day of each month
during which such amount remains unpaid, beginning with the month in which such
disputed amount was properly invoiced.

12. MISCELLANY. This Agreement represents and contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supercedes all prior negotiations, discussions, and agreements
(including but not limited to the IBSU Agreement) between the parties hereto
relating to the subject matter hereof. This Agreement may not be amended,
modified, or otherwise altered except by a writing duly executed by the parties
hereto. No usage of trade, or other regular practice or method of dealing
between the parties hereto or others, will be used to modify, interpret,
supplement, or alter in any manner the express terms of this Agreement. Neither
party shall be deemed the draftsperson of this Agreement, for the purpose of the
rule that ambiguities in a contract shall be construed against the draftsperson.
At all times incident to this Agreement, the parties shall be deemed, construed
and considered to be independent contractors, and not partners, associates,
joint venturers, employer-employee, principal-agent, or representatives or
agents of each other. This Agreement will be governed, construed, and enforced
under the laws of the State of New York, U.S.A., and the federal laws of the
U.S.A.

13. ASSIGNMENT.

A. This Agreement is and shall be shall be binding upon, and inure to the
benefit of, each of the parties' respective successors and assigns. Teletrac
shall not assign, pledge, grant, license, or otherwise encumber or transfer to
any person, either directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, this Agreement, all or part of its rights under
this Agreement, or any or all rights to the Teletrac Contributions or the
Teletrac Components without the advance written consent of Tadiran; provided,
however, that Teletrac may assign, pledge, grant, license, or otherwise encumber
or transfer to any person, either directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, this Agreement or all or part
of its rights under this Agreement if the assignee or transferee covenants and
agrees in writing with Tadiran that it assumes and undertakes, and agrees to
perform and discharge in accordance with their terms all of the liabilities,
covenants, and obligations of Teletrac arising under or out of this Agreement,
as if it were the original party to this Agreement. Tadiran shall not assign,
pledge, grant, license, or otherwise encumber or transfer to any person, either
directly or indirectly, voluntarily or involuntarily, by operation of law or
otherwise, this Agreement or all or part of its rights under this Agreement
without the advance written consent of Teletrac; provided, however, that Tadiran
may assign, pledge, grant, license, or otherwise encumber or transfer to any
person, either directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, this Agreement or all or part of its rights under
this Agreement if the assignee or transferee covenants and agrees in writing
with Teletrac that it assumes and undertakes, and agrees to perform and
discharge in accordance with their terms all of the liabilities, covenants, and
obligations of Tadiran arising under or out of this Agreement, as if it were the
original party to this Agreement.


B. A party's permitted assignment or other encumbrance of transfer under this
Agreement will not relieve that party of or from its obligations or duties of
performance hereunder, except as follows:

(i) Teletrac's obligation to indemnify under Paragraph 7.C. shall continue only
in respect of claims for acts and/or damage occurring, arising or suffered
before the effective date of any Teletrac assignment.

(ii) Tadiran's obligation to indemnify under Paragraph 7.A. and B. shall
continue only in respect of claims for acts and/or damages occurring, arising or
suffered before the effective date of any Tadiran assignment.

(iii) Tadiran shall be relieved of all future obligations to submit Reports
under Paragraph 10, to pay Royalties under Paragraph 4, and to be financially
responsible under Paragraph 5.B., as of the effective date of any Tadiran
assignment.

14. The parties hereto confirm and agree that they have read and understand this
Agreement, and that they are represented by competent counsel who have read and
who understand this Agreement.

15. Each person who executes this Agreement on behalf of each party represents
and warrants that he or she has been duly authorized and empowered to execute
and bind the parties to the terms, conditions, covenants, promises and
agreements contained herein. Each party hereto represents and warrants that it
is a duly formed corporation in good standing under the laws of Israel (Tadiran)
and Delaware (Teletrac), respectively, and that each party has all necessary
rights, power and authority to enter into and perform this Agreement and to
grant the rights and licenses granted under this Agreement.

16. Each party shall bear all of its own costs and expenses (including
attorneys' fees) incurred in connection with this Agreement and the transactions
contemplated hereunder.

17. This agreement shall continue in full force and effect perpetually from the
Effective Date and may not be terminated except upon mutual agreement of the
parties. Paragraphs 1, 2, 5, 6, 7, 8, 9, 12, 13, 15, and 16 shall survive
termination of this Agreement.

AGREED AND ACCEPTED, and intending to be legally bound, this 29th day of
December, 2000.

TADIRAN TELEMATICS LTD.



/s/Kafry Eddy
-------------

By:  Eddy Kafry
     ----------
Title: CEO                25/02/01
       ---------------------------


TELETRAC, INC.


/s/ Steven D. Scheiwe
---------------------

By:  Steven D. Scheiwe
     -----------------

Title:  Chief Executive Officer
        -----------------------







                                 SCHEDULE 1.A.

                          [TO BE PROVIDED BY TADIRAN]







                                                                   EXHIBIT 10.11


                             RADIO LOCATION SYSTEM

                               LICENSE AGREEMENT

                              DATED MARCH 1, 1999

                                    BETWEEN

                                 TELETRAC, INC.

                                      AND

                        BEHEERMAATSCHAPPIJ de ROOIJ B.V.









TABLE OF CONTENTS

<TABLE>


1. Definitions 1

1.1  Contract Administrator  1

1.2  Contract Technical Coordinator  1

1.3  Effective Date  1

1.4  Radio Location System  2

1.5  RLS Components          2

1.6  RLS Coverage Area  2

1.7  RLS Customer  2

1.8  RLS Customer Equipment  2

1.9  RLS Customer Equipment Revenue  2

1.10  RLS Customer Maintenance  2

1.11  RLS Customer Maintenance Revenue  2

1.12  RLS Customer Services           2

1.13  RLS Customer Services Revenue  2

1.14  RLS Customer Workstations  3

1.15  RLS Data Transmission Network  3

1.16  RLS Licensed Software Corrections  3

1.17  RLS Licensed Software Upgrades  3

1.18  RLS Licensed Software   3

(a) RLS Customer Workstation Licensed Software 4

(b) RLS Network Control Center Licensed Software 4

(c) RLS Transmission and RLS Receiver Sites Licensed Software 4

(d) RLS Episode Software 4

1.19  RLS Licensed Technical Information  4




1.20  RLS Licensed Technical Information Corrections  5

1.21  RLS Licensed Technical Information Upgrades  5

1.22  RLS Location Unit  5

1.23  RLS Map   5

1.24  RLS Network Control Center  5

1.25  RLS Receiver Sites   5

1.26  RLS Transmission Sites  6

1.27  Spectrum License  6

1.28  Territory  6

1.29  Tier I Countries  6

1.30  U.S.  CPI  6

2. Grant of Rights 6

2.1  Radio Location System  6

2.2  RLS Licensed Software Executable Format and RLS Licensed Technical Information  6

2.3  RLS Customer Workstation Licensed Software Source Code  7

2.4  Registration of Patent and Copyrights  8

3. Reservation of Rights 8

4. Consideration 8

4.1  Fees  8

4.1.1  Lump Sum Payment  8

4.1.2  Annual Royalty  8

4.1.3  Tier I Countries - Annual Royalty Waiver  8

4.2  Records and Adjustments  9

4.3  Reports, Forecasts and Payments  9

43.1  Reports  9




43.2  Payments  10

4.4  Late Payments  10

5. Radio System Location Equipment 10

6. Term 11

7. Termination 11

8. Restrictions on Business Activities 13

9. Effect of Termination or Cancellation 13

9.1  Circumstances Where Operations Continue - Continued Rights  13

9.2  Circumstances Where Operations End - Return of Materials and Non-Compete  14

9.3  No Damages  14

9.4  Payment Obligations  14

9.5  Survival  14

10. Corrections, Upgrades and Newly Developed Equipment 15

10.1  RLS Licensed Software Upgrades and Corrections; RLS Licensed Technical

     Information Upgrades and Corrections  15

10.1.1  RLS Licensed Software Upgrades  15

10.1.2  RLS Licensed Software Corrections  15

10.1.3  RLS Licensed Technical Information Upgrades  15

10.1.4  RLS Licensed Technical Information Corrections  15

10.2  Upgrades and Modifications to the Radio Location System Developed by Licensee;

Newly Developed Equipment  16

10.2.1  RLS Licensed Customer Workstation Software  16

(a) Authority to Make Upgrades 16

(b) Ownership and License of Upgrades 16

(i) Derivative Upgrades 16



(ii) Stand-alone Upgrades 16

10.2.2  RLS Licensed Software Other Than RLS Licensed Customer Workstation

     Software 17

(a) Authority to Make Upgrades 17

(b) Ownership and License of Upgrades 17

(i) Derivative Upgrades 17

(ii) Stand-alone Upgrades 18

10.2.3  RLS Licensed Technical Information  19

(a) Authority to Make Modifications 19

(b) Ownership and License of Modifications 19

(i) Derivative Upgrades 19

(ii) Stand-alone Upgrades 19

10.2.4  Newly Developed Equipment  20

10.3  Delivery; Licensee Assistance Concerning Upgrades and Modifications  20

Teletrac Obligations With Respect to Licensee Upgrades and Licensee Modifications  20

10.5  Protection of Licensee Upgrades and Licensee Modifications  20

11. Teletrac Indemnity; Infringement Claims 21

11.1  Indemnity  21

11.2  Teletrac's Obligations Regarding Infringement Claims  22

11.2.1  No Warranty; Licensee Due Diligence  22

11.2.2  Third Party Infringement Claims  22

11.2.3  Limitation on Teletrac's Obligations  23

11.2.4  Sole Remedy for Infringement Claims  23

12. Licensee Indemnity 23

13. Teletrac Representations and Disclaimer 24


13.1  Exhibits  24

13.2  No Warranty  24

14. Limitation of Liability 25

15. Obligations and Responsibilities of Teletrac 25

15.1  Delivery of RLS Licensed Technical Information  25

15.2  Delivery of RLS Licensed Software  25

15.3  Training and Support  25

15.3.1  Training  26

15.3.2  Telephone Support  26

15.3.3  Payments for Training and Support  26

15.4  Completion of RLS Episode Software  27

16. Obligations and Responsibilities of Licensee 27

16.1  Compliance with Laws; Enforceability  27

16.2  Spectrum License  28

16.3  Reasonable Diligence  28

16.4  RLS Commercial Operation Date  28

61.4.1  Confidentiality and Proprietary Protection  28

61.4.2  Proprietary Rights Reserved  28

61.4.3  Copyright and Patent Registration and Notices  28

16.5  Insurance  28

16.6  Teletrac Marks  29

16.7  Other Marks  29

16.8  Infringement by Others  29

16.9  Restriction Regarding Reverse-Engineering  29

17. Relationship of the Parties 29


18. Force Majeure 29

19. Governing Law 29

20. Dispute Resolution 30

20.1  Good Faith and Fair Dealing  30

20.2  Arbitration  30

20.3  Legal Proceedings  30

20.4  Annual Royalty Payment Disputes  30

21. General 31

21.1  Designation of Contract Administrators and Contract Technical Coordinators  3l

21.2  Notices  3l

21.3  English Language  32

21.4  No Publicity  32

21.5  Scope and Amendment of License Agreement        32

2l.6  Assignment  32

21.7  Binding Effect  33

21.8  Authority  33

21.9  Severability  34

21.10  Headings  34

21.11  Expenses of Litigation  34

21.12  Waiver  34

21.13  Entire Agreement  34

21.14  Re-Export Assurances  34

21.15  Exhibits  35

21.16  Construction of Agreement  35

21.17  Counterparts  35

21.18  Escrow of RLS Software License  35
</TABLE>





                    RADIO LOCATION SYSTEM LICENSE AGREEMENT

THIS RADIO LOCATION SYSTEM LICENSE AGREEMENT (this "License Agreement"), dated
this 1st day of March, 1999, is made by and between TELETRAC, INC., a Delaware
corporation, ("Teletrac"), and Beheermaatschappij de Rooij B.V., a corporation
organized under the laws of the Netherlands ("Licensee"). Teletrac and Licensee
are sometimes individually referred to as "Party" and collectively as "Parties."

WITNESSETH:

WHEREAS, Teletrac owns or possesses rights to proprietary information,
technology and software necessary for the operation of a Radio Location System,
as defined below; and

WHEREAS, Licensee has or intends to obtain a Spectrum License for operation of a
land-based radio location system in the Territory, as defined below; and

WHEREAS, Licensee desires to establish and operate within the Territory a Radio
Location System; and

WHEREAS, subject to the terms and conditions of this License Agreement, and only
for purposes within the Territory, Teletrac desires to grant to Licensee: (i) an
exclusive, nontransferable right to use, construct, maintain and provide support
for a Radio Location System, and to market, sell, promote, maintain and provide
support for RLS Customer Equipment and RLS Customer Services, as defined below;
and (ii) an exclusive, nontransferable license to use RLS Licensed Software and
RLS Licensed Technical Information, as defined below, to construct, maintain,
operate and provide support for a Radio Location System in the Territory, and
Licensee desires to acquire such right and licenses.

NOW THEREFORE, in consideration of the foregoing and the mutual premises set
forth in this License Agreement, the Parties agree as follows:

1. Definitions.

1.1 "Contract Administrator" shall mean the person designated by each Party as
the contact person at such Party for matters, other than engineering matters,
concerning the administration of this License Agreement.

12 "Contract Technical Coordinator" shall mean the person designated by each
Party as the contact person at such Party for engineering matters related to
this License Agreement.

1.3 "Effective Date" shall mean the date on which both Parties have executed and
delivered this License Agreement, as evidenced by the last date set forth on the
signature date below.

1.4 "Radio Location System" shall mean a land-based radio location system that
uses the RLS Licensed Software and RLS Licensed Technical information for
purposes of locating animate or inanimate objects, including people and
vehicles, and for ancillary activities such as data messaging or voice messages,
or both.




1.5 "RLS Components" shall mean all components of the Radio Location System in
the Territory. In general, the major components are: the RLS Customer
Workstation; the RLS Network Control Center and network; the RLS Transmission
Sites; the RLS Receiver Sites; and the RLS Location Units. Each of these major
components, in turn, has a number of constituent parts, all of which are
considered "RLS Components" for purposes of this License Agreement.

1.6 "RLS Coverage Area" shall mean the geographic area of designed coverage of
the Radio Location System in the Territory.

1.7 "RLS Customer" shall mean a purchaser, renter, lessee or other end user of
any RLS Customer Equipment, RLS Customer Maintenance, RLS Customer Services or
RLS Component, that is provided with respect to the Radio Location System in the
Territory.

1.8 "RLS Customer Equipment" shall mean the equipment, including, but not
limited to, RLS Location Unit and RLS Customer Basestations, that enables an RLS
Customer to receive RLS Customer Services.

1.9 "RLS Customer Equipment Revenue" shall mean the gross amount invoiced to any
RLS Customer or other third party for RLS Customer Equipment less any value
added tax, sales tax or other tax or levy actually imposed in the Territory on
the RLS Customer with respect to sales of RLS Customer Equipment and paid by
Licensee (not including any tax on Licensee's income with respect to such
sales). If Licensee receives compensation for RLS Customer Equipment in the form
of goods or services, then the fair market value of such goods or services shall
be included as RLS Customer Equipment Revenue.

1.10 "RLS Customer Maintenance" shall mean maintenance and support provided for
software, hardware or other equipment with respect to RLS Location Unit, RLS
Customer Workstations and other RLS Customer Equipment.

1.11 "RLS Customer Maintenance Revenue" shall mean the gross amount invoiced to
RLS Customers and other third parties for RLS Customer Maintenance.

1.12 "RLS Customer Services" shall mean the services provided by means of the
Radio Location System, including, but not limited to radio location, data
messaging and voice messages. RLS Customer Services do not include RLS Customer
Maintenance.

1.13 "RLS Customer Services Revenue" shall mean the gross amount invoiced to any
RLS Customer or other third party for RLS Customer Services, together with all
other revenues, other than revenues attributable to RLS Customer Equipment and
RLS Customer Maintenance, received by Licensee by reason of the rights and
licenses granted under this License Agreement, less any value added tax, sales
tax or other tax or levy actually imposed in the Territory on the RLS Customer
with respect to such Services and paid by Licensee (not including any tax on
Licensee's income with respect to such Services). If Licensee is compensated in
the form of goods or services, then the fair market value of such goods or
services shall be treated as income for the purpose of calculating RLS Customer
Services Revenue.

1.14 "RLS Customer Workstations" shall mean a workstation installed at an RLS
Customer site that enables an RLS Customer to forward requests for locations to
the RLS Network Control

                                        2



Center, that receives location information from the RLS Network Control Center
and displays locations on an RLS Map. The RLS Customer Workstation consists of
hardware and software components.

1.15 "RLS Data Transmission Network" shall mean the data transmission equipment
that transports data between RLS Transmission Sites, RLS Receiver Sites and the
RLS Network Control Center.

1.16 "RLS Licensed Software Corrections" shall mean any and all technical,
functional, operational or other corrections or modifications to the RLS
Licensed Software that are designated by Teletrac, in its sole discretion, to be
minor corrections or modifications. RLS Licensed Software Corrections shall not
include any software or other proprietary data that a third party owns and that
Teletrac is not authorized to disclose. RLS Licensed Software Corrections that
Teletrac provides to Licensee during the term of this License Agreement shall be
treated as RLS Licensed Software for all purposes under this License Agreement.

1.17 "RLS Licensed Software Upgrades" shall mean any and all technical,
functional, operational or other enhancements, improvements, additions, upgrades
or modifications to, and new versions of, the RLS Licensed Software other than
the RLS Licensed Software Corrections. RLS Licensed Software Upgrades shall not
include any software or other proprietary data that a third party owns and that
Teletrac is not authorized to disclose. RLS Licensed Software Upgrades that
Teletrac provides to Licensee during the term of this License Agreement shall be
treated as RLS Licensed Software for all purposes under this License Agreement

1.18 "RLS Licensed Software" shall mean the executable format versions of the
operational computer software or firmware programs, or both, that are listed in
Exhibit A to this License Agreement and are commonly referred to by Teletrac as
the "SIMON software", as such programs exist and, to the extent applicable, may
be sublicensed by Teletrac to Licensee, at the time of delivery in accordance
with this License Agreement, and available documentation relating to the use of
such software or firmware. With respect to the RLS Customer Workstation Licensed
Software only, RLS Licensed Software also shall include the source code of such
software to the extent that Teletrac is entitled to disclose such source code.
The RLS Licensed Software does not include management information software,
including, but not limited to, for purposes such as customer activation, billing
and accounting, and Licensee will be responsible for supplying any such
software. Teletrac will, however, provide all of its available interface
specifications or software books, for Licensee's use in designing management
information software to be used with the RLS Licensed Software. In summary, the
RLS Licensed Software programs are the programs designed to perform the
following functions for the Radio Location System:

(1) RLS Customer Workstations Licensed Software. These software programs enable
the RLS Customer to send and receive information to and from the RLS Network
Control Center and to display the location date on the RLS Map when such map is
provided as part of the RLS Customer Workstation.

(2) RLS Network Control Center Licensed Software. These software programs
consist of the following three categories:


                                        3


(a) Real time operating software that communicates and synchronizes information
received from Location Unit radio signals to calculate locations in real time.

(b) Systems support and maintenance software that enables RLS Customers to
access a Radio Location System, forwards requests for locations to RLS
Transmission Sites and diagnoses Radio Location System malfunctions; provided,
however, that Licensee acknowledges that this software has been specifically
designed to perform in accordance with the standards and protocols in use on the
telephone system in the United States and may need to be modified by Licensee in
order to perform properly in the Territory.

(c) Database services software that performs customer validation functions,
tracks or records use of the Radio Location System and performs message
management functions.

(3) RLS Transmission and RLS Receiver Sites Licensed Software. These software
programs perform calculations and act as an interface for signals from RLS
Receiver Sites and RLS Transmission Sites and the RLS Data Transmission Network.

(4) RLS Episode Software. Teletrac is finalizing the development of certain
software programs designed for managing critical events generated from RLS
Location Units at times when the corresponding RLS Customer Workstation is not
logged in to the RLS Network Control Center or the RLS Customer does not have a
workstation.

1.19 "RLS Licensed Technical Information" shall mean the manuals, blue prints
and other tangible data listed in Exhibit B to this License Agreement, together
with intangible information that is proprietary to Teletrac and that may assist
Licensee to use the information listed in Exhibit B for the purpose of
designing, constructing and operating and maintaining the RLS in the Territory.

1.20 "RLS Licensed Technical Information Corrections" shall mean any and all
technical, functional, operational or other corrections or modifications to the
RLS Licensed Technical Information that are designated by Teletrac, in its sole
discretion, to be minor corrections or modifications to the RLS Licensed
Technical Information, provided that RLS Licensed Software Upgrades and RLS
Licensed Software Corrections are not included in this definition. RLS Licensed
Technical Information corrections shall not include any software or other
proprietary data that a third party owns and that Teletrac is not authorized to
disclose. RLS Licensed Technical Information Corrections that Teletrac provides
to Licensee during the term of this License Agreement shall be treated as RLS
Licensed Technical Information for all purposes under this License Agreement.

1.21 "RLS Licensed Technical Information Upgrades" shall mean any and all
technical, functional, operational or other enhancements, improvements,
additions, updates or modifications to, and any new versions of, the RLS
Licensed Technical Information other than the RLS Licensed Technical Information
Corrections, provided that RLS Licensed Software Upgrades and RLS Licensed
Software Corrections are not included in this definition. RLS Licensed Technical
Information Upgrades shall not include any software or other proprietary data
that a third party owns and that Teletrac is not authorized to disclose. RLS
Licensed Technical Information Upgrades that Teletrac provides to Licensee
during the term of this

                                       4


License Agreement shall be treated as RLS Licensed Technical Information for all
purposes under this License Agreement.

1.22 "RLS Location Unit" shall mean a radio transceiver and its antenna that is
capable of receiving and sending radio signals. A RLS Location Unit enables a
Radio Location System to locate the object to which such RLS Location Unit is
attached.

1.23 "RLS Map" shall mean the digitized map of the RLS Coverage Area that
Licensee will provide and use.

1.24 "RLS Network Control Center" shall mean the master station that serves a
RLS Coverage Area. The RLS Network Control Center consists of a group of
networked or interconnected computers, or both, that constitute the information
processing hub of the Radio Location System.

1.25 "RLS Receiver Sites" shall mean the receivers that gather Location Unit
radio signals. Each RLS Receiver Site consists of equipment and software
components that capture and convert transmitter and RLS Location Unit radio
signals to a computer usable level, and calculate and transmit to the RLS
Network Control Center information about the signals received.

1.26 "RLS Transmission Sites" shall mean the sites that receive location
requests from the RLS Network Control Center and transmit forward link signals
that prompt RLS Location Unit located in the RLS Coverage Area to send a
response radio signal to the RLS Receiver Sites.

1.27 "Spectrum License" shall mean a permit granted to Licensee or a Sublicensee
by the proper governmental authorities to use a radio spectrum of four (4) MHz
in the Territory.

1.28  "Territory" shall mean the countries described on Exhibit C.

1.29 "Tier I Countries" shall mean those countries in the Territory designated
on Exhibit C as "Tier I Countries".

1.30 "U.S. CPI" shall mean the Consumer Price Index for Urban Wage Earners and
Clerical Workers published by the U.S. Department of Labor, Bureau of Labor
Statistics, U.S. City Average, "All Items," base year 1982-1984 = 100. If for
any reason the U.S. CPI is discontinued or does not exist, "U.S. CPI" shall mean
the official or replacement index published by the U.S. Department of Labor,
Bureau of Labor Statistics, or successor or similar governmental agency which is
most similar to the U.S. CPI. U.S. CPI dates shall mean the latest published
U.S. CPI.

2. Grant of Rights.

2.1 Radio Location System. As of the Effective Date, and subject to the terms
and conditions of this License Agreement, Teletrac grants to Licensee an
exclusive nontransferable right, except as may be permitted by Section 21.6,
solely within the Territory, to construct, use, maintain and provide support for
a Radio Location System, and to market, sell, promote, maintain and provide
support for RLS Customer Equipment and RLS Customer Services, and to provide RLS
Customer Maintenance. Teletrac shall not directly or indirectly operate a Radio
Location System in the Territory during the term of this License Agreement.

                                       5


2.2 RLS Licensed Software Executable Format and RLS Licensed Technical
Information. As of the Effective Date, and subject to the terms and conditions
of this License Agreement, Teletrac grants to Licensee an exclusive
nontransferable, except as may be provided by Section 21.6, license to use RLS
Licensed Software in executable format and RLS Licensed Technical Information
solely for the purpose of operating, maintaining and providing support for a
Radio Location System in the Territory. Licensee may sublicense to RLS Customers
the right to use RLS Customer Workstation Licensed Software only in executable
format and only on such RLS Customers designated computer processing unit(s).
Licensee agrees that neither it nor its employees will use or copy RLS Licensed
Software except as authorized in this License Agreement. Other than the RLS
Customer Workstation Licensed Software in executable format, which Licensee may
sublicense to RLS Customers, Licensee may copy the RLS Licensed Software solely
for its own use and solely in connection with the performance of its obligations
under this License Agreement.

2.3 RLS Customer Workstation Licensed Software Source Code. As of the Effective
Date, and subject to the terms and conditions of this License Agreement,
Teletrac grants to Licensee a non-exclusive, nontransferable license, except as
may be permitted by Section 21.6, to use the RLS Customer Workstation Licensed
Software that Teletrac delivers to Licensee in source code format, solely for
the purpose of translating such software to the native language of the countries
in the Territory and otherwise adapting such software for purposes of operating
the Radio Location System in the Territory. Licensee may copy the source code
for the RLS Customer Workstation Licensed Software solely for its own internal
use for the purposes set forth in this Section 2.3 and for the use of
independent contractors that Licensee has engaged to make the translations or
adaptations authorized under this Section 2.3, provided that such independent
contractors shall execute a confidentiality agreement in substantially the same
form as the Nondisclosure Agreement referred to in Section 16.4.1 below, and
shall execute an agreement to assign to Licensee all inventions made and work
performed by the contractor in connection with the RLS Customer Workstation
Licensed Software. In addition, such contractors shall not have any direct or
indirect ownership interest in a land-based radio location system or be in the
business of providing programming software for any such system, other than the
Radio Location System. Any other use or disclosure of the Customer Workstation
Licensed Software source code shall be subject to Teletrac's prior written
consent, which consent Teletrac may withhold in its sole discretion. Teletrac
shall have no obligation to provide RLS Licensed Software Upgrades or RLS
Licensed Technical Information Upgrades that are compatible with Licensee's
modifications to the RLS Customer Workstation Licensed Software.

2.4 Registration of Patent and Copyrights. Each Party shall have the right in
the Territory to file and prosecute to issuance, at its own expense,
applications for letters patent and registrations of copyrights with respect to
all or any part of the RLS Licensed Software and RLS Licensed Technical
Information, but in any such event the application or registration shall be in
the sole name of Teletrac and Teletrac shall be the sole owner of any such
letters patent or copyrights, subject only to the terms of this License
Agreement; provided, however, that before taking any action under this Section
2.4, Licensee shall notify Teletrac of its intention to do so, and Teletrac
shall have the right within sixty (60) days after receipt of such notice, at its
own expense, to take such action or any other action it deems necessary or which
may be lawfully available, in which event Licensee shall not proceed to take the
proposed actions set forth in its notice. Each Party will keep the other fully
informed of its activities with respect to the filing of patent applications

                                       6


or registration of copyrights hereunder. In the event that the Party taking such
action determines not to take necessary measures to maintain any letters patent,
patent application, copyright or copyright registration, such Party shall notify
the other Party of such determination in writing and, thereafter, the other
Party shall have the right, at its own expense, to take such measures as may be
deemed advisable by it to maintain such rights and coverage; provided, however,
that the other Party shall not thereafter be obligated to maintain such coverage
or rights.

3. Reservation of Rights. Except as to those certain rights and licenses
expressly granted to Licensee under this License Agreement, Teletrac reserves
all proprietary rights, title and interest, including all ownership and
proprietary rights, in and to the Radio Location System, RLS Licensed Software,
RLS Licensed Technical Information and the "Teletrac" trade name, trademark and
service mark, including all designs, inventions, patents, copyrights,
trademarks, service marks, trade secrets, know-how, techniques, engineering
details, enhancements, improvements, addition, upgrades, modifications,
derivative works. Licensee acknowledges that no title to the "Teletrac" marks,
RLS Licensed Software or RLS Licensed Technical Information, or any part
thereof, has been or will be transferred to Licensee. Neither Licensee nor any
Licensee affiliate will disassemble or recompile any RLS Licensed Software,
other than the RLS Customer Workstation Licensed Software solely for the
purposes set forth in Section 2.3 above.

4. Consideration.

4.1 Fees. In consideration for the grant of rights to Licensee in this License
Agreement, Licensee will perform the obligations set forth in this License
Agreement and will pay to Teletrac the following amounts:

4.1.1 Lump Sum Payment. In consideration for the execution and delivery of this
License Agreement by Teletrac, Licensee shall pay to Teletrac the sum of Two
Million Eight Hundred Thousand U.S. Dollars (U.S. $2,800,000.00) payable on the
Effective Date.

4.1.2 Annual Royalty. In addition, Licensee shall pay to Teletrac an annual
royalty (the "Annual Royalty"), payable quarterly, based upon the revenues
earned by Licensee from operating the Radio Location System in the Territory, as
follows:

(1) Equipment Royalty Interest. A fee equal to three per cent (3%) of RLS
Customer Equipment Revenue (the "Equipment Royalty Interest").

(2) Maintenance Royalty Interest. A fee equal to three per cent (3%) of RLS
Customer Maintenance Revenue (the "Maintenance Royalty Interest").

(3) Service Royalty Interest. A fee equal to three per cent (3%) of RLS Customer
Service Revenue (the "Services Royalty Interest, and together with the Equipment
Royalty Interest and Maintenance Royalty Interest, the "Royalty Interests").

4.1.3 Tier I Countries - Annual Royalty Wavier. Licensee's obligation to pay an
Annual Royalty on revenues received from the operation of the Radio Location
System in each Tier I Country shall not commence until the earliest to occur of
(i) the fifth anniversary of the issuance of the Spectrum License in such
country and (ii) the eighth anniversary of the Effective Date.

                                       7


4.2 Records and Adjustments. Licensee shall keep full, clear, separate and
accurate records, accounts and working papers with respect to RLS Customer
Equipment Revenue, RLS Maintenance Revenue, and RLS Customer Services Revenue
and calculation of Royalty Interests for at least four (4) years after the
termination of the calendar year to which they relate. Licensee shall use
accounting principles generally accepted in Israel ("Israeli GAAP") for all
records and accounts required under this License Agreement. Licensee shall
engage an independent accountant to conduct an annual audit of such records and
accounts. In addition, upon two (2) days notice to Licensee, Teletrac or its
agent shall have the right to examine during normal business hours all records
and accounts relating to the Royalty Interest and Licensee's performance under
this License Agreement, including, but not limited to, any auditors' work
records. Prompt adjustment shall be made by the proper party to compensate for
any errors or omissions disclosed by any such examination. If a special
examination or special audit requested by Teletrac discloses an under
calculation in excess of five percent (5%) of the amount payable to Teletrac,
then Licensee shall bear the cost of such examination, and shall promptly
correct the calculation of amounts payable and pay any underpaid amount, plus
all late payment charges due and owing. If such an examination or audit
discloses an overpayment to Teletrac, then Teletrac shall promptly repay to
Licensee the overpaid amount. Disagreements about accounting matters shall be
resolved as set forth in Section 20.4 below.

4.3  Reports, Forecasts and Payments.

4.3.1 Reports. Commencing on the date that Royalty Interests first begin to
accrue, Licensee shall provide to Teletrac within thirty (30) days after the end
of each calendar quarter ending on March 31, June 30, September 30 and December
31, financial information for the quarter that just ended and year-to-date
financial information (in accordance with the accounting requirements set forth
in Section 4.2 above), together with all working papers used to compile such
statements, that show the amount of and the basis for the calculation of the RLS
Customer Equipment Revenue, RLS Maintenance Revenue, RLS Customer Services
Revenue, and Royalty Interests and the number of activated Location Units and
RLS Customers. In all such reports, the amount of RLS Customer Equipment
Revenue, RLS Maintenance Revenue, RLS Customer Services Revenue, and Royalty
Interests and the number of activated Location Units and RLS Customers, shall be
reported in the aggregate and for each country in the Territory. All such
information and working papers shall be in English and shall be accompanied by a
letter from the independent accountant that Licensee has engaged as required
under Section 4.2 above confirming that such accountant has reviewed and agrees
that the method of computing the Royalty Interests complies with the
requirements of this License Agreement. Licensee also shall provide with its
quarterly financial statements its forecast of RLS Customer Equipment Revenue,
RLS Maintenance Revenue and RLS Customer Services Revenue for the next four (4)
quarters. Such statements, working papers and forecasts, together with all fees
due to Teletrac, shall be sent to Teletrac at its address specified in
accordance with Section 21.2 below.

4.3.2 Payments. All payments of Royalty Interests shall be made quarterly and
audited and adjusted annually. The audit shall be conducted by Licensee
independent accountant as set forth in Section 4.2 above. All payment shall be
due and payable thirty (30) days after the end of each calendar quarter in U.S.
dollars and any conversion to U.S. dollars shall be made as often as Licensee
makes such conversions for its own purposes and, in all cases, at least on the
last day, Monday through Friday, excluding Bank of Israel holidays, before the
payment is due, at the

                                       8


Representative Rate of Exchange determined by the Bank of Israel. Payments of
Royalty Interests shall be subject to deduction for Israeli withholding taxes
that apply to payments from Licensee to Teletrac. Licensee shall cooperate with
Teletrac in providing documentation that will assist Teletrac to obtain tax
credits with respect to such withholding.

4.4 Late Payments. Late payments of Annual Royalty Payments or of any other
amounts due under this License Agreement shall be subject to a late payment
charge calculated at an annual rate of eighteen percent (18%) commencing on the
date such payment or other amount was due and continuing until it has been paid
in full. If the amount of such charge exceeds the maximum charge permitted by
law, such charge shall be reduced to such maximum.

5. Radio System Location Equipment. Licensee acknowledges that Teletrac does not
manufacture or provide any of the equipment that will be needed in order to
construct and operate the Radio Location System in the Territory. Teletrac has
advised Licensee that Teletrac currently purchases most RLS Location Units and
RLS Receiver Site equipment for its operations in the United States from Tadiran
Telematics Ltd., a division of Tadiran Ltd., of Holan, Israel ("Tadiran"). The
Parties acknowledge and agree that Licensee is free to purchase RLS Location
Units, RLS Receiver Site equipment, RLS Customer Workstations, RLS Network
Control Center Equipment and any and all other equipment and materials needed in
order to construct and operate the Radio Location System in the Territory from
any individual or entity that manufactures such equipment in accordance with the
technical and other specifications necessary to properly operate the Radio
Location System. Licensee acknowledges and agrees that Teletrac does not provide
any representation or warranty of any kind, express or implied, including,
without limitation, any implied warranty of merchantability or fitness for a
particular purpose on any equipment or materials obtained by License from any
third party, including Tadiran.

6. Term. This License Agreement shall commence on the Effective Date and shall
remain in effect until it is terminated in accordance with Section 7 below.

7. Termination. Neither Party shall be in breach of this License Agreement if
the License Agreement is terminated under Sections 7.1, 7.3, 7.4 or 7.5 below,
and the terminating Party shall not be in breach of this License Agreement if it
terminates this License Agreement under Sections 7.2 or 7.6 below.

7.1  This License Agreement may be terminated by mutual written agreement.

7.2 If either Party (a) is dissolved or liquidated or otherwise ceases to
operate as a going concern or ceases to operate a Radio Location System, and (b)
does not have a successor to its rights and obligations under this License
Agreement (the "Non-operational Party"), then, at any time within ninety (90)
days from the date that the other Party (the "Operational Party") learns of the
facts referred to in subsections (a) and (b) above, the Operational Party may
elect to terminate this License Agreement upon thirty (30) days' written notice
to the Non-operational Party. If Licensee elects to terminate this License
Agreement pursuant to this Section 7.2, then Licensee also may elect to continue
to operate the Radio Location System in the Territory pursuant to Section 9.1
below.

                                       9


7.3 Licensee may elect to cease operation of the Radio Location System at any
time and to terminate this License Agreement provided that it complies with the
provisions of Section 9.2 below.

7.4 Teletrac may elect to cease its Radio Location System business at any time
and to terminate this License Agreement provided that Licensee is allowed to
continue to operate its Radio Location System as set forth in Section 9.1.

7.5 Either party may terminate this License Agreement if:

(1) the other Party shall file a voluntary petition pursuant to Chapter 7 of the
United States Bankruptcy Code (the "Bankruptcy Code") or commence any other
proceeding for the liquidation of its business under the laws of any state or
nation governing insolvencies, liquidation, or other similar matters; or

(2) if a person shall file an involuntary petition against the other Party
pursuant to Chapter 7 of the Bankruptcy Code or commence any other proceeding
against such other Party for the liquidation of such Party's business and a
bankruptcy or other court, tribunal or body having jurisdiction shall, by final
order no longer subject to appeal, ajudge such other Party a bankrupt under
Chapter 7 of the Bankruptcy Code or such other law or order the liquidation of
the other Party's business; or

(3) if, pursuant to the order which shall become final and no longer subject to
appeal of a court having jurisdiction over the other Party, a receiver or
trustee, shall be appointed to liquidate the Party's business; or

(4) if the other Party shall, in fact, terminate all or substantially all of its
business;

provided, however, that notwithstanding anything in this License Agreement to
the contrary, a Party shall not be entitled to terminate this License Agreement
(i) because the other Party shall file or commence, or have filed or commenced
against it, any petition or proceeding for a reorganization of its business, or
(ii) because the other Party shall transfer to any person its business, assets
or operations, provided that the transferee shall agree to be bound by the terms
of this License Agreement.

7.6 Either Party may terminate this License Agreement by written notice to the
defaulting Party if any of the following occurs and the defaulting Party has
received written notice of the default and has failed to cure the default during
the cure period specified below:

7.6.1 A Party's failure to timely make any payment as required by this License
Agreement, and the failure to cure such default within sixty (60) days of its
receipt of written notice of such default during the first two such defaults, or
within thirty (30) days of its receipt of written notice of any payment default
after the first two events of late payment;

7.6.2 A Party's breach of one or more of its material obligations under this
License Agreement, and the breaching Party's failure to cure such breach within
sixty (60) days of its receipt of written notice of such breach; or

                                       10


7.6.3 An attempt to sell, transfer or assign a Party's rights or delegate its
duties under this License Agreement in violation of Section 21.6 of this License
Agreement, and the failure to cure such default within sixty (60) days of the
defaulting Party's receipt of written notice of such default.

provided, however, notwithstanding the foregoing, the License Agreement can not
be terminated pursuant to this Section 7.6 if the Parties are arbitrating a
dispute in good faith and the cure periods set forth herein have expired after a
final arbitration decision has been reached.

7.7 The rights granted to Licensee hereunder shall terminate on the eighth
anniversary of the Effective Date with respect to any country in the Territory
for which Licensee has not obtained a Spectrum License and is actively pursuing
establishment of a Radio Location System by such date, provided, however, that
if on such date Licensee has applied for and is actively pursuing a Spectrum
License in any such country, Licensee may obtain a reasonable extension of this
deadline in order to obtain the Spectrum License and establish a Radio Location
System in such country by paying Teletrac an extension fee in an amount to be
negotiated by the parties at such time.

8. Restrictions on Business Activities.

8.1 Except for the operation of the Radio Location System in the Territory
during the term of this License Agreement, and after the term of this License
Agreement as specifically set forth in Section 9.1 of this License Agreement,
during the term of this License Agreement and for a period of three (3) years
after termination of this License Agreement, neither Licensee nor any entity
that Licensee controls or has the ability to control:

8.1.1 Shall construct or operate or invest in any multi-lateration land based
radio location services designed to service the mass consumer or commercial
market anywhere in the world that is based or derived, in whole or in part, on
any confidential or proprietary information of Teletrac, including, without
limitation, the RLS Licensed Software and the RLS Licensed Technical
Information. For purposes of this Section 8.1, "radio location service" shall
mean any service which, within a defined geographic region that (a) uses time of
arrival radio measurements to locate an object and (b) has been designed
primarily for the purpose of determining an object's location.

8.1.2 Shall operate, invest in or acquire a direct or indirect ownership
interest in any entity that operates a business that competes or will compete,
directly or indirectly, with the Radio Location System operated by Licensee in
the Territory.

8.2 Teletrac shall not unreasonably withhold its consent to allow entities that
have previously provided services to Teletrac, and have entered into
confidentiality and nondisclosure agreements with Teletrac which prohibit such
entities and their employees from disclosing confidential or proprietary
information regarding Teletrac to third parties, to provide services to
Licensee, provided that any confidential or proprietary information of Teletrac
received by Licensee from such entities shall be subject to the provisions of
the Nondisclosure Agreement attached hereto as Exhibit D to the same extent as
if Licensee had received such information directly from Teletrac.

                                       11


9. Effect of Termination or Cancellation.

9.1 Circumstances Where Operations Continue - Continued Rights. If, as set forth
in Section 7.2, 7.5 or 7.6.2, Licensee elects to terminate this License
Agreement, or as set forth in Section 7.4, Teletrac elects to terminate this
License Agreement, and Licensee elects to continue to operate the Radio Location
System in the Territory, then, solely for the purpose of such operations in the
Territory, Licensee may continue to use the RLS Licensed Software and RLS
Licensed Technical Information.

9.2 Circumstances Where Operations End - Return of Materials Non-Compete. In all
cases of termination or cancellation of this License Agreement (other than where
Licensee elects to terminate this License Agreement under Section 7.2, 7.5 or
7.6.2, or Teletrac elects to terminate this License Agreement under Section 7.4,
and Licensee elects to continue operation of the Radio Location System in the
Territory pursuant to Section 9.1 above), within sixty (60) days after
termination or cancellation of this License Agreement, Licensee shall cease all
use of RLS Licensed Software and RLS Licensed Technical Information. In
addition, Licensee shall, at Teletrac's request, return to Teletrac, or to
Teletrac's designee, all RLS Licensed Technical Information, RLS Licensed
Software, and all other data, software, warranty and maintenance information,
and other materials related to Radio Location Systems, and shall permanently
erase, including low-level re-format of fixed disk storage devices, and remove
from all computer, electronic or other storage devices in its possession or
under its control, or otherwise destroy, all images, copies or documents that
incorporate the RLS Licensed Software and RLS Licensed Technical Information.
Notwithstanding anything to be contrary in this License Agreement, Licensee
shall not be required to return RLS Customer Equipment that Licensee has
provided to RLS Customers, or executable format RLS Customer Workstation
Licensed Software that Licensee has licensed to third parties, in accordance
with the terms and conditions of this License Agreement.

9.3 No Damages. Neither Licensee nor Teletrac shall, by reason of the
termination or cancellation of this License Agreement in accordance with the
terms of this License Agreement, be liable to the other for compensation,
reimbursement or any damages, either actual, consequential, incidental, special
or punitive, arising out of such termination or cancellation, including, but not
limited to, the loss of prospective profits on anticipated sales, or on account
of expenditures, investments, leases or commitments in connection with the
business or goodwill of Teletrac or Licensee or otherwise anticipated under this
License Agreement.

9.4 Payment Obligations. Termination or cancellation of this License Agreement
shall not relieve Licensee of any obligation to pay Teletrac any amounts due and
owing to Teletrac under this License Agreement.

9.5 Survival. After the termination or cancellation of this License Agreement by
its terms, operation of law or otherwise, all rights, privileges and obligations
arising from this License Agreement shall cease to exist; provided, however the
confidentiality requirement in Section 16.4, the obligations and limitations in
Sections 3, 4.1 (to the extent amounts are past due), 4.2, 8, 9, 10.2, 10.3,
10.5, 11, 12, 13.2, 14, 16.6, 16.9, 19, 20 and 21, and such other obligations
which, from the context hereof, are intended to survive the termination of this
Agreement, shall remain in full force and effect.

                                       12


10. Corrections, Upgrades and Newly Developed Equipment.

10.1 RLS Licensed Software Upgrades and Corrections; RLS Licensed Technical
Information Upgrades and Corrections.

10.1.1 RLS Licensed Software Upgrades. Licensee shall have the right to receive
any RLS Licensed Software Upgrades, at no charge, provided that Teletrac shall
have no obligation to provide Licensee any RLS Licensed Software Upgrades until
such upgrades have been installed on at least twenty-five percent (25%) of
Teletrac's Radio Location System operating in the United States. Licensee
acknowledges that Teletrac shall have no obligation to create RLS Licensed
Upgrades or to provide upgrades requested by Licensee.

10.1.2 RLS Licensed Software Corrections. During the term of this License
Agreement, Teletrac agrees that, within sixty (60) days after the release of any
RLS Licensed Software Corrections to at least fifty percent (50%) of Teletrac's
Radio Location System operating in the United States, Teletrac will deliver to
Licensee, at no charge, copies in executable format of such RLS Licensed
Software Corrections. Licensee acknowledges that Teletrac shall have no
obligation to create RLS Licensed Software Corrections or to provide corrections
requested by Licensee. Teletrac shall deliver all such corrections to Licensee's
Contract Technical Coordinator, together with a list of the corrections that
Teletrac is providing.

10.1.3 RLS Licensed Technical Information Upgrades. Licensee shall have the
right to receive any RLS Licensed Technical Information Upgrades at no charge,
provided that Teletrac shall have no obligation to provide any RLS Licensed
Technical Information Upgrades until such RLS Technical Modifications have been
installed on at least twenty-five (25%) of Teletrac's Radio Location System
operating in the United States. Licensee acknowledges that Teletrac shall have
no obligation to make RLS Licensed Technical Information Upgrades or to design
or implement RLS Licensed Technical Information Upgrades requested by Licensee.

10.1.4 RLS Licensed Technical Information Corrections. During the term of this
License Agreement Teletrac agrees that, within sixty (60) days after the release
of any RLS Licensed Technical Information Corrections to at least fifty percent
(50%) of Teletrac's Radio Location Systems operating in the United States,
Teletrac will deliver to Licensee, at no charge, copies of such RLS Licensed
Technical Information Corrections. Licensee acknowledges that Teletrac shall
have no obligation to make RLS Licensed Technical Information Corrections or to
design or implement RLS Licensed Technical Information Corrections requested by
Licensee. Teletrac shall deliver all such Corrections to Licensee's Contract
Technical Coordinator, together with a list of the corrections that Teletrac is
providing.

10.2 Upgrades and Modifications to the Radio Location System Developed by
Licensee; Newly Developed Equipment.

10.2.1  RLS Licensed Customer Workstation Software.

(1) Authority to Make Upgrades. Licensee may make upgrades, improvements,
additions, enhancements or modifications to RLS Customer Workstations Licensed
Software ("Licensee Workstation Software Upgrades"). Licensee shall notify the
Teletrac Technical Coordinator in writing of the Licensee Workstation Software
Upgrades within thirty (30) days after Licensee

                                       13


commences work on them. Licensee acknowledges and assumes all risks that
Licensee Workstation Software Upgrades may affect the functionality or operation
of the RLS Licensed Software or Radio Location System, or both.

(2) Ownership and License of Upgrades. Licensee will be the sole owner of
Licensee Workstation Software Upgrades.

(a) Derivative Upgrades. As to those Licensee Workstation Software Upgrades that
are derived from or include any part the RLS Workstation Software or RLS
Licensed Technical Information, Licensee hereby grants to Teletrac a world-wide,
exclusive (except in the Territory, where such license shall be nonexclusive)
perpetual, royalty free, license to use, market, distribute, sublicense,
reproduce and have reproduced such Licensee Workstation Software Upgrades solely
for purposes of land-based radio location systems that locate animate or
inanimate objects, including people, and for ancillary activities such as data
messaging or voice messages. Such licenses shall not include any portion of the
Licensee Workstation Software Upgrades that is owned by a third party other than
any entity that Licensee controls or has the ability to control, and that
Licensee is not authorized to disclose. Licensee shall have no right, either
during or after the term of this License Agreement, to sell or disclose to third
parties, or to use, other than as part of the Radio Location System in the
Territory, Licensee Workstation Software Upgrades that are derived from or
include any part of the RLS Licensed Software or RLS Licensed Technical
Information. Licensee shall have no obligation to deliver Licensee Workstation
Software Upgrades to Teletrac until test versions of such Upgrades are
available.

(b) Stand-alone Upgrades. As to those Licensee Workstation Software Upgrades
that are neither derived from nor include any part of the RLS Workstation
Software or RLS Licensed Technical Information, Licensee hereby grants to
Teletrac a world-wide, nonexclusive, perpetual, royalty free, license to use
market, distribute, sublicense, reproduce and have reproduced such Licensee
Workstation Software Upgrades solely for the purposes of land-based radio
location systems that locate animate or inanimate objects, including people, and
for ancillary activities such as data messaging or voice messaging. Such
licenses shall not include any portion of the Licensee Workstation Software
Upgrades that is owned by a third party other than any entity that Licensee
controls or has the ability to control, and that Licensee is not authorized to
disclose. Teletrac shall have no right to sell or disclose stand-alone Licensee
Workstation Software Upgrades as a product independent from its provision of a
radio location service. Other than the limitations on business activities set
forth in Section 8 above, there shall be no restrictions on Licensee's rights
with respect to Licensee Workstation Software Upgrades that do not include and
are not derived from any of the RLS Licensed Software or RLS Licensed Technical
Information. Licensee shall have no obligation to deliver Licensee Workstation
Software Upgrades to Teletrac until test versions of such Upgrades are
available.

10.2.2 RLS Licensed Software Other Than RLS Licensed Customer Workstation
Software.

(1) Authority to Make Upgrades. Licensee may make upgrades, improvements,
additions, enhancements or modifications to RLS Licensed Software other than the
RLS Licensed Customer Workstation Software ("Licensee Executable Software
Upgrades"). Licensee shall notify the Teletrac Technical Coordinator in writing
of the Licensee Executable Software Upgrades within thirty (30) days after
License commences work on them. Licensee

                                       14


acknowledges and assumes all risks that Licensee Executable Software Upgrades
may affect the functionality or operation of the RLS Licensed Software or Radio
Location System, or both.

(2) Ownership and License of Upgrades. Licensee will be the sole owner of
Licensee Executable Software Upgrades.

(a) Derivative Upgrades. As to those Licensee Executable Software Upgrades that
are derived from or include any part the RLS Licensed Software or RLS Licensed
Technical Information, Licensee hereby grants to Teletrac a world-wide,
exclusive (except in the Territory where such license shall be nonexclusive)
perpetual, royalty free, license to use, market, distribute, sublicense,
reproduce and have reproduced such Licensee Executable Software Upgrades solely
for purposed of land-based radio location systems that locate animate and
inanimate objects, including people, and for ancillary activities such as data
messaging or voice messages. Such licenses shall not include any portion of the
Licensee Executable Software Upgrades that is owned by a third party other than
any entity that Licensee controls or has the ability to control, and that
Licensee is not authorized to disclose. Licensee shall have no right, either
during or after the term of this License Agreement, to sell or disclose to third
parties, or to use, other than as part of the Radio Location System in the
Territory, Licensee Executable Software Upgrades that are derived from or
include any part of the RLS Licensed Software. Licensee shall have no obligation
to deliver Licensee Executable Software Upgrades to Teletrac until test versions
of such Upgrades are available.

(b) Stand-alone Upgrades. As to those Licensee Executable Software Upgrades that
are neither derived from nor include any part of the RLS Licensed Software or
RLS Licensed Technical Information, Licensee hereby grants to Teletrac a
world-wide, nonexclusive, perpetual, royalty free, license to use, market,
distribute, sublicense, reproduce and have reproduced such Licensee Executable
Software Upgrades solely for purposes of land-based radio location systems that
locate animate or inanimate objects, including people, and for ancillary
activities such as data messaging or voice messages. Such licenses shall not
include any portion of the Licensee Executable Software Upgrades that is owned
by a third party other than any entity that Licensee controls or has the ability
to control, and that Licensee is not authorized to disclose. Teletrac shall have
no right to sell or disclose stand-alone Licensee Executable Software Upgrades
as a product independent from its provision of a radio location service. Other
than the limitations on business activities set forth in Section 8 above, there
shall be no restrictions on Licensee's rights with respect to Licensee
Executable Software Upgrades that do not include and are not derived from any of
the RLS Licensed Software or RLS Licensed Technical Information. Licensee shall
have no obligation to deliver Licensee Executable Software Upgrades to Teletrac
until test versions of such Upgrades are available.

10.2.3  RLS Licensed Technical Information.

(1) Authority to Make Modifications. Licensee may make modifications, upgrades,
additions, enhancements and improvements to the RLS Licensed Technical
Information ("Licensee Technical Modifications"). Licensee shall notify the
Teletrac Technical Coordinator in writing of the Licensee Technical
Modifications within thirty (30) days after Licensee commences work on them.
Licensee acknowledges and assumes all risks that Licensee Technical
Modifications

                                       15


may affect the functionality or operation of the RLS Licensed Software or Radio
Location System, or both.

(2) Ownership and License of Modifications. Licensee will be the sole owner of
Licensee Technical Modifications.

(a) Derivative Upgrades. As to those Licensee Technical Modifications that are
derived from or include any part of the RLS Licensed Technical Information,
Licensee hereby grants to Teletrac a world-wide, exclusive (except in the
Territory, where such license shall be nonexclusive), perpetual, royalty free,
license to use, market, distribute, sublicense, reproduce and have reproduced
such Licensee Technical Modifications solely for purposes of land-based radio
location systems that locate animate or inanimate objects, including people, and
for ancillary activities such as data messaging or voice messaging. Such
licenses shall not include any portion of the Licensee Technical Modifications
that is owned by a third party other than any entity that Licensee controls or
has the ability to control, and that Licensee is not authorized to disclose.
Licensee shall have no right, either during or after the term of this License
Agreement to sell or disclose to third parties, or to use, other than as part of
the Radio Location System in the Territory, Licensee Technical Modifications
that are derived from or include any part of the RLS Licensed Technical
Information. Licensee shall no obligation to deliver Licensee Technical
Modifications to Teletrac until test versions of such Modifications are
available.

(b) Stand-alone Upgrades. As to those Licensee Technical Modifications that are
neither derived from nor include any part of the RLS Licensed Technical
Information, Licensee hereby grants to Teletrac a world-wide, nonexclusive,
perpetual, royalty free, license to use, market, distribute, sublicense,
reproduce and have reproduced such Licensee Technical Modifications solely for
purposes of land-based ratio location systems that locate animate or inanimate
objects, including people, and of ancillary activities such as data messaging or
voice messages. Such licenses shall not include any portion of the Licensee
Technical Modifications that is owned by a third party other than any entity
that Licensee controls or has the ability to control, and that Licensee is not
authorized to disclose, Teletrac shall have no right to sell or disclose
stand-alone Licensee Technical Modifications as a product independent from its
provision of a radio location service. Other than the limitations on other
business activities set forth in Section 8 above, there shall be no restrictions
on Licensee's rights with respect to Licensee Technical Modifications that do
not include and are not derived from any of the RLS Licensed Technical
Information. Licensee shall have no obligation to deliver Licensee Technical
Modifications to Teletrac until test versions of such Modifications are
available.

10.2.4 Newly Developed Equipment. If Licensee develops equipment related to the
Radio Location System, Licensee shall not be required to disclose to Teletrac
the engineering and manufacturing specifications for the equipment, but Licensee
shall within sixty (60) days after the development thereof, notify and provide
to the Teletrac Technical Coordinator the performance specification and Radio
Location System interface information for such equipment, and shall offer to
Teletrac the opportunity to purchase such equipment at a reasonable price, which
shall be no higher than the lowest price at which Licensee sells such equipment
to third parties purchasing similar quantities.

                                       16


10.3 Delivery; Licensee Assistance Concerning Upgrades and Modifications. As to
all Licensee Workstation Software Upgrades, Licensee Executable Software
Upgrades and Licensee Technical Modifications that Licensee delivers to Teletrac
under this Agreement, Licensee will deliver to Teletrac the software source code
and information concerning the source and authorship of delivered material and
inventions and copies of all printed or written materials related thereto.
Licensee agrees to make its engineering and production personnel reasonably
available, at Teletrac's cost, for consultation with Teletrac at Teletrac's
facilities in the United States of America, or at such other location selected
by Teletrac, in order to provide training, advice and assistance with respect to
the Licensee Workstation Software Upgrades, Licensee Executable Software
Upgrades and Licensee Technical Modifications.

10.4 Teletrac Obligations With Respect to Licensee Upgrades and Licensee
Modifications. Licensee's implementation of Upgrades and Modifications
authorized under Section 10.2 will not relieve Teletrac of its obligations under
this License Agreement. However, the Parties acknowledge and agree that Teletrac
will have no obligation to modify the RLS Licensed Software or RLS Licensed
Technical Information or to modify the training, support and warranty provisions
that it is obligated to provide under this License Agreement, to make them
compatible with the Licensee Workstation Software Upgrades, Licensee Executable
Software Upgrades or Licensee Technical Modifications.

10.5 Protection of Licensee Upgrades and Licensee Modifications. Licensee will
cooperate with Teletrac in taking such actions as Teletrac reasonably requests
for the purposes of filing, any where in the world, patent, copyright and other
intellectual property registration applications with respect to the Licensee
Workstation Software Upgrades, Licensee Executable Software Upgrades and
Licensee Technical Modifications. Such applications, shall, where applicable,
list Licensee as the author, owner or inventor. Nothing in this Section 10.5
shall limit Licensee's right to file or prosecute to issuance any such
applications with respect to the Licensee Workstation Software Upgrades,
Licensee Executable Software Upgrades or Licensee Technical Modifications, and
Licensee shall be free to file such applications, provided that (i) Licensee
notifies Teletrac in writing of such action prior to the time it is taken and
(ii) any such application by Licensee concerning rights that are derived from,
or include any part, of the RLS Licensed Software or RLS Licensed Technical
Information shall acknowledge and protect Teletrac's sole ownership of, and such
right's derivative use of, the RLS Licensed Software and/or RLS Licensed
Technical Information. Teletrac shall have the right, at its expense, but,
except as set forth in Section 11.2 below, no obligation, to bring, defend and
maintain any appropriate suit, action or proceeding involving the infringement
or misappropriation of the Licensee Workstation Software Upgrades, Licensee
Executable Software Upgrades or Licensee Technical Modifications. If Teletrac
finds it necessary to join Licensee in such suit, action or proceeding, Licensee
shall execute all papers and perform such other acts as may reasonably be
required and may, at its option and expense, be represented by counsel of its
choice. Should Teletrac lack standing to bring any such suit, action or
proceeding, then Licensee, at the request of Teletrac, shall do so, or, at
Teletrac's request, Licensee shall assign such rights and interest to Teletrac
as will enable Teletrac to gain such standing.

                                       17


11. Teletrac Indemnity: Infringement Claims.

11.1 Indemnity. Subject to Sections 13.2 and 14 below, Teletrac will defend,
indemnify and hold harmless Licensee, and its directors, officers, employees and
agents, from and against any and all claims, demands, liabilities, actions,
suits, proceedings (including reasonable attorneys' fees) asserted by a third
party arising out of or relating to Teletrac's performance under or breach of
this License Agreement, and Teletrac agrees to undertake the cost of defending
the same, and will pay resulting costs and damages finally awarded, provided
that:

(1) Licensee promptly notifies Teletrac of the claim;

(2) Licensee cooperates with Teletrac in the defense, provided that Teletrac
reimburses Licensee for its reasonable out-of-pocket expenses (including
reasonable outside counsel legal fees) associated with such cooperation; and

(3) Teletrac has sole control of the defense and all related settlement
negotiations, using counsel reasonably satisfactory to Licensee.

11.2  Teletrac's Obligations Regarding Infringement Claims.

11.2.1 No Warranty; Licensee Due Diligence. Teletrac represents and warrants to
Licensee that as of the Effective Date it has not been notified of any claim
that Teletrac's use of the RLS Licensed Software and RLS Licensed Technical
Information in the United States violates the legally protected trade secret,
proprietary right or other interest of a third party, or infringes a patent,
copyright or other intellectual property right of a third party (a "Third Party
Infringement Claim"). Licensee acknowledges and agrees, however, that Teletrac
makes absolutely no representation or warranty regarding Third Party
Infringement Claims arising from Licensee's use of the RLS Licensed Software and
RLS Licensed Technical Information in the Territory. Teletrac strongly
encourages Licensee to conduct patent and copyright searches, and other
appropriate due diligence, in the Territory to ensure that Licensee's use of the
RLS Licensed Software and RLS Licensed Technical Information in the Territory
will not result in a Third Party Infringement Claim, prior to investing any
substantial funds in the construction of the Radio Location System in the
Territory. Licensee acknowledges and agrees that it is assuming all risk and
liability that a Third Party Infringement Claim may result from Licensee's use
of the RLS Licensed Software or RLS Licensed Technical Information in the
Territory.

11.2.2 Third Party Infringement Claims. If a Third Party Infringement Claim
occurs in the Territory with respect to one or more elements of the RLS Licensed
Technical Information or RLS Licensed Software, or in Teletrac's opinion is
likely to occur, Teletrac will use reasonable commercial efforts, at its option
and expense, either to challenge such Third Party Infringement Claim or
otherwise procure for Licensee the right to continue to use, maintain and
provide support for the Radio Location System, or to replace or modify the
alleged infringing element so that such element becomes non-infringing, provided
that such replacement or modification does not materially affect performance of
the Radio Location System. If Teletrac has spent, or anticipates that it will be
required to spend, more than U.S. $100,000 for such efforts, then Teletrac may
give Licensee a ninety (90) day option to pursue such efforts on its own and at
its own expense. If Licensee elects to pursue such efforts on its own, then
Licensee may deduct from the Annual Royalty Payments due to Teletrac in the
future, the reasonable expenses Licensee has incurred in obtaining
non-infringing elements, up to a maximum amount of

                                       18


U.S.$250,000. If Licensee has not elected to pursue such efforts on its own
within such ninety (90) day option period, then Licensee must notify Teletrac in
writing either (i) that this License Agreement shall continue in full force and
effect without regard to such Third Party Infringement Claim and without any
reduction in the Annual Royalty Payment, or (ii) that Licensee elects to
terminate this License Agreement due to such Third Party Infringement Claim,
which shall be deemed to be a termination under Section 7.1. If the use of any
RLS Licensed Software or RLS Licensed Technical Information is enjoined and the
foregoing remedies cannot reasonably be accomplished, or if Licensee elects to
continue this License Agreement but fails to procure the right to use the
infringing element or to replace or modify the infringing element so that it
becomes non-infringing, then Teletrac may require the return of the infringing
RLS Licensed Software or RLS Licensed Technical Information, and Licensee's
right to use such RLS Licensed Software or RLS Licensed Technical Information
shall thereupon terminate. In no event shall Teletrac have any obligation to
repay or refund any amounts previously paid to it by Licensee.

11.2.3 Limitation on Teletrac's Obligations. Teletrac shall have no obligation,
and Licensee shall have no rights, under Section 11.2.2 if the Third Party
Infringement Claim: (a) could have been avoided by Licensee's use of the most
current, unaltered release of RLS Licensed Software or RLS Licensed Technical
Information; (b) resulted, in whole or in part, from a modification to the Radio
Location System made or owned by Licensee or by one or more of its affiliates;
(c) resulted, in whole or in part, from Licensee's use, sale or modification,
enhancement or improvement of RLS Location Units, RLS Customer Workstations, RLS
Network Control Center or any equipment, software or other items not obtained
from Teletrac; (d) resulted, in whole or in part, from Licensee's combination of
the RLS Licensed Software or RLS Licensed Technical Information with any other
software, equipment or technology; (e) resulted, in whole or in part, from
Licensee's Workstation Software Upgrades, Licensee Executable Software Upgrades
or Licensee Technical Information Upgrades; or (f) resulted, in whole or in
part, from Licensee's breach of its obligations under this Licensed Agreement.

11.2.4 Sole Remedy for Infringement Claims. The foregoing states the entire
obligation of Teletrac, and the sole remedies of Licensee, with respect to
infringement of patents, copyrights, trade secrets and other proprietary rights
or interests.

12. Licensee Indemnity. Licensee shall defend, indemnify and hold harmless
Teletrac, and its directors, officers, employees and agents from and against any
and all claims, demands, liabilities, actions, suits, proceedings or expenses
(including reasonable attorney's fees) asserted by a third party: (a) arising
out of or relating to Licensee's marketing, sale, use, design, construction,
manufacture, maintenance, repair, modification, upgrade, enhancement,
improvement or support of the Radio Location System in the Territory, or any
part thereof, including Licensee Workstation Software Upgrades, Licensee
Executable Software Upgrades or Licensee Technical Modifications, the RLS
Location Units, RLS Customer Workstations, RLS Network Control Center or any
equipment, software or other items not obtained from Teletrac, or any
combination thereof; or (b) arising out of or relating to Licensee's performance
under or breach of this License Agreement, and Licensee agrees to undertake the
cost of defending the same, and will pay resulting costs and damages finally
awarded, provided that:

(1) Teletrac promptly notifies Licensee of the claim;

                                       19


(2) Teletrac cooperates with Licensee in the defense, provided that Licensee
reimburses Teletrac for its reasonable out-of-pocket expenses (including
reasonable outside counsel's legal fees) associated with operations; and

(3) Licensee has sole control of the defense and all related settlement
negotiations, using counsel reasonable satisfactory to Teletrac.

13. Teletrac Representations and Disclaimer.

13.1 Exhibits. Teletrac represents that to the best of its knowledge the RLS
Licensed Software listed on Exhibit A and the RLS Licensed Technical Information
listed on Exhibit B to this License Agreement is all of the RLS Licensed
Software and all of the tangible RLS Licensed Technical Information that has
been released to at least fifty percent (50%) of Teletrac's U.S. Radio Location
Systems as of the date of this License Agreement. If Teletrac has omitted any
such software or information, upon discovery of such omissions, it will amend
Exhibits A and B and deliver such software or information to Licensee.

13.2 NO WARRANTY. EXCEPT AS PROVIDED IN SECTION 11.2.1, TELETRAC MAKES
ABSOLUTELY NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE RADIO LOCATION
SYSTEM OR ANY PART THEREOF, INCLUDING, BUT NOT LIMITED TO, THE RLS COMPONENTS,
RLS LICENSED SOFTWARE AND RLS LICENSED TECHNICAL INFORMATION. BY WAY OF EXAMPLE,
BUT NOT OF LIMITATION, TELETRAC MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR WARRANTY THAT THE RADIO LOCATION SYSTEM, OR ANY PART
THEREOF, IS ERROR-FREE OR THAT ITS USE WILL BE UNINTERRUPTED OR THAT ITS SALE OR
USE WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADE SECRET, TRADEMARK, SERVICE
MARK OR OTHER PROPRIETARY RIGHT OR THAT THE RADIO LOCATION SYSTEM WILL BE A
PROFITABLE ENTERPRISE FOR LICENSEE. LICENSEE ACKNOWLEDGES THAT IT HAS MADE AN
INDEPENDENT INVESTIGATION OF THE RADIO LOCATION SYSTEM BUSINESS THAT IT WILL
CONDUCT UNDER THIS LICENSE AGREEMENT. TELETRAC AND EACH OF ITS AFFILIATES
EXPRESSLY DISCLAIM THE MAKING OF, AND LICENSEE ACKNOWLEDGES THAT IT HAS NOT
RECEIVED OR RELIED UPON, ANY GUARANTEE OR REPRESENTATION, EXPRESS OR IMPLIED, AS
TO THE FEASIBILITY OF OPERATING A RADIO LOCATION SYSTEM IN THE TERRITORY, AS TO
LICENSEE'S ABILITY TO DESIGN, CONSTRUCT, OPERATE OR MAINTAIN A RADIO LOCATION
SYSTEM IN THE TERRITORY OR AS TO THE COSTS LICENSEE MAY INCUR OR THE REVENUES IT
MAY RECEIVE WITH RESPECT TO A RADIO LOCATION SYSTEM IN THE TERRITORY. LICENSEE
FURTHER ACKNOWLEDGES THAT IT HAS NO KNOWLEDGE OF ANY REPRESENTATIONS BY ANY
OFFICER, EMPLOYEE, OR AGENT OF TELETRAC THAT ARE CONTRARY TO THIS SECTION 13.2.

14. LIMITATION OF LIABILITY. OTHER THAN WITH RESPECT TO THIRD PARTY DAMAGE
CLAIMS FOR WHICH THE PARTIES MAY BE OBLIGATED TO INDEMNIFY EACH OTHER AS SET
FORTH IN SECTIONS 11 AND 12 ABOVE, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR ANY DAMAGES OR FOR ANY LOST

                                       20


REVENUES, LOST PROFITS, OR OTHER, INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL
OR PUNITIVE DAMAGES CAUSED, IN WHOLE OR IN PART, BY THE LICENSING, USE OR SALE
OF THE RADIO LOCATION SYSTEM OR ANY PART THEREOF, INCLUDING, BUT NOT LIMITED TO,
RLS LICENSED SOFTWARE AND RLS LICENSED TECHNICAL INFORMATION, OR OTHERWISE
ARISING OUT OF OR RELATING TO THIS LICENSE AGREEMENT. NOTHING IN THIS SECTION 14
SHALL RELIEVE LICENSEE OF ANY OBLIGATION TO PAY TO TELETRAC AMOUNTS DUE AND
OWING UNDER SECTION 4 AND DEVELOPMENT, TRAINING AND SUPPORT CHARGES UNDER
SECTION 15.3.

15. Obligations and Responsibilities of Teletrac. Teletrac will have the
following obligations and responsibilities in addition to those specified
elsewhere in this License Agreement:

15.1 Delivery of RLS Licensed Technical Information. Teletrac will deliver the
RLS Licensed Technical Information to Licensee, as applicable, during the
training sessions available pursuant to Section 15.3 below. Notwithstanding
anything to the contrary in this License Agreement, all deliveries of RLS
Licensed-Technical Information shall be subject to Teletrac's receipt of all
necessary export licenses and all required consents from third parties with
proprietary rights in such information, which Teletrac shall use reasonable
efforts to acquire. If there are delays in obtaining any such licenses or
consents, Teletrac will make partial deliveries of RLS Licensed Technical
Information, in accordance with the terms and conditions of this License
Agreement, to the extent feasible.

15.2 Delivery of RLS Licensed Software. Teletrac will deliver the components of
the RLS Licensed Software to Licensee, as and when needed by Licensee during the
design and construction of the Radio Location System and the Territory, within
thirty (30) days after receiving a written request therefor from Licensee.
Notwithstanding anything to the contrary in this License Agreement, all
deliveries of RLS Licensed Software shall be subject to Teletrac's receipt of
all necessary export licenses and all required consents from third parties with
proprietary rights in such software, which Teletrac shall use reasonable efforts
to acquire. If there are delays in obtaining any such licenses or consents,
Teletrac will make partial deliveries of RLS Licensed Software, in accordance
with the terms and conditions of this License Agreement, to the extent feasible.

15.3 Training and Support. Teletrac shall provide 50 hours of training and
support to Licensee as set forth in this Section 15.3. Licensee acknowledges and
agrees that Teletrac shall have an obligation to provide only the 50 hours of
training and support for Licensee and that any additional training or support
shall be provided at Teletrac's sole discretion, subject in all cases to the
availability of sufficient qualified personnel of Teletrac to provide such
services to Licensee. Notwithstanding any training or support provided to
Licensee hereunder, Teletrac shall have no responsibility or liability for the
design, construction, operation or maintenance of the Radio Location System.

15.3.1 Training. Licensee may request that Teletrac provide, at Licensee's cost
following the first 50 hours of training and support, the training courses set
forth below. The scope and subject matter to be covered by each training course
shall be determined by the mutual agreement of the parties at least thirty (30)
days in advance of the scheduled date for the training course. All

                                       21


training courses shall be conducted in English at Teletrac's facilities, or at
such other location within the United States as Teletrac may specify.

15.3.1.1 The training courses available to Licensee shall be:

(1) Technician Training Courses;

(2) Master Control Center Operator Training Course;

(3) RLS Customer Support Training Course; and

(4) RLS Customer Service Training Course.

15.3.1.2 Licensee shall provide Teletrac with at least ninety (90) days advance
notice of a requested date for a training course. If Teletrac is not able to
provide the training course, then Teletrac shall so notify Licensee.

15.3.1.3 At Licensee's request, Teletrac will prepare a non-binding estimate of
the cost for a particular training course each time it is to be provided.

15.3.1.4 Teletrac will bill Licensee monthly for the costs that Teletrac incurs
in preparing and providing each training course, each time it is provided. Such
costs shall include all of the out-of-pocket costs and expenses that Teletrac
incurs in preparing and providing such course, plus a rate of U.S. $125.00 per
person hour for time Teletrac employees or consultants spend preparing and
providing such course. Such rate shall be adjusted annually after the first year
of this Agreement to reflect percentage changes in the U.S CPI during the
preceding year.

15.3.1.5 Licensee shall be responsible for all travel arrangements, including
obtaining all visas that may be required, and shall pay all travel costs and
expenses, including transportation, meals, lodging and any per diem pay and
other salary and benefits arrangements, for Licensee's personnel in connection
with the training courses provided under this Section 15.3. As to training
courses provided at Teletrac facilities, Licensee acknowledges that its
employees participating in such training are not employees of Teletrac, and
Licensee will obtain such insurance coverage as Teletrac may reasonably request
for such Licensee employees, including, but not limited to, workers'
compensation insurance. Licensee shall provide Teletrac with a certificate of
such insurance that names Teletrac as an additional insured.

15.3.2 Telephone Support. Licensee may request that Teletrac provide, at
Licensee's cost, telephone support to Licensee. Licensee shall pay for such
telephone support at a rate of U.S. $125.00 per person hour, with such rate to
be adjusted annually after the first year of this Agreement to reflect
percentage changes in the U.S. CPI during the preceding year. In addition,
Licensee shall be responsible for placing and paying for all telephone calls
made in connection with telephone support to be provided under this Section.

15.3.3 Payments for Training and Support. Teletrac will bill Licensee monthly
for training and support provided under this Section 15.3, and Licensee's
payments will be due and payable in U.S. dollars within thirty (30) days of
receipt of the invoice. In the event Teletrac pays overtime

                                       22


pay to its personnel providing such training and support, Licensee's charges for
such training and support shall be increased accordingly.

15.4 Completion of RLS Episode Software. Teletrac is obligated to finalize the
development of the RLS Episode Software by April 30, 1999. Teletrac acknowledges
that Licensee has informed Teletrac that completion of this development is vital
to Licensee's business prospects and failure to complete the work may have a
significant adverse effect on Licensee's business.

16. Obligations and Responsibilities of Licensee. Licensee will have the
following obligations and responsibilities in addition to those specified
elsewhere in this License Agreement.

16.1 Compliance With Laws; Enforceability. Licensee represents, warrants,
covenants and agrees with and to Teletrac that, during the term of this License
Agreement (and thereafter with respect to those provisions which survive the
termination of this License Agreement), this License Agreement, and all
agreements executed and delivered in connection herewith, and the performance by
both Parties of their respective obligations and duties under this Agreement and
such other agreements, will not violate any law, rule or regulation in effect in
the Territory. Licensee further represents, warrants, covenants and agrees with
and to Teletrac that, during the term of this License Agreement (and thereafter
with respect to those provisions which survive the termination of this License
Agreement), all of the provisions of this License Agreement are fully
enforceable under the laws in effect in the Territory and that each party can
fully and completely enforce the obligations, covenants, agreements and
restrictions of the other Party under this License Agreement.

16.2 Spectrum License. Prior to commencing the construction and operation of the
Radio Location System in the Territory, a Spectrum License shall be held by
Licensee or a sublicensee as permitted by this License Agreement, and Licensee
or the sublicensee will use reasonable efforts to expand the Spectrum License to
obtain approval for paging, data messaging and other activities via a land-based
radio location system.

16.3 Reasonable Diligence. Licensee shall use reasonable diligence, at its own
expense, to build, operate and maintain a Radio Location System in the Territory
and to promote, market, sell and support RLS Customer Equipment and RLS Customer
Services in the Territory.

16.4  Confidentiality and Proprietary Protection.

16.4.1 Confidentiality and Nondisclosure Agreement. Teletrac and Licensee shall
execute and deliver, as part of this License Agreement, the Nondisclosure
Agreement that is attached as Exhibit D and incorporated by reference in this
License Agreement.

16.4.2 Proprietary Rights Reserved. It is expressly agreed that neither title to
the Radio Location System, nor title to any part thereof, including, but not
limited to the RLS Licensed Software and RLS Licensed Technical Information,
passes to Licensee. Licensee's license and right to use any part of the Radio
Location System is as set forth in this License Agreement, and Teletrac reserves
all proprietary rights in the Radio Location System. This reservation of
proprietary rights survives any termination of this License Agreement.

                                       23


16.4.3 Copyright and Patent Registration and Notices. Licensee agrees not to
remove from view any copyright, trademark, confidentiality or other proprietary
notice, mark, or legend appearing on any of the RLS Licensed Software, on output
generated by such software or on RLS Licensed Technical Information, and agrees
to reproduce and include the same on each copy of the RLS. Licensed Technical
Information and RLS Licensed Software.

16.5 Insurance. Licensee agrees that at all times during the term of this
License Agreement it will maintain property and liability insurance in an amount
adequate to cover the value of and risks associated with the Radio Location
System in the Territory.

16.6 Teletrac Marks. The rights and licenses granted under this License
Agreement do not constitute a grant of any right or license to use Teletrac's
marks, including but not limited to the "Teletrac" trade name, trademark and
service mark. Upon Teletrac's request, Licensee will cooperate with and, if
necessary, consent to, any registration by Teletrac or any of its affiliates of
the "Teletrac" mark in the Territory. Licensee and Licensee's affiliates are
estopped from challenging the validity of the Teletrac mark or from setting up
any claim adverse to Teletrac with respect to the Teletrac mark, and any good
will arising with respect to such mark in the Territory shall inure solely to
the benefit of Teletrac.

16.7 Other Marks. Other than as set forth in Section 16.6 above, Licensee shall
be the sole owner of valid marks that Licensee uses to identify the Radio
Location System, or any part thereof.

16.8 Infringement by Others. Licensee agrees to inform Teletrac promptly of any
possible infringement of, or unfair competition affecting, the Radio Location
System in the Territory, including the RLS Licensed Software and RLS Licensed
Technical Information, that comes to the attention of Licensee. If Teletrac
decides to take action against any such possible infringement or act of unfair
competition, Licensee agrees to assist Teletrac, in whatever manner Teletrac may
direct, and, provided that neither Licensee nor one or more of its affiliates
is, in whole or part, responsible, directly or indirectly, for such
infringement, at the expense of Teletrac.

16.9 Restriction Regarding Reverse-Engineering. Licensee agrees that it will not
derive or attempt to derive the source code or structure of all or any portion
of the RLS Licensed Software by reverse engineering, disassembly, decompilation,
or any other means, and that it will not decompile, disassemble, reverse
engineer, port, translate, modify, copy, transfer, make derivative works of, or
otherwise use the RLS Licensed Software, except as expressly authorized by this
License Agreement.

17. Relationship of the Parties. The relationship of the parties established by
this License Agreement shall be that of independent contractors. Nothing in this
License Agreement shall be construed to create an agency, partnership, joint
venture or employment relationship between Licensee and Teletrac, nor to make
Licensee the agent of Teletrac, or Teletrac the agent of Licensee, for any
purpose. Neither party is granted authority by the other to undertake
commitments, transact business, create or assume any obligation (express or
implied) or otherwise act (or represent that it can act) in the other's name or
on the other's behalf.

                                       24


18. Force Majeure. If the performance of either Party required by this License
Agreement (other than payment of amounts due under this License Agreement) is
prevented, restricted or delayed by fire, other casualty or accident, war or
violence or serious threat of the same, arrest or restraint of government,
requisition of vessel or aircraft, explosion, governmental request, guidance,
order or regulation, or any other circumstance beyond the reasonable control of
the Party and without such Party's fault or negligence, the affected Party, upon
giving due notice to the other Party, shall be excused from such performance,
but only to the extent directly attributable to the circumstance and the excused
party shall not be liable for loss or damage or failure of or delay in such
performance.

19. Governing Law. The governing law of this License Agreement shall be that of
the State of California, U.S.A., as if both parties hereto were resident and
doing business in such state.

20. Dispute Resolution.

20.1 Good Faith and Fair Dealing. The parties intend to carry out the provisions
of this License Agreement in accordance with principles of good faith and fair
dealing and to respect and observe the spirit as well as the letter of this
License Agreement. The parties shall exercise their best efforts to settle
between themselves in an amicable way any dispute which may arise out of or in
connection with this License Agreement.

20.2 Arbitration. Except as set forth in Sections 20.3 and 20.4 below, any
controversy or claim arising out of or relating to this License Agreement, or
the breach, termination or invalidity thereof, shall be settled by arbitration
in accordance with the rules and regulations of the American Arbitration
Association for resolving commercial disputes, as modified by this Section 20.2.
The number of arbitrators shall be three (3). The place of arbitration shall be
San Diego, California and the arbitration shall be conducted in English. The
arbitrators shall be bound by stare decisis, and the arbitral award shall be
final and binding, shall be rendered in writing and shall state the reasons for
the award. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. The costs of arbitration, including the
cost of legal counsel, shall be awarded in the discretion of the arbitrators.
The arbitrators shall have the ability to grant all relief available at law and
in equity, to the extent permitted under this License Agreement.

20.3 Legal Proceedings. Either Party may elect to initiate litigation, rather
than arbitration, but only with respect to claims for nonpayment of the Annual
Royalty Payment (other than accounting disputes covered by Section 20.4), or for
specific performance or injunctive relief to enforce the terms of this agreement
or prevent a breach thereof. In particular, Licensee acknowledges that its
failure to comply with the provisions of this License Agreement concerning use
of the RLS Licensed Software, RLS Licensed Technical Information or Teletrac's
trade names, trademarks or service marks will result in immediate and
irreparable harm to Teletrac for which there is no adequate remedy at law.
Teletrac shall be entitled to bring an action or proceeding for specific
performance, injunctive relief, declaratory relief or other equitable relief to
compel Licensee to cease and desist all unauthorized use of the RLS Licensed
Software, RLS Licensed Technical Information or any trade name, trademark or
service mark of Teletrac, to require Licensee to perform its obligations with
respect to such software, technology and marks, and to obtain such other relief
as may be necessary and proper. Teletrac shall not be

                                       25


required to post a bond in connection with any such proceeding. The Parties'
consent to the nonexclusive venue and jurisdiction of the state and federal
courts serving San Diego, California in any legal proceeding commenced pursuant
to this License Agreement.

20.4 Annual Royalty Payment Disputes. If the sole subject of a dispute under
this License Agreement concerns the manner of accounting for the Annual Royalty
Payment and the amount of royalties due to Teletrac, then such dispute shall be
settled by a mutually agreeable independent accountant (the "Neutral
Accountant"). Either Party may initiate resolution of an accounting dispute by
the Neutral Accountant by requesting a meeting with the Neutral Accountant, and
by sending at least forty-five (45) days' notice of such meeting to the other
Party. If the Parties are unable to agree on a Neutral Accountant within ten
(10) days of the date of the date of such notice, then, within ten (10) days
each Party shall select one accountant (the "Party Accountant"). The Party
Accountants shall then select a Neutral Accountant within a further ten (10)
days and schedule the first meeting with the Neutral Accountant. If a Party
fails to select a Party Accountant, then the Neutral Accountant shall be the
other Party's Party Accountant. At least thirty (30) days prior to the first
meeting with the Neutral Accountant each Party may submit to the Neutral
Accountant a written explanation of the dispute, together with any relevant
documents. Within thirty (30) days after the meeting, the Neutral Accountant
shall conduct an audit of Licensee, if in the opinion of the Neutral Accountant
such an audit is necessary. Within sixty (60) days after the meeting, the
Neutral Accountant shall issue a decision on the accounting matter. The Neutral
Accountant's decision shall be final and binding, shall be rendered in writing
and shall state the reasons for the decision. Judgment upon the decision
rendered by the Neutral Accountant, and any costs to be awarded as set forth
below, may be entered in any court having jurisdiction thereof. Each Party shall
bear its own costs of the proceeding and the Parties shall share equally the
costs of the Neutral Accountant; provided, however, that if the Neutral
Accountant decides that Licensee's position has resulted or would result in an
under calculation or underpayment in excess of two (2) percent of the amount
owed, paid or to be paid to Teletrac, then Licensee shall be responsible for
Teletrac's costs of the proceeding, including reasonable legal fees, and for the
entire cost of the Neutral Accountant, and if the Neutral Accountant decides
that Teletrac's position has resulted or would result in an overpayment to
Teletrac that in excess of two percent (2%), then Teletrac shall be responsible
for Licensee's costs of the proceeding, including reasonable legal fees, and for
the entire cost of the Neutral Accountant. During all proceedings under this
Section 20.4, each Party shall continue timely payment of all amounts owed to
the other Party under this License Agreement.

21. General.

21.1 Designation of Contract Administrators and Contract Technical Coordinators.
Each party shall designate a Contract Administrator and Contract Technical
Coordinator within ten (10) business days of the Effective Date. If a Party
fails to make such designation, then that Party's Contract Administrator and
Technical Coordinator shall be the person designated by such Party in Section
21.2 below, or such other person as either Party may notify to the other from
time to time.

21.2 Notices. All notices under this License Agreement shall be in writing and
may be given by delivering the same by hand, or by sending the same by an
overnight courier that maintains verification of delivery, or by facsimile, to
the relevant person and address set out below or such

                                       26


other person and address as either Party may notify to the other from time to
time. Any such notice given as set forth above shall be deemed to have been
given or received at the time of delivery (if delivered by hand) and upon
verified receipt (if sent by post, facsimile or overnight courier). In the case
of facsimile, the transmission report shall constitute the verified receipt.
Each Party may, at any time, change the persons or address to which its notices
are to be sent by notifying the other Party of such change in accordance with
this Section 21.2.

Teletrac
--------

Teletrac, Inc.
2131 Faraday Ave.
Carlsbad, CA
(760) 931-2644 (Tel)
(760) 931-2550 (Fax)

Attn: General Counsel

Licensee
--------

Beheermaatschappij de Rooij B.V.
Koningslaan 14
1075 AC Amsterdam
The Netherlands

Attn: General Manager

21.3 English Language. All communications, notices and records required to be
kept under and materials provided pursuant to this License Agreement shall be in
English.

21.4 No Publicity. Each Party agrees not to disclose the contents of this
License Agreement to anyone other than its employees and affiliates with a need
to know, without the prior written consent of the other Party. Consistent with
the requirements of law and any lega1 process, neither Party will issue any
press or news release, make any public disclosure with respect to the substance
of this License Agreement or the relationship of the Parties, or make any such
general disclosure to either Party's customers, or potential customers, without
the prior written approval of the other Party.

21.5 Scope and Amendment of License Agreement. The parties acknowledge that each
has read this License Agreement, understands it and agrees to be bound by its
terms. This License Agreement may be amended only by a subsequent writing that
specifically refers to this License Agreement and that is signed by both
Parties, and no other act, document, usage or custom shall be deemed to amend
this License Agreement.

21.6 Assignment. Neither Party may assign or delegate any of its rights, duties
or obligations under this License Agreement in whole or in part without the
other Patty's written consent. Any attempt by either Party to assign or delegate
any rights, duties or obligations which arise under this License Agreement,
without the other Party's written consent, shall be void. Teletrac may, however,
upon notice to Licensee, assign or delegate, or both, its rights, duties and
obligations

                                       27


under this License Agreement to an entity: (a) that Teletrac controls or has the
ability to control, or that controls or has the ability to control Teletrac and
that receives and assumes all of Teletrac's rights and obligations under this
License Agreement, or (b) that has purchased all or substantially all of the
assets of Teletrac utilized in connection with its Radio Location Systems, and
receives and assumes all of Teletrac's rights and obligations under this License
Agreement, provided that, in either case, the same entity provides engineering
support to Radio Location Systems located in the United States, and also will be
available to provide to Licensee the engineering support that Teletrac is
required to provide under this License Agreement. Notwithstanding the foregoing,
Licensee may sublicense its rights hereunder to another entity (a "Sublicensee")
for the purpose of permitting the Sublicensee to operate a Radio Location System
hereunder in a country in the Territory, provided that (i) the Sublicensee is an
entity organized and existing under the laws of, and authorized to operate a
Radio Location System under a Spectrum License in, such country, (ii) Licensee
has an equity ownership interest, either directly or indirectly, in the
Sublicense, (iii) if Licensee has less than a twenty five percent (25%) equity
ownership interest, either directly or indirectly, in the Sublicensee, Licensee
shall pay to Teletrac twenty percent (20%) of any "lump sum payment" (as defined
below) received from Sublicensee, (iv) the Sublicensee shall pay to Teletrac all
royalties due to Teletrac under this License Agreement with respect to revenues
received from the operation of the Radio Location System in the country and the
Licensee shall remain liable for such royalties in the event they are not
promptly paid by the Sublicensee, (v) the Sublicensee shall agree in writing to
comply with all of the teams and conditions of this License Agreement and that
Teletrac char have the right to enforce its rights hereunder directly against
the Sublicensee as if the Sublicensee was the licensee hereunder, (vi) Licensee
shall provide Teletrac with copies of all agreements between Licensee and
Sublicense, and any amendments thereto, and (vii) Licensee shall provide
Teletrac with detailed information regarding the Sublicensee and its principals
as reasonably requested by Teletrac. In the event any payment is made to
Teletrac pursuant to clause (iii) above, the royalty payments to be made to
Teletrac by Sublicensee pursuant to clause (iv) above shall be paid to Licensee
until such time as Licensee has been paid an amount equal to the amount received
by Teletrac pursuant to clause (iii) above. For the purposes of this Section,
"lump sum payment" shall mean any payment received from the Sublicensee, either
upon commencement of the sublicense or thereafter, which is not based on a
percentage of the Sublicensee's revenues or income, or the number of customers
of Sublicensee or RLS Location Units in service in the country.

Notwithstanding the foregoing, Licensee may assign all of his rights, duties or
obligations under this License Agreement, provided the assignment will take
place within ninety (90) days of the Effective Date and the assignee will be an
entity controlled by the Licensee. Licensee will be obligated to inform Teletrac
of the assignment within seven (7) days following the assignment. Upon
Licensee's request, Teletrac and the assignee will execute an identical Radio
System License Agreement with appropriate Exhibits and deliveries that shall
replace this License Agreement.

21.7 Binding Effect. This License Agreement shall be binding on and inure to the
benefit of the respective successors and permitted assigns of the parties.

                                       28


21.8 Authority. Each of the respective persons executing this License Agreement
hereby covenants and warrants that such person has full legal power, right and
authority to bind the entity on whose behalf such person is signing to each and
every term and provision herein.

21.9 Severability. If any provision of this License Agreement shall be held
illegal or invalid by and court, this License Agreement shall be construed and
enforced as if such illegal or invalid provision had not been contained herein
and this License Agreement shall be deemed an agreement of the Parties to the
full extent permitted by law. If any provision shall be declared invalid or
unenforceable because of its breadth, scope or duration, such provision shall be
deemed modified to the extent necessary to make it valid and enforceable and
shall remain in full force and effect as so modified, or if not so modified,
shall be severable from the rest of this License Agreement.

21.10 Headings. All headings are for reference only and shall not be considered
in construing this License Agreement.

21.11 Expenses of Litigation. In case of litigation arising out of or in
connection with this License Agreement, the substantially prevailing Party shall
be entitled to recover its reasonable attorneys' fees, costs and expenses from
the other Party. In case of arbitration or Neutral Accountant proceedings, such
fees, costs and expenses shall be recovered as set forth in Sections 20.2 and
20.4 above.

21.12 Waiver. The failure of either Party at any time to require performance by
the other Party of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter. Nor shall the waiver by either
party of a breach of any provision hereof be a waiver of any succeeding breach
of the same or any other such provisions or be a waiver of the provision itself.

21.13 Entire Agreement. This License Agreement together with its Exhibits and
the Nondisclosure Agreements constitute the entire agreement of the parties with
respect to the license of the RLS Licensed Software and RLS Licensed Technical
Information to Licensee and supersede any and all prior negotiations,
correspondence, understandings and agreements between the parties respecting the
subject matter of this License Agreement, and the full understanding of the
Parties is embraced herein.

21.14  Re-Export Assurances.

21.14.1 Licensee agrees to comply with the terms of the Export Administration
Act of 1979 (the "Act") of the United States of America, as amended, and the
rules and regulations promulgated thereunder, and any other law or regulation of
the United States of America which restricts, regulates or prohibits the export
or license of the RLS Licensed Software and RLS Licensed Technical Information,
or any portion thereof, or any other technical data relating to the Radio
Location System, now or hereafter in effect, Licensee agrees that it will not
knowingly, either directly or indirectly, export or re-export such technology or
products without the prior authorization of Teletrac and the United States
Office of Export Administration to Country Group P, Q, W, Y or Z, as defined in
the regulations, or to Afghanistan or otherwise in violation of any requirement
or prohibition contained in the Act or such laws, rules and regulations.

                                       29


21.14.2 Teletrac agrees that it will comply with the terms of any export laws,
rules or regulations in the Territory with respect to the export of software and
technical data and components licensed to Teletrac under Section 10.2 above.

21.14.3 Licensee hereby agrees to pay for all fees and expenses (including
reasonable attorney's fees) incurred by Teletrac in complying with the
provisions of Section 21.14.2 and in ensuring that Licensee has complied with
the provisions of Section 21.14.1.

21.15 Exhibits. The following exhibits are a part of this License Agreement:

Exhibit A - List of RLS Licensed Software
Exhibit B - List of RLS Licensed Technical Information
Exhibit C - Territory Description
Exhibit D - Nondisclosure Agreement
Exhibit E - Escrow Agreement

21.16 Construction of Agreement. This License Agreement has been negotiated by
the Parties and their respective attorneys and the language of this Agreement
shall not be construed for or against either party.

21.17 Counterparts. This License Agreement may be executed in counterparts, each
of which shall be an original as against any Party whose signature appears on
such counterpart and all of which together shall constitute one and the same
instrument.

21.18 Escrow of RLS Licensed Software. The parties agree to execute and deliver
the Escrow Agreement attached as Exhibit E and incorporated by reference in this
License Agreement on the Effective Date.


                                       30




IN WITNESS WHEREOF, the Parties executed and delivered this License Agreement as
of the day and year first above written.

TELETRAC, INC.

By  /s/ Steven D. Scheiwe
    ----------------------------------------

Print Name  Steven D. Scheiwe
            --------------------------------



Title  Secretary
       -------------------------------------

Date: 3/1/99
      --------------------------------------

Beheermaatschappij de Rooij B.V.

By
   -----------------------------------------

Print Name
           ---------------------------------

Title
      --------------------------------------

Date:
      --------------------------------------



                                       31




IN WITNESS WHEREOF, the Parties executed and delivered this License Agreement as
of the day and year first above written.

TELETRAC, INC.

By  /s/ Steven D. Scheiwe
    ----------------------------------------

Print Name  Steven D. Scheiwe
            --------------------------------



Title  Secretary
       -------------------------------------

Date: 3/1/99
      --------------------------------------


Beheermaatschappij de Rooij B.V.

By  /s/ Easi Sheratzky
    ----------------------------------------

Print Name  Easi Sheratzky
            --------------------------------



Title  Proxy Holder
       -------------------------------------

Date:  3/1/99
       -------------------------------------






                                       32






                                   EXHIBIT A

                             RLS LICENSED SOFTWARE

<TABLE>

Component                     O/S               Purpose
---------                     ---               -------

RXIF                          QNX4              Interface to Tadiran Receiver sites
TXIF                          QNX4              Interface to transmit sites using Simulcast Paging Controller
SOLVR                         QNX4              Multilateration position determination
ITH                           QNX4              Inbound transmission handler
RMGR                          QNX4              Request Manager for user service requests
TP                            QNX4              Transaction Processor to capture transaction data
                                                for billing
CAM                           QNX4              Customer Access Monitor for FD3.x access lines
SCHED                         QNX4              Transmission Scheduler for Simulcast Paging
                                                System
ASMGR                         QNX4              Process messages initiated from mobile units
CAL                           QNX4              Calibrate receiver site timing
SF                            QNX4              Message store and forward services
Traccess                      QNX4              Dial in access for FD3.x protocol
Traccess II                   QNX4              TCP/IP Access for FDEE protocol
Mqueue                        QNX4              Message queuing between QNX tasks on same LAN
QWIS                          QNX4              Message queuing between QNX tasks on same WAN
SMC Server                    QNX4              Network management server
SMC Workstation               NT4               Network management workstation
DBClient                      QNX4              Route database queries from QNX to WINDOWS NT
Eventlogger                   QNX4              Performance analysis database capture
Eventlogger                   NT4               ODBC Interface to MS-SQL Server for Eventlogger
WDBServer                     NT4               ODBC Interface to MS-SQL Server for DBCLIENT
CAB                           NT4               Customer Access Bridge
CDPDMgr*                      NT4               CDPD Network Interface
CustomerDB                    SQL               Customer database schema
EventLogStat                  SQL               Eventlogger statistical database schema
SimonClient                   W95               Data entry for MS-SQL Server
Pasmdb                        W95               Performance analysis user interface (MSACCESS)

</TABLE>


* This component is required only for CDPD network access.




                                       33




No later than April 30, 1999, Teletrac shall deliver certain additional software
for the management of Episode situations. The Episode software shall include:



Component                        O/S          Purpose
---------                        ---          -------
EMSDatabase                      SQL          Critical Event database schema
EMSAgent                         NT4          Notify operators of events
EMSIncipient                     NT4          Episode generator
EMSScheduler                     NT4          Schedule events to operator
EMSVerifier                      NT4          Customer Verification
EMSUser/GUI Services             W95          Operator Graphical User Interface
Wintrak                          W95          Episode location workstation






                                       34




                                   EXHIBIT B

                       RLS LICENSED TECHNICAL INFORMATION

A brief description of Teletrac's radio location system technical information
library is attached. The description sets out the format of the information as
being either HC (hard copy) EC (electronic copy or both. The assigned document
number is indicated as is the status on the current revision, if any. The title,
use description, author and other comments are also indicated.




                                       35







<TABLE>

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

HC  EC  Doc       Rev    Date     Type        Title
-----------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------
X   X   900-0003  00     10/18/91             Teletrac Technical Glossary
-----------------------------------------------------------------------------------------
X.      900-0004  00                          Teletrac Writers' Style Guide

-----------------------------------------------------------------------------------------
X       900-0101  00     12/06/90             Standard Format for Internal Documentation
-----------------------------------------------------------------------------------------
X   X   900-0103  D0     1/4/93               Software Requirements Specification
                                              Document Preparation Description


-----------------------------------------------------------------------------------------
X       900-0106  input  7/27/92              Software Quality Assurance Manual

-----------------------------------------------------------------------------------------
X       900-0107  input  7128/92              Software Configuration Management Manual

-----------------------------------------------------------------------------------------
X       900-0109  B0     9/14/93  System Spec Horizon System Specification
-----------------------------------------------------------------------------------------
    X   900-0110  review 7/1/93               Simon RF Software Detailed Design
                                              Specification
-----------------------------------------------------------------------------------------
X   X   900-0111  01     7/1/92               Software Standards and Guidelines
-----------------------------------------------------------------------------------------
    x   900-0119  review 9/1/93               Horizon II Proposal


-----------------------------------------------------------------------------------------
X   X   900-0123  A0     11/11/94 System Spec RCM_B and Long Inbound Messaging Analysis
                                              and System Specification
-----------------------------------------------------------------------------------------
X   X   900-0125  00     3/17/97  System Spec Specification for Inbound Messaging
-----------------------------------------------------------------------------------------
    X   905-0107  prelim 7/15/94  Software    Simon-RF Software Requirements
                                  Req         Specification
-----------------------------------------------------------------------------------------
X   X   905-0109  00     4/16/98              Air interface Specification and
                                              Subscriber Unit Minimum Requirements
-----------------------------------------------------------------------------------------
    X   905-0408  00     1/20/97  Install     WINSMC Installation & Operations Guide

-----------------------------------------------------------------------------------------
    X   905-0409  00     3/2/98   Operations  Adding Reclever Sites with QNX
-----------------------------------------------------------------------------------------
    X   905-0410  00     3/6/98   Operation   Adding Transmit Sites with QNX
-----------------------------------------------------------------------------------------
X       905-0605  00     2/7/92   Training    Quser Training Guide





-----------------------------------------------------------------------------------------
    X   906-0115  00     1/11/93  Software    Message Manager Software Requirements
                                  Req         Specification
-----------------------------------------------------------------------------------------
    X   905-0623  00     9/26/96              Simon-RF Subsystem Overview


-----------------------------------------------------------------------------------------
    X   906-0108  A0     2/11/93  Software    Quser Software Requirements Specification
                                  Req
-----------------------------------------------------------------------------------------
    X   910-0102  D0     11/2/94              VLS-Quser Communication Protocol
-----------------------------------------------------------------------------------------
        910-0104  00     5/24/94  I/F Spec    CVLS-Quser Interface Specification


-----------------------------------------------------------------------------------------
    X   910-0401  M0     2/15/94              ETAK Mapbases












-----------------------------------------------------------------------------------------
    X   912-0105  Draft  10/18/96 Software    WinFleet 1.0 Feature Requirement
                                  Spec        Specifications
-----------------------------------------------------------------------------------------
    X   913-0604  00     9/18/96              Fleet Reporter Service Guide


-----------------------------------------------------------------------------------------
X       915-0303  draft  11/15/90             GPS Site Survey Procedure
-----------------------------------------------------------------------------------------
X       915-0304  none   1/29/91              GPS Site Survey Procedure (Short Version)
-----------------------------------------------------------------------------------------
X       915-0305  none   1/28/91              GPS Antenna Installation
-----------------------------------------------------------------------------------------
X       915-0306  draft  8/30/90              Grounding, Lightning and AC Surge
                                              Protection
-----------------------------------------------------------------------------------------
X       915-0608  00     9/18/92              How to Conduct a GPS Survey for Project
                                              Managers and Field Engineers
-----------------------------------------------------------------------------------------
X       916-0102  00     2/14/97  Software    RSSW Software Requirements Specification
                                  Req
-----------------------------------------------------------------------------------------
    X   916-0103  H2     9/15/94              RSSW Communication Protocol
-----------------------------------------------------------------------------------------
    X   916-0104  00     10/13/94             Universal Message Receiver Unit (UMR)
                                              Technical Definition
-----------------------------------------------------------------------------------------
    X   916-0202  none   9/1/93   Test        Base Station Test Procedure
-----------------------------------------------------------------------------------------
X       916-0401  review 5/27/93  Reference:  RSSW User Reference



-----------------------------------------------------------------------------------------
X       916-0501  none   2/92                 RSU Field Technicians Guide

-----------------------------------------------------------------------------------------
    X   916-0503  00     11/30/93             Base Station Lightening Protection
                                              Modification Procedures
-----------------------------------------------------------------------------------------
X       917-0102  draft  8/24/90              Simulcast Network Specification
-----------------------------------------------------------------------------------------
    X   917-0303  01     3/3/98   Installation SPCU Setup Procedure
-----------------------------------------------------------------------------------------
X       917-0601  00     2/7/92   Training    GPS Receiver; Odetics Model 325 SATSYNC
                                              Training Guide
-----------------------------------------------------------------------------------------
X       917-0602  00     4/6/92   Training    Transmitter and Controller Training Guide

-----------------------------------------------------------------------------------------
X       917-0603  00     2/14/92  Test        Simulcast Test Software SPX Training Guide



-----------------------------------------------------------------------------------------
X       917-0604  00     ?        Training    Simulcast Paging Network





-----------------------------------------------------------------------------------------
X       921-0102  00     9/5/94               Multi-Zone Calibration Normalization
                                              Software Design Spec
-----------------------------------------------------------------------------------------
X       921-0202  none   9/91     Test        Calibration Transmitter Unit Installation
                                              and Test Procedure,
-----------------------------------------------------------------------------------------
    X   921-0302  A0     9/1/31   Upgrade     CTU Metro Code Upgrade Instructions



-----------------------------------------------------------------------------------------
    X   925-0101  11.C   6/30/93  Requirements VLU Second Generation Requirements









-----------------------------------------------------------------------------------------
    X   925-0102  00     9/14/94  I/F         Peripheral Equipment Interface
                                  Requirement Requirements Specification
-----------------------------------------------------------------------------------------
X       925-0206  none   3/91     Test        Antenna Return Loss Test Acceptance Test

-----------------------------------------------------------------------------------------
X       927-0102  00              Hardware    Status Messaging Terminal Requirements
                                  Spec

-----------------------------------------------------------------------------------------
X       927-0103  00              Hardware    Display Messaging Terminal Requirements
                                  Spec

-----------------------------------------------------------------------------------------
    X   927-0104  01     6/16/93  I/F Req     MDT Interface Preprocessor User Interface
                                              Reqmt. Specs


-----------------------------------------------------------------------------------------
    X   927-0106  Draft  4/19/98  Hardware    Vehicle Location Transceiver Corporate
                                  Spec        Application (CVLU)
-----------------------------------------------------------------------------------------
X       927-0201  00     9/18/96  Test        Status Messaging Terminal Test Procedures
-----------------------------------------------------------------------------------------
        927-0308  00     1/12/98  Installation SMT II Installation and Operation Guide

-----------------------------------------------------------------------------------------
    X   927-0401  00     6/23/93  Programming Message Display Terminal Programming Guide
-----------------------------------------------------------------------------------------
    X   927-0402  00     6/23/93  Programming CVLU Programming Guide



-----------------------------------------------------------------------------------------
    X   927-0403  00     10/3/96  Installation Status Messaging Terminal (SMT) Operation
                                               and Installation Instructions
-----------------------------------------------------------------------------------------
        928-0101  00     5/6/97               Personal Location Unit
-----------------------------------------------------------------------------------------
    X   928-0102  00     6/22/94              Personal Locator Monitor Functional Spec
-----------------------------------------------------------------------------------------
        930-0401  00     2/10/99  User manual SimonClient User Manual


-----------------------------------------------------------------------------------------
X       931-5002  A      6/92                 Base Station Tester Operators Guide

-----------------------------------------------------------------------------------------
    X   1000-0101 00     4/6/98               Simon 2000 System Specifications
-----------------------------------------------------------------------------------------
X       1000-0201 00     7/10/97  Test        Communication and Messaging Test Plan for
                                              the Teletrac Simon System



-----------------------------------------------------------------------------------------
    X   1110-0101 00     8/14/98              Traccess Requirements Specifications Doc
-----------------------------------------------------------------------------------------
    X   1111-0101 00     11/14/98 SRS         Traccess II Connection Specification
-----------------------------------------------------------------------------------------
    X   1140-0101 00     4/12/98  SRS         QNX Wan Interface Server (QWIS) Software
                                              Requirements Specification
-----------------------------------------------------------------------------------------
    X   1210-0101 00              SRS         Request Manager Software Design
                                              Specification
-----------------------------------------------------------------------------------------
X       1220-0101 00     7/12/96  SDS         Scheduler Software Design Specification
-----------------------------------------------------------------------------------------
X       1240-0101 00     7/12/96  SDS         Receive Site Interface Software Design
                                              Specification
-----------------------------------------------------------------------------------------
X       1250-0101 00     7/12/96  SDS         Inbound Transmission Handler Software
                                              Design Specification
-----------------------------------------------------------------------------------------
    X   1280-0101 00              SDS         Post Processor Software Design
                                              Specification
-----------------------------------------------------------------------------------------
    X   1310-0101 00     2/23/99  SRS         SQL Database QNX API
-----------------------------------------------------------------------------------------
    X   1310-0102 00     2/17/99              Current Schema for MSSQL Current Database
-----------------------------------------------------------------------------------------
X       1330-0101 00     2/17/99  SRS         Software Requirements Spec for
                                              Performance Analysis
-----------------------------------------------------------------------------------------
X       1340-0101 00     8/4/98   SRS         Event Logger - QNX to Windows Interface
-----------------------------------------------------------------------------------------
    X   1410-0201 00     9/97                 MRPF ATP




-----------------------------------------------------------------------------------------
    X   1420-0202 00     7/17/97              TOA Processor ATP










-----------------------------------------------------------------------------------------
        1420-0203 00     7/7/97               GMIO ATP



-----------------------------------------------------------------------------------------
        1420-0204 00     7/27/97              CCSP - MPRP Communication Protocol ATP





-----------------------------------------------------------------------------------------
    X   1420-0401 00     3/24/97              Integrated Base Station Software User
                                              Interface Design Document (IBSSW User's
                                              Guide)
-----------------------------------------------------------------------------------------
    X   1510-0101 00     4/14/98              CDPD Manager Functional Requirements for
                                              OpenTrac
-----------------------------------------------------------------------------------------
X       1520-0101 00     12/28/98 SRS         Episode Management System Requirements
-----------------------------------------------------------------------------------------
    X   1540-0001 00     3/24/98              Recommendations on Differential GPS
                                              Implementations for OpenTrac
-----------------------------------------------------------------------------------------
    X   1540-0201 00     10/6/98              Engineering Test Plan - OpenTrac System
-----------------------------------------------------------------------------------------
X       1610-0101 00     11/19/98 SRS         Software Requirements Specification for
                                              the OpenTrac Mobile Unit (OMU)
-----------------------------------------------------------------------------------------
X       1610-0102 00     5/29/97              Hardware Requirements Specification for
                                              the Pilot HVLU
-----------------------------------------------------------------------------------------
X       1610-0103 00     12/15/98             OMU Sleep Mode Requirements
-----------------------------------------------------------------------------------------
    X   1610-0104 00     7/16/98              Requirement Specification for the
                                              Production OMU
-----------------------------------------------------------------------------------------
    X   1610-0105 00     10/4/98              Hardware Requirement Specification for
                                              the OpenTrac Mobile Unit (OMU)
-----------------------------------------------------------------------------------------
    X   1610-0106 00     5/12/98              Communication Interface Specification for
                                              the OpenTrac Mobile Unit
-----------------------------------------------------------------------------------------
</TABLE>





<TABLE>

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

HC      EC     Doc         Description                 Comments        Author
--------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------
X       X      900-0003                                                Drew Bradford
--------------------------------------------------------------------------------------------
X.             900-0004    Shows usage of commonly                     Drew Bradford
                           used ambiguous terms.
--------------------------------------------------------------------------------------------
X              900-0101                                                Natalie/Drew
--------------------------------------------------------------------------------------------
X       X      900-0103    Defines and describes the                   Joy Tamanaha
                           standard format for
                           Software Requirements
                           Specification Documents
--------------------------------------------------------------------------------------------
X              900-0106                                no electronic   Joy Tamanaha
                                                       copy
--------------------------------------------------------------------------------------------
X              900-0107                                no electronic   Joy Tamanaha
                                                       copy
--------------------------------------------------------------------------------------------
X              900-0109                                                Joy Tamanaha
--------------------------------------------------------------------------------------------
        X      900-0110                                                Joy Tamanaha

--------------------------------------------------------------------------------------------
X       X      900-0111                                                Joy Tamanaha
--------------------------------------------------------------------------------------------
        x      900-0119    Engineering document        Later           Joy Tamanaha
                           describing resources        revision In
                           needed, schedule, etc.      the EWP.
--------------------------------------------------------------------------------------------
X       X      900-0123                                                Emmanuel

--------------------------------------------------------------------------------------------
X       X      900-0125                                                Darwin Thompson
--------------------------------------------------------------------------------------------
        X      905-0107                                                Joy Tamanaha

--------------------------------------------------------------------------------------------
X       X      905-0109    Originally produced In                      Darwin Thompson
                           8/16/94
--------------------------------------------------------------------------------------------
        X      905-0408    WINSMC Workstation setup                    Ed Peterson
                           and howto guide
--------------------------------------------------------------------------------------------
        X      905-0409                                                Fred Anderson
--------------------------------------------------------------------------------------------
        X      905-0410                                                Fred Anderson
--------------------------------------------------------------------------------------------
X              905-0605    Training course for PTT                     Rex Frye
                           FEs. Bullets Ideas to be
                           covered by an experience
                           Quser user. Also
                           includes information for
                           trainee.
--------------------------------------------------------------------------------------------
        X      906-0115                                                Joy Tamanaha

--------------------------------------------------------------------------------------------
        X      905-0623    Overview/Background of                      Barry Atkinson, Ed
                           Simon Rack                                  Hurst, Jim Nie, Jim
                                                                       Forman, Alice Kwok
--------------------------------------------------------------------------------------------
        X      906-0108                                                Joy Tamanaha

--------------------------------------------------------------------------------------------
        X      910-0102                                                Joy Tamanaha
--------------------------------------------------------------------------------------------
               910-0104    Version of the VLS-Quser
                           Protocol Jeff updated to
                           give to outsiders.
--------------------------------------------------------------------------------------------
        X      910-0401    Gives file name and                         Joy Tamanaha
                           latitude/longitude
                           coordinates of each
                           mapbase, for use with VLS
                           software. Includes
                           Atlanta, Chicago,
                           Dallas/Fort Worth,
                           Detroit, Hong Kong,
                           Houston, Los Angeles,
                           Miami, New York,
                           Nordrhein Region - West
                           Germany, Phoenix,
                           Riverside
--------------------------------------------------------------------------------------------
        X      912-0105                                                Chuyen Dong

--------------------------------------------------------------------------------------------
        X      913-0604    Training guide for CC                       Joe Crevino
                           members to run Winfax
                           machine
--------------------------------------------------------------------------------------------
X              915-0303                                                Ray/Florin
--------------------------------------------------------------------------------------------
X              915-0304
--------------------------------------------------------------------------------------------
X              915-0305
--------------------------------------------------------------------------------------------
X              915-0306                                                Ray Campbell

--------------------------------------------------------------------------------------------
X              915-0608    Training course for PTT                     Florin Stelzer
                           FEs.
--------------------------------------------------------------------------------------------
X              916-0102                                                Ed Hurst

--------------------------------------------------------------------------------------------
        X      916-0103                                                Joy Tamanaha
--------------------------------------------------------------------------------------------
        X      916-0104                                                Gary Russel

--------------------------------------------------------------------------------------------
        X      916-0202                                                Richard La Porte
--------------------------------------------------------------------------------------------
X              916-0401    Describe displays and                       Joy Tamanaha
                           controls of RSSW and
                           fields, as used in the
                           Control Center.
--------------------------------------------------------------------------------------------
X              916-0501                                JDs, numbered   Richard La Porte
                                                       931-5001.
--------------------------------------------------------------------------------------------



        X      916-0503                                                Bill Koppel
--------------------------------------------------------------------------------------------
X              917-0102                                                Bob Hopkins
--------------------------------------------------------------------------------------------
        X      917-0303                                                Fred Anderson
--------------------------------------------------------------------------------------------
X              917-0601    Training course for PTT                     Abel Montes
                           FEs.
--------------------------------------------------------------------------------------------
X              917-0602    Training course for PTT                     Norm Leggett
                           FEs.
--------------------------------------------------------------------------------------------
X              917-0603    Training course for PTT                     Bill Goshay
                           FEs.  Includes discussion
                           topics to be covered by
                           experienced user.
--------------------------------------------------------------------------------------------
X              917-0604    A training document -                       ?
                           describes the Simulcast
                           Paging Network in some
                           technical detail, at the
                           level of a Field Engineer
                           or a Software Engineer.
--------------------------------------------------------------------------------------------
X              921-0102

--------------------------------------------------------------------------------------------
X              921-0202                                JDs

--------------------------------------------------------------------------------------------
        X      921-0302    Provides Instruction to                     Joy Tamanaha
                           Metros on how to perform
                           a hardware upgrade at
                           the sites.
--------------------------------------------------------------------------------------------
        X      925-0101    Requirement specification   There is a
                           for second generation VLU   memo about
                           - Includes both SVLU and    voice
                           CVLU requirements.          requirements
                                                       that goes
                                                       along with
                                                       this. Hard
                                                       copy in
                                                       library.
--------------------------------------------------------------------------------------------
        X      925-0102                                                Darwin Thompson

--------------------------------------------------------------------------------------------
X              925-0206    Acceptance test for         JDs             Richard La Porte
                           hidden antenna.
--------------------------------------------------------------------------------------------
X              927-0102    (I think it should be                       Joy Tamanaha
                           "Status Message Terminal                    (Massoud)
                           Requirements")
--------------------------------------------------------------------------------------------
X              927-0103    (I think should be "Data                    Joy Tamanaha
                           Message Terminal                            (Massoud)
                           Requirements")
--------------------------------------------------------------------------------------------
        X      927-0104    Describes user Interface                    Joy Tamanaha
                           requirements for s/w used
                           by customer to program
                           Message Display Terminal.
--------------------------------------------------------------------------------------------
        X      927-0106                                                Darwin Thompson

--------------------------------------------------------------------------------------------
X              927-0201
--------------------------------------------------------------------------------------------
               927-0308    Installation & Operation                    Mike Case
                           guide
--------------------------------------------------------------------------------------------
        X      927-0401    How to program the MDT.                     Florin Stelzer
--------------------------------------------------------------------------------------------
        X      927-0402    For use by Product                          Joy Tamanaha
                           Support personnel to
                           enable certain CVLU
                           programming options.
--------------------------------------------------------------------------------------------
        X      927-0403                                                Michael Case

--------------------------------------------------------------------------------------------
               928-0101                                                Darwin Thompson
--------------------------------------------------------------------------------------------
        X      928-0102
--------------------------------------------------------------------------------------------
               930-0401    Instructions on how to      Bill Goshay
                           use the Simon Client
                           Database
--------------------------------------------------------------------------------------------
X              931-5002                                JDs,
                                                       misnumbered.
--------------------------------------------------------------------------------------------
        X      1000-0101                                               Technocom
--------------------------------------------------------------------------------------------
X              1000-0201   Outline a plan for                          Technocom
                           testing the messaging and
                           end to end communication
                           of the Teletrac Simon
                           system.
--------------------------------------------------------------------------------------------
        X      1110-0101                                               Chuyen Dong
--------------------------------------------------------------------------------------------
        X      1111-0101                                               Chuyen Dong
--------------------------------------------------------------------------------------------
        X      1140-0101                                               Chuyen Dong

--------------------------------------------------------------------------------------------
        X      1210-0101

--------------------------------------------------------------------------------------------
X              1220-0101
--------------------------------------------------------------------------------------------
X              1240-0101

--------------------------------------------------------------------------------------------
X              1250-0101

--------------------------------------------------------------------------------------------
        X      1280-0101

--------------------------------------------------------------------------------------------
        X      1310-0101                                               Mark Sasson
--------------------------------------------------------------------------------------------
        X      1310-0102                                               Chuyen Dong
--------------------------------------------------------------------------------------------
X              1330-0101                                               David Wiley

--------------------------------------------------------------------------------------------
X              1340-0101                                               Mark Sasson
--------------------------------------------------------------------------------------------
        X      1410-0201   This document contains                      Tadiran
                           procedures for testing of
                           MPRF unit. (RF portion
                           of the IBSU vehicle
                           location system).
--------------------------------------------------------------------------------------------
        X      1420-0202   This document defines the                   Tadiran
                           TOA processor tests
                           procedures that should
                           verify the performance
                           TOA board. The UMR test
                           procedure is divided to
                           some tests groups. This
                           partition is matched to
                           the functionality
                           structure of the TOA
                           processor.
--------------------------------------------------------------------------------------------
               1420-0203   This document defines the                   Tadiran
                           GMIO tests procedures
                           that verify the
                           performance of GMIO board.
--------------------------------------------------------------------------------------------
               1420-0204   This document defines the
                           CCSP - MPRF tests
                           procedures that should
                           verify the performance of
                           CCSP - MPRF
                           Communication Channel.
--------------------------------------------------------------------------------------------
        X      1420-0401                                               Ed Hurst


--------------------------------------------------------------------------------------------
        X      1510-0101                                               Technocom

--------------------------------------------------------------------------------------------
X              1520-0101                                               David Wiley
--------------------------------------------------------------------------------------------
        X      1540-0001                                               Technocom

--------------------------------------------------------------------------------------------
        X      1540-0201                                               Technocom
--------------------------------------------------------------------------------------------
X              1610-0101                                               Technocom

--------------------------------------------------------------------------------------------
X              1610-0102                                               Technocom

--------------------------------------------------------------------------------------------
X              1610-0103
--------------------------------------------------------------------------------------------
        X      1610-0104                                               Technocom

--------------------------------------------------------------------------------------------
        X      1610-0105                                               Technocom

--------------------------------------------------------------------------------------------
        X      1610-0106                                               Technocom

--------------------------------------------------------------------------------------------
</TABLE>




Draft       Never formatted by us and not formally released. Our only copy may
            have handwritten notes on it.
None        No revision was ever assigned. Usually the old documents.
Input       Have the rough input, but it needs to be formatted and edited.
NA          The document does not need a revision, like some training documents
            or collections of documents.
Review      Formatted by us and sent out for review, but not formally released.









                                   EXHIBIT C

TERRITORY

Europe/Asia
Poland*
Czech Republic*
Hungary*
Russia

South America
Argentina*
Bolivia
Brazil*
Chile
Colombia*
Ecuador
Guyana
Paraguay
Peru*
Suriname
Uruguay
Venezuela*

Central America
Costa Rica
El Salvador
Guatemala*
Honduras
Belize
Nicaragua
Panama*
Mexico*

*Designates Tier I Countries





                                                                   EXHIBIT 10.12


                    RADIO LOCATION SYSTEM LICENSE AGREEMENT
                    ---------------------------------------

THIS RADIO LOCATION SYSTEM LICENSE AGREEMENT (this "License Agreement"), dated
as of the 21st day of December, 1999, is made by and between TELETRAC, INC., a
Delaware corporation, ("Teletrac"), and GREENPORT ENTERPRISES A.V.V., a
corporation organized under the laws of Aruba ("Licensee"). Teletrac and
Licensee are sometimes individually referred to as "Party" and collectively as
"Parties."

WITNESSETH:

WHEREAS, Teletrac owns or possesses rights to proprietary information,
technology and software necessary for the operation of a Radio Location System;
as defined below; and

WHEREAS, Licensee has or intends to obtain a Spectrum License for operation of a
land-based radio location system in the Territory, as defined below; and

WHEREAS, Licensee desires to establish and operate within the Territory a Radio
Location System; and

WHEREAS, subject to the terms and conditions of this License Agreement, and only
for purposes within the Territory, Teletrac desires to grant to Licensee: (i) an
exclusive, nontransferable right to use, construct, maintain and provide support
for a Radio Location System, and to market, sell, promote, maintain and provide
support for RLS Customer Equipment and RLS Customer Services, as defined below;
and (ii) an exclusive, nontransferable license to use RLS Licensed Software and
RLS Licensed Technical Information, as defined below, to construct, maintain,
operate and provide support for a Radio Location System in the Territory, and
Licensee desires to acquire such right and licenses.

NOW THEREFORE, in consideration of the foregoing and the mutual premises set
forth in this License Agreement, the Parties agree as follows:

1. Definitions.

1.1 "Contract Administrator" shall mean the person designated by each Party as
the contact person at such Party for matters, other than engineering matters,
concerning the administration of this License Agreement.

1.2 "Contract Technical Coordinator" shall mean the person designated by each
Party as the contact person at such Party for engineering matters related to
this License Agreement.

1.3 "Effective Date" shall mean March 1, 1999.

1 4 "Radio Location System" shall mean a land-based radio location system that
uses the RLS Licensed Software and RLS Licensed Technical information for
purposes of locating animate or inanimate objects, including people and
vehicles, and for ancillary activities such as data messaging or voice messages,
or both.



1.5 "RLS Components" shall mean all components of the Radio Location System in
the Territory. In general, the major components are: the RLS Customer
Workstation; the RLS Network Control Center and network; the RLS Transmission
Sites; the RLS Receiver Sites; and the RLS Location Units. Each of these major
components, in turn, has a number of constituent parts, all of which are
considered "RLS Components" for purposes of this License Agreement.

1.6 "RLS Coverage Area" shall mean the geographic area of designed coverage of
the Radio Location System in the Territory.

1.7 "RLS Customer" shall mean a purchaser, renter, lessee or other end user of
any RLS Customer Equipment, RLS Customer Maintenance, RLS Customer Services or
RLS Component, that is provided with respect to the Radio Location System in the
Territory.

1.8 "RLS Customer Equipment" shall mean the equipment, including, but not
limited to, RLS Location Unit and RLS Customer Basestations, that enables an RLS
Customer to receive RLS Customer Services.

1.9 "RLS Customer Equipment Revenue" shall mean the gross amount invoiced to any
RLS Customer or other third party for RLS Customer Equipment less any value
added tax, sales tax or other tax or levy actually imposed in the Territory on
the RLS Customer with respect to sales of RLS Customer Equipment and paid by
Licensee (not including any tax on Licensee's income with respect to such
sales). If Licensee receives compensation for RLS Customer Equipment in the form
of goods or services, then the fair market value of such goods or services shall
be included as RLS Customer Equipment Revenue.

1.10 "RLS Customer Maintenance" shall mean maintenance and support provided for
software, hardware or other equipment with respect to RLS Location Unit, RLS
Customer Workstations and other RLS Customer Equipment.

1.11 "RLS Customer Maintenance Revenue" shall mean the gross amount invoiced to
RLS Customers and other third parties for RLS Customer Maintenance.

1.12 "RLS Customer Services" shall mean the services provided by means of the
Radio Location System, including, but not limited to' radio location, data
messaging and voice messages. RLS Customer Services do not include RLS Customer
Maintenance.

1.13 "RLS Customer Services Revenue" shall mean the gross amount invoiced to any
RLS Customer or other third party for RLS Customer Services, together with all
other revenues, other than revenues attributable to RLS Customer Equipment and
RLS Customer Maintenance, received by Licensee by reason of the rights and
licenses granted under this License Agreement, less any value added tax, sales
tax or other tax or levy actually imposed in the Territory on the RLS Customer
with respect to such Services and paid by Licensee (not including any tax on
Licensee's income with respect to such Services). If Licensee is compensated in
the form of goods or services, then the fair market value of such goods or
services shall be treated as income for the purpose of calculating RLS Customer
Services Revenue.

1.14 "RLS Customer Workstations" shall mean a workstation installed at an RLS
Customer site that enables an RLS Customer to forward requests for locations to
the RLS Network Control

                                       2


Center, that receives location information from the RLS Network Control Center
and displays locations on an RLS Map. The RLS Customer Workstation consists of
hardware and software components.

1.15 "RLS Data Transmission Network" shall mean the data transmission equipment
that transports data between RLS Transmission Sites, RLS Receiver Sites and the
RLS Network Control Center.

1.16 "RLS Licensed Software Corrections" shall mean any and all technical,
functional, operational or other corrections or modifications to the RLS
Licensed Software that are designated by Teletrac, in its sole discretion, to be
minor corrections or modifications. RLS Licensed Software Corrections shall not
include any software or other proprietary data that a third party owns and that
Teletrac is not authorized to disclose. RLS Licensed Software Corrections that
Teletrac provides to Licensee during the term of this License Agreement shall be
treated as RLS Licensed Software for all purposes under this License Agreement.

1.17 "RLS Licensed Software Upgrades" shall mean any and all technical,
functional, operational or other enhancements, improvements, additions, upgrades
or modifications to, and new versions of, the RLS Licensed Software other than
the RLS Licensed Software Corrections. RLS Licensed Software Upgrades shall not
include any software or other proprietary data that a third party owns and that
Teletrac is not authorized to disclose. RLS Licensed Software Upgrades that
Teletrac provides to Licensee during the term of this License Agreement shall be
treated as RLS Licensed Software for all purposes under this License Agreement

1.18 "RLS Licensed Software" shall mean the executable format versions of the
operational computer software or firmware programs, or both, that are listed in
Exhibit A to this License Agreement and are commonly referred to by Teletrac as
the "SIMON software", as such programs exist and, to the extent applicable, may
be sublicensed by Teletrac to Licensee, at the time of delivery in accordance
with this License Agreement, and available documentation relating to the use of
such software or firmware. With respect to the RLS Customer Workstation Licensed
Software only, RLS Licensed Software also shall include the source code of such
software to the extent that Teletrac is entitled to disclose such source code.
The RLS Licensed Software does not include management information software,
including, but not limited to, for purposes such as customer activation, billing
and accounting, and Licensee will be responsible for supplying any such
software. Teletrac will, however, provide all of its available interface
specifications or software books, for Licensee's use in designing management
information software to be used with the RLS Licensed Software. In summary, the
RLS Licensed Software programs are the programs designed to perform the
following functions for the Radio Location System:

(1) RLS Customer Workstations Licensed Software. These software programs enable
the RLS Customer to send and receive information to and from the RLS Network
Control Center and to display the location date on the RLS Map when such map is
provided as part of the RLS Customer Workstation.

(2) RLS Network Control Center Licensed Software. These software programs
consist of the following three categories:

                                       3


(a) Real time operating software that communicates and synchronizes information
received from Location Unit radio signals to calculate locations in real time.

(b) Systems support and maintenance software that enables RLS Customers to
access a Radio Location System, forwards requests for locations to RLS
Transmission Sites and diagnoses Radio Location System malfunctions; provided,
however, that Licensee acknowledges that this software has been specifically
designed to perform in accordance with the standards and protocols in use on the
telephone system in the United States and may need to be modified by Licensee in
order to perform properly in the Territory.

(c) Database services software that performs customer validation functions,
tracks or records use of the Radio Location System and performs message
management functions.

(3) RLS Transmission and RLS Receiver Sites Licensed Software. These software
programs perform calculations and act as an interface for signals from RLS
Receiver Sites and RLS Transmission Sites and the RLS Data Transmission Network.

(4) RLS Episode Software. Teletrac is finalizing the development of certain
software programs designed for managing critical events generated from RLS
Location Units at times when the corresponding RLS Customer Workstation is not
logged in to the RLS Network Control Center or the RLS Customer does not have a
workstation.

1.19 "RLS Licensed Technical Information" shall mean the manuals, blue prints
and other tangible data listed in Exhibit B to this License Agreement, together
with intangible information that is proprietary to Teletrac and that may assist
Licensee to use the information listed in Exhibit B for the purpose of
designing, constructing and operating and maintaining the RLS in the Territory.

1.20 "RLS Licensed Technical Information Corrections" shall mean any and all
technical, functional, operational or other corrections or modifications to the
RLS Licensed Technical Information that are designated by Teletrac, in its sole
discretion, to be minor corrections or modifications to the RLS Licensed
Technical Information, provided that RLS Licensed Software Upgrades and RLS
Licensed Software Corrections are not included in this definition. RLS Licensed
Technical Information corrections shall not include any software or other
proprietary data that a third party owns and that Teletrac is not authorized to
disclose. RLS Licensed Technical Information Corrections that Teletrac provides
to Licensee during the term of this License Agreement shall be treated as RLS
Licensed Technical Information for all purposes under this License Agreement.

1.21 "RLS Licensed Technical Information Upgrades" shall mean any and all
technical, functional, operational or other enhancements, improvements,
additions, updates or modifications to, and any new versions of, the RLS
Licensed Technical Information other than the RLS Licensed Technical Information
Corrections, provided that RLS Licensed Software Upgrades and RLS Licensed
Software Corrections are not included in this definition. RLS Licensed Technical
Information Upgrades shall not include any software or other proprietary data
that a third party owns and that Teletrac is not authorized to disclose. RLS
Licensed Technical Information Upgrades that Teletrac provides to Licensee
during the term of this

                                       4


License Agreement shall be treated as RLS Licensed Technical Information for all
purposes under this License Agreement.

1.22 "RLS Location Unit" shall mean a radio transceiver and its antenna that is
capable of receiving and sending radio signals. A RLS Location Unit enables a
Radio Location System to locate the object to which such RLS Location Unit is
attached.

1.23 "RLS Map" shall mean the digitized map of the RLS Coverage Area that
Licensee will provide and use.

1.24 "RLS Network Control Center" shall mean the master station that serves a
RLS Coverage Area. The RLS Network Control Center consists of a group of
networked or interconnected computers, or both, that constitute the information
processing hub of the Radio Location System.

1.25 "RLS Receiver Sites" shall mean the receivers that gather Location Unit
radio signals. Each RLS Receiver Site consists of equipment and software
components that capture and convert transmitter and RLS Location Unit radio
signals to a computer usable level, and calculate and transmit to the RLS
Network Control Center information about the signals received.

1.26 "RLS Transmission Sites" shall mean the sites that receive location
requests from the RLS Network Control Center and transmit forward link signals
that prompt RLS Location Unit located in the RLS Coverage Area to send a
response radio signal to the RLS Receiver Sites.

1.27 "Spectrum License" shall mean a permit granted to Licensee or a Sublicensee
by the proper governmental authorities to use a radio spectrum of four (4) MHz
in the Territory.

1.28 "Territory" shall mean the countries described on Exhibit C. ---------

1.29 "Tier I Countries" shall mean those countries in the Territory designated
on Exhibit C as "Tier I Countries".

1.30 "U.S. CPI" shall mean the Consumer Price Index for Urban Wage Earners and
Clerical Workers published by the U.S. Department of Labor, Bureau of Labor
Statistics, U.S. City Average, "All Items," base year 1982-1984 = 100. If for
any reason the U.S. CPI is discontinued or does not exist, "U.S. CPI" shall mean
the official or replacement index published by the U.S. Department of Labor,
Bureau of Labor Statistics, or successor or similar governmental agency which is
most similar to the U.S. CPI. U.S. CPI dates shall mean the latest published
U.S. CPI.

2. Grant of Rights.

2.1 Radio Location System. As of the Effective Date, and subject to the terms
and conditions of this License Agreement, Teletrac grants to Licensee an
exclusive nontransferable right, except as may be permitted by Section 21.6,
solely within the Territory, to construct, use, maintain and provide support for
a Radio Location System, and to market, sell, promote, maintain and provide
support for RLS Customer Equipment and RLS Customer Services, and to provide RLS
Customer Maintenance. Teletrac shall not directly or indirectly operate a Radio
Location System in the Territory during the term of this License Agreement.

                                       5


2.2 RLS Licensed Software Executable Format and RLS Licensed Technical
Information. As of the Effective Date, and subject to the terms and conditions
of this License Agreement, Teletrac grants to Licensee an exclusive
nontransferable license to use RLS Licensed Software in executable format and
RLS Licensed Technical Information solely for the purpose of operating,
maintaining and providing support for a Radio Location System in the Territory.
Licensee may sublicense to RLS Customers the right to use RLS Customer
Workstation Licensed Software only in executable format and only on such RLS
Customers designated computer processing unit(s). Licensee agrees that neither
it nor its employees will use or copy RLS Licensed Software except as authorized
in this License Agreement. Other than the RLS Customer Workstation Licensed
Software in executable format, which Licensee may sublicense to RLS Customers,
Licensee may copy the RLS Licensed Software solely for its own use and solely in
connection with the performance of its obligations under this License Agreement.

2.3 RLS Customer Workstation Licensed Software Source Code. As of the Effective
Date, and subject to the terms and conditions of this License Agreement,
Teletrac grants to Licensee a non-exclusive, nontransferable license to use the
RLS Customer Workstation Licensed Software that Teletrac delivers to Licensee in
source code format, solely for the purpose of translating such software to the
native language of the countries in the Territory and otherwise adapting such
software for purposes of operating the Radio Location System in the Territory.
Licensee may copy the source code for the RLS Customer Workstation Licensed
Software solely for its own internal use for the purposes set forth in this
Section 2.3 and for the use of independent contractors that Licensee has engaged
to make the translations or adaptations authorized under this Section 2.3,
provided that such independent contractors shall execute a confidentiality
agreement in substantially the same form as the Nondisclosure Agreement referred
to in Section 16.4.1 below, and shall execute an agreement to assign to Licensee
all inventions made and work performed by the contractor in connection with the
RLS Customer Workstation Licensed Software. In addition, such contractors shall
not have any direct or indirect ownership interest in a land-based radio
location system or be in the business of providing or programming software for
any such system, other than the Radio Location System. Any other use or
disclosure of the Customer Workstation Licensed Software source code shall be
subject to Teletrac's prior written consent, which consent Teletrac may withhold
in its sole discretion. Teletrac shall have no obligation to provide RLS
Licensed Software Upgrades or RLS Licensed Technical Information Upgrades that
are compatible with Licensee's modifications to the RLS Customer Workstation
Licensed Software.

2.4 Registration of Patent and Copyrights. Each Party shall have the right in
the Territory to file and prosecute to issuance, at its own expense,
applications for letters patent and registrations of copyrights with respect to
all or any part of the RLS Licensed Software and RLS Licensed Technical
information, but in any such event the application or registration shall be in
the sole name of Teletrac and Teletrac shall be the sole owner of any such
letters patent or copyrights, subject only to the terms of this License
Agreement; provided, however, that before taking any action under this Section
2.4, Licensee shall notify Teletrac of its intention to do so, and Teletrac
shall have the right within sixty (60) days after receipt of such notice, at its
own expense, to take such action or any other action it deems necessary or which
may be lawfully available, in which event Licensee shall not proceed to take the
proposed actions set forth in its notice. Each Party will keep the other fully
informed of its activities with respect to the filing of patent applications or
registration of copyrights hereunder. In the event that the Party taking such
action determines

                                       6


not to take necessary measures to maintain any letters patent, patent
application, copyright or copyright registration, such Party shall notify the
other Party of such determination in writing and, thereafter, the other Party
shall have the right, at its own expense, to take such measures as may be deemed
advisable by it to maintain such rights and coverage; provided, however, that
the other Party shall not thereafter be obligated to maintain such coverage or
rights.

3. Reservation of Rights. Except as to those certain rights and licenses
expressly granted to Licensee under this License Agreement, Teletrac reserves
all proprietary rights, title and interest, including all ownership and
proprietary rights, in and to the Radio Location System, RLS Licensed Software,
RLS Licensed Technical Information and the "Teletrac" trade name, trademark and
service mark, including all designs, inventions, patents, copyrights,
trademarks, service marks, trade secrets, know-how, techniques, engineering
details, enhancements, improvements, addition, upgrades, modifications,
derivative works. Licensee acknowledges that no title to the "Teletrac" marks,
RLS Licensed Software or RLS Licensed Technical Information, or any part
thereof, has been or will be transferred to Licensee. Neither Licensee nor any
Licensee affiliate will disassemble or recompile any RLS Licensed Software,
other than the RLS Customer Workstation Licensed Software solely for the
purposes set forth in Section 2.3 above.

4. Consideration.

4.1 Fees. In consideration for the grant of rights to Licensee in this License
Agreement, Licensee will perform the obligations set forth in this License
Agreement and will pay to Teletrac the following amounts:

4.1.1 Lump Sum Payment. In consideration for the execution and delivery of this
License Agreement by Teletrac, Licensee shall pay to Teletrac the sum of Two
Million Eight Hundred Thousand U.S. Dollars (U.S. $2,800,000.00) payable on the
Effective Date.

4.1.2 Annual Royalty. In addition, Licensee shall pay to Teletrac an annual
royalty (the "Annual Royalty"), payable quarterly, based upon the revenues
earned by Licensee from operating the Radio Location System in the Territory, as
follows:

(1) Equipment Royalty Interest. A fee equal to three per cent (3%) of RLS
Customer Equipment Revenue (the "Equipment Royalty Interest").

(2) Maintenance Royalty Interest. A fee equal to three per cent (3%) of RLS
Customer Maintenance Revenue (the "Maintenance Royalty Interest").

(3) Service Royalty Interest. A fee equal to three per cent (3%) of RLS Customer
Service Revenue (the "Services Royalty Interest, and together with the Equipment
Royalty Interest and Maintenance Royalty Interest, the "Royalty Interests").

4.1.3 Tier I Countries - Annual Royalty Wavier. Licensee's obligation to pay an
Annual Royalty on revenues received from the operation of the Radio Location
System in each Tier I Country shall not commence until the earliest to occur of
(i) the fifth anniversary of the issuance of the Spectrum License in such
country and (ii) the eighth anniversary of the Effective Date.

                                       7


4.2 Records and Adjustments. Licensee shall keep full, clear, separate and
accurate records, accounts and working papers with respect to RLS Customer
Equipment Revenue, RLS Maintenance Revenue, and RLS Customer Services Revenue
and calculation of Royalty Interests for at least four (4) years after the
termination of the calendar year to which they relate. Licensee shall use
accounting principles generally accepted in Israel ("Israeli GAAP") for all
records and accounts required under this License Agreement. Licensee shall
engage an independent accountant to conduct an annual audit of such records and
accounts. In addition, upon two (2) days notice to Licensee, Teletrac or its
agent shall have the right to examine during normal business hours all records
and accounts relating to the Royalty Interest and Licensee's performance under
this License Agreement, including, but not limited to, any auditors' work
records. Prompt adjustment shall be made by the proper party to compensate for
any errors or omissions disclosed by any such examination. If a special
examination or special audit requested by Teletrac discloses an under
calculation in excess of five percent (5%) of the amount payable to Teletrac,
then Licensee shall bear the cost of such examination, and shall promptly
correct the calculation of amounts payable and pay any underpaid amount, plus
all late payment charges due and owing. If such an examination or audit
discloses an overpayment to Teletrac, then Teletrac shall promptly repay to
Licensee the overpaid amount. Disagreements about accounting matters shall be
resolved as set forth in Section 20.4 below.

4.3 Reports, Forecasts and Payments.

4.3.1 Reports. Commencing on the date that Royalty Interests first begin to
accrue, Licensee shall provide to Teletrac within thirty (30) days after the end
of each calendar quarter ending on March 31, June 30, September 30 and December
31, financial information for the quarter that just ended and year-to-date
financial information (in accordance with the accounting requirements set forth
in Section 4.2 above), together with all working papers used to compile such
statements, that show the amount of and the basis for the calculation of the RLS
Customer Equipment Revenue, RLS Maintenance Revenue, RLS Customer Services
Revenue, and Royalty Interests and the number of activated Location Units and
RLS Customers. In all such reports, the amount of RLS Customer Equipment
Revenue, RLS Maintenance Revenue, RLS Customer Services Revenue, and Royalty
Interests and the number of activated Location Units and RLS Customers, shall be
reported in the aggregate and for each country in the Territory. All such
information and working papers shall be in English and shall be accompanied by a
letter from the independent accountant that Licensee has engaged as required
under Section 4.2 above confirming that such accountant has reviewed and agrees
that the method of computing the Royalty Interests complies with the
requirements of this License Agreement. Licensee also shall provide with its
quarterly financial statements its forecast of RLS Customer Equipment Revenue,
RLS Maintenance Revenue and RLS Customer Services Revenue for the next four (4)
quarters. Such statements, working papers and forecasts, together with all fees
due to Teletrac, shall be sent to Teletrac at its address specified in
accordance with Section 21.2 below.

4.3.2 Payments. All payments of Royalty Interests shall be made quarterly and
audited and adjusted annually. The audit shall be conducted by Licensee
independent accountant as set forth in Section 4.2 above. All payment shall be
due and payable thirty (30) days after the end of each calendar quarter in U.S.
dollars and any conversion to U.S. dollars shall be made as often as Licensee
makes such conversions for its own purposes and, in all cases, at least on the
last day, Monday through Friday, excluding Bank of Israel holidays, before the
payment is due, at the

                                       8


Representative Rate of Exchange determined by the Bank of Israel. Payments of
Royalty Interests shall be subject to deduction for Israeli withholding taxes
that apply to payments from Licensee to Teletrac. Licensee shall cooperate with
Teletrac in providing documentation that will assist Teletrac to obtain tax
credits with respect to such withholding.

4.4 Late Payments. Late payments of Annual Royalty Payments or of any other
amounts due under this License Agreement shall be subject to a late payment
charge calculated at an annual rate of eighteen percent (18%) commencing on the
date such payment or other amount was due and continuing until it has been paid
in full. If the amount of such charge exceeds the maximum charge permitted by
law, such charge shall be reduced to such maximum.

5. Radio System Location Equipment. Licensee acknowledges that Teletrac does not
manufacture or provide any of the equipment that will be needed in order to
construct and operate the Radio Location System in the Territory. Teletrac has
advised Licensee that Teletrac currently purchases most RLS Location Units and
RLS Receiver Site equipment for its operations in the United States from Tadiran
Telematics Ltd., a division of Tadiran Ltd., of Holan, Israel ("Tadiran"). The
Parties acknowledge and agree that Licensee is free to purchase RLS Location
Units, RLS Receiver Site equipment, RLS Customer Workstations, RLS Network
Control Center Equipment and any and all other equipment and materials needed in
order to construct and operate the Radio Location System in the Territory from
any individual or entity that manufactures such equipment in accordance with the
technical and other specifications necessary to properly operate the Radio
Location System. Licensee acknowledges and agrees that Teletrac does not provide
any representation or warranty of any kind, express or implied, including,
without limitation, any implied warranty of merchantability or fitness for a
particular purpose on any equipment or materials obtained by License from any
third party, including Tadiran.

6. Term. This License Agreement shall commence on the Effective Date and shall
remain in effect until it is terminated in accordance with Section 7 below.

7. Termination. Neither Party shall be in breach of this License Agreement if
the License Agreement is terminated under Sections 7.1, 7.3, 7.4 or 7.5 below,
and the terminating Party shall not be in breach of this License Agreement if it
terminates this License Agreement under Sections 7.2 or 7.6 below.

7.1 This License Agreement may be terminated by mutual written agreement.

7.2 If either Party (a) is dissolved or liquidated or otherwise ceases to
operate as a going concern or ceases to operate a Radio Location System, and (b)
does not have a successor to its rights and obligations under this License
Agreement (the "Non-operational Party"), then, at any time within ninety (90)
days from the date that the other Party (the "Operational Party") learns of the
facts referred to in subsections (a) and (b) above, the Operational Party may
elect to terminate this License Agreement upon thirty (30) days' written notice
to the Non-operational Party. If Licensee elects to terminate this License
Agreement pursuant to this Section 7.2, then Licensee also may elect to continue
to operate the Radio Location System in the Territory pursuant to Section 9.1
below.

                                       9


7.3 Licensee may elect to cease operation of the Radio Location System at any
time and to terminate this License Agreement provided that it complies with the
provisions of Section 9.2 below.

7.4 Teletrac may elect to cease its Radio Location System business at any time
and to terminate this License Agreement provided that Licensee is allowed to
continue to operate its Radio Location System as set forth in Section 9.1.

7.5 Either party may terminate this License Agreement if:

(1) the other Party shall file a voluntary petition pursuant to Chapter 7 of the
United States Bankruptcy Code (the "Bankruptcy Code") or commence any other
proceeding for the liquidation of its business under the laws of any state or
nation governing insolvencies, liquidation, or other similar matters; or

(2) if a person shall file an involuntary petition against the other Party
pursuant to Chapter 7 of the Bankruptcy Code or commence any other proceeding
against such other Party for the liquidation of such Party's business and a
bankruptcy or other court, tribunal or body having jurisdiction shall, by final
order no longer subject to appeal, ajudge such other Party a bankrupt under
Chapter 7 of the Bankruptcy Code or such other law or order the liquidation of
the other Party's business; or

(3) if, pursuant to the order which shall become final and no longer subject to
appeal of a court having jurisdiction over the other Party, a receiver or
trustee, shall be appointed to liquidate the Party's business; or

(4) if the other Party shall, in fact, terminate all or substantially all of its
business;

provided, however, that notwithstanding anything in this License Agreement to
the contrary, a Party shall not be entitled to terminate this License Agreement
(i) because the other Party shall file or commence, or have filed or commenced
against it, any petition or proceeding for a reorganization of its business; or
(ii) because the other Party shall transfer to any person its business, assets
or operations, provided that the transferee shall agree to be bound by the terms
of this License Agreement.

7.6 Either Party may terminate this License Agreement by written notice to the
defaulting Party if any of the following occurs and the defaulting Party has
received written notice of the default and has failed to cure the default during
the cure period specified below.

7.6.1 A Party's failure to timely make any payment as required by this License
Agreement, and the failure to cure such default within sixty (60) days of its
receipt of written notice of such default during the first two such defaults, or
within thirty (30) days of its receipt of written notice of any payment default
after the first two events of late payment;

7.6.2 A Party's breach of one or more of its material obligations under this
License Agreement, and the breaching Party's failure to cure such breach within
sixty (60) days of its receipt of written notice of such breach; or

                                       10


7.6.3 An attempt to sell, transfer or assign a Party's rights or delegate its
duties under this License Agreement in violation of Section 21.6 of this License
Agreement, and the failure to cure such default within sixty (60) days of the
defaulting Party's receipt of written notice of such default.

provided, however, notwithstanding the foregoing, the License Agreement can not
be terminated pursuant to this Section 7.6 if the Parties are arbitrating a
dispute in good faith and the cure periods set forth herein have expired after a
final arbitration decision has been reached.

7.7 The rights granted to Licensee hereunder shall terminate on the eighth
anniversary of the Effective Date with respect to any country in the Territory
for which Licensee has not obtained a Spectrum License and is actively pursuing
establishment of a Radio Location System by such date, provided, however, that
if on such date Licensee has applied for and is actively pursuing a Spectrum
License in any such country, Licensee may obtain a reasonable extension of this
deadline in order to obtain the Spectrum License and establish a Radio Location
System in such country by paying Teletrac an extension fee in an amount to be
negotiated by the parties at such time.

8. Restrictions on Business Activities.

8.1 Except for the operation of the Radio Location System in the Territory
during the term of this License Agreement, and after the term of this License
Agreement as specifically set forth in Section 9.1 of this License Agreement,
during the term of this License Agreement and for a period of three (3) years
after termination of this License Agreement, neither Licensee nor any entity
that Licensee controls or has the ability to control:

8.1.1 Shall construct or operate or invest in any multi-lateration land based
radio location services designed to service the mass consumer or commercial
market anywhere in the world that is based or derived, in whole or in part, on
any confidential or proprietary information of Teletrac, including, without
limitation, the RLS Licensed Software and the RLS Licensed Technical
Information. For purposes of this Section 8.1, "radio location service" shall
mean any service which, within a defined geographic region that (a) uses time of
arrival radio measurements to locate an object and (b) has been designed
primarily for the purpose of determining an object's location.

8.1.2 Shall operate, invest in or acquire a direct or indirect ownership
interest in any entity that operates a business that competes or will compete,
directly or indirectly, with the Radio Location System operated by Licensee in
the Territory.

8.2 Teletrac shall not unreasonably withhold its consent to allow entities that
have previously provided services to Teletrac, and have entered into
confidentiality and nondisclosure agreements with Teletrac which prohibit such
entities and their employees from disclosing confidential or proprietary
information regarding Teletrac to third parties, to provide services to
Licensee, provided that any confidential or proprietary information of Teletrac
received by Licensee from such entities shall be subject to the provisions of
the Nondisclosure Agreement attached hereto as Exhibit D to the same extent as
if Licensee had received such information directly from Teletrac.

                                       11


9. Effect of Termination or Cancellation.

9.1 Circumstances Where Operations Continue - Continued Rights. If, as set forth
in Section 7.2, 7.5 or 7.6.2, Licensee elects to terminate this License
Agreement, or as set forth in Section 7.4, Teletrac elects to terminate this
License Agreement, and Licensee elects to continue to operate the Radio Location
System in the Territory, then, solely for the purpose of such operations in the
Territory, Licensee may continue to use the RLS Licensed Software and RLS
Licensed Technical Information.

9.2 Circumstances Where Operations End -- Return of Materials and Non-Compete.
In all cases of termination or cancellation of this License Agreement (other
than where Licensee elects to terminate this License Agreement under Section
7.2, 7.5 or 7.6.2, or Teletrac elects to terminate this License Agreement under
Section 7.4, and Licensee elects to continue operation of the Radio Location
System in the Territory pursuant to Section 9.1 above), within sixty (60) days
after termination or cancellation of this License Agreement, Licensee shall
cease all use of RLS Licensed Software and RLS Licensed Technical Information.
In addition, Licensee shall, at Teletrac's request, return to Teletrac, or to
Teletrac's designee, all RLS Licensed Technical Information, RLS Licensed
Software, and all other data, software, warranty and maintenance information,
and other materials related to Radio Location Systems, and shall permanently
erase, including low-level re-format of fixed disk storage devices, and remove
from all computer, electronic or other storage devices in its possession or
under its control, or otherwise destroy, all images, copies or documents that
incorporate the RLS Licensed Software and RLS Licensed Technical Information.
Notwithstanding anything to be contrary in this License Agreement, Licensee
shall not be required to return RLS Customer Equipment that Licensee has
provided to RLS Customers, or executable format RLS Customer Workstation
Licensed Software that Licensee has licensed to third parties, in accordance
with the terms and conditions of this License Agreement.

9.3 No Damages. Neither Licensee nor Teletrac shall, by reason of the
termination or cancellation of this License Agreement in accordance with the
terms of this License Agreement, be liable to the other for compensation,
reimbursement or any damages, either actual, consequential, incidental, special
or punitive, arising out of such termination or cancellation, including, but not
limited to, the loss of prospective profits on anticipated sales, or on account
of expenditures, investments, leases or commitments in connection with the
business or goodwill of Teletrac or Licensee or otherwise anticipated under this
License Agreement.

9.4 Payment Obligations. Termination or cancellation of this License Agreement
shall not relieve Licensee of any obligation to pay Teletrac any amounts due and
owing to Teletrac under this License Agreement.

9.5 Survival. After the termination or cancellation of this License Agreement by
its terms, operation of law or otherwise, all rights, privileges and obligations
arising from this License Agreement shall cease to exist; provided, however the
confidentiality requirement in Section 16.4, the obligations and limitations in
Sections 3, 4.1 (to the extent amounts are past due), 4.2, 8, 9, 10.2, 10.3,
10.5, 11, 12, 13.2, 14, 16.6, 16.9, 19, 20 and 21, and such other obligations
which, from the context hereof, are intended to survive the termination of this
Agreement, shall remain in full force and effect.

                                       12


10. Corrections, Upgrades and Newly Developed Equipment.

10.1 RLS Licensed Software Upgrades and Corrections; RLS Licensed Technical
Information Upgrades and Corrections.

10.1.1 RLS Licensed Software Upgrades. Licensee shall have the right to receive
any RLS Licensed Software Upgrades, at no charge, provided that Teletrac shall
have no obligation to provide Licensee any RLS Licensed Software Upgrades until
such upgrades have been installed on at least twenty-five percent (25%) of
Teletrac's Radio Location System operating in the United States. Licensee
acknowledges that Teletrac shall have no obligation to create RLS Licensed
Upgrades or to provide upgrades requested by Licensee.

10.1.2 RLS Licensed Software Corrections. During the term of this License
Agreement, Teletrac agrees that, within sixty (60) days after the release of any
RLS Licensed Software Corrections to at least fifty percent (50%) of Teletrac's
Radio Location System operating in the United States, Teletrac will deliver to
Licensee, at no charge, copies in executable format of such RLS Licensed
Software Corrections. Licensee acknowledges that Teletrac shall have no
obligation to create RLS Licensed Software Corrections or to provide corrections
requested by Licensee. Teletrac shall deliver all such corrections to Licensee's
Contract Technical Coordinator, together with a list of the corrections that
Teletrac is providing.

10.1.3 RLS Licensed Technical Information Upgrades. Licensee shall have the
right to receive any RLS Licensed Technical Information Upgrades at no charge,
provided that Teletrac shall have no obligation to provide any RLS Licensed
Technical Information Upgrades until such RLS Technical Modifications have been
installed on at least twenty-five (25%) of Teletrac's Radio Location System
operating in the United States. Licensee acknowledges that Teletrac shall have
no obligation to make RLS Licensed Technical Information Upgrades or to design
or implement RLS Licensed Technical Information Upgrades requested by Licensee.

10.1.4 RLS Licensed Technical Information Corrections. During the term of this
License Agreement Teletrac agrees that, within sixty (60) days after the release
of any RLS Licensed Technical Information Corrections to at least fifty percent
(50%) of Teletrac's Radio Location Systems operating in the United States,
Teletrac will deliver to Licensee, at no charge, copies of such RLS Licensed
Technical Information Corrections. Licensee acknowledges that Teletrac shall
have no obligation to make RLS Licensed Technical Information Corrections or to
design or implement RLS Licensed Technical Information Corrections requested by
Licensee. Teletrac shall deliver all such Corrections to Licensee's Contract
Technical Coordinator, together with a list of the corrections that Teletrac is
providing.

10.2 Upgrades and Modifications to the Radio Location System Developed by
Licensee; Newly Developed Equipment.

10.2.1 RLS Licensed Customer Workstation Software.

(1) Authority to Make Upgrades. Licensee may make upgrades, improvements,
additions, enhancements or modifications to RLS Customer Workstations Licensed
Software ("Licensee Workstation Software Upgrades"). Licensee shall notify the
Teletrac Technical Coordinator in

                                       13


writing of the Licensee Workstation Software Upgrades within thirty (30) days
after Licensee commences work on them. Licensee acknowledges and assumes all
risks that Licensee Workstation Software Upgrades may affect the functionality
or operation of the RLS Licensed Software or Radio Location System, or both.

(2) Ownership and License of Upgrades. Licensee will be the sole owner of
Licensee Workstation Software Upgrades.

(a) Derivative Upgrades. As to those Licensee Workstation Software Upgrades that
are derived from or include any part the RLS Workstation Software or RLS
Licensed Technical Information, Licensee hereby grants to Teletrac a world-wide,
exclusive (except in the Territory, where such license shall be nonexclusive)
perpetual, royalty free, license to use, market, distribute, sublicense,
reproduce and have reproduced such Licensee Workstation Software Upgrades solely
for purposes of land-based radio location systems that locate animate or
inanimate objects, including people, and for ancillary activities such as data
messaging or voice messages. Such licenses shall not include any portion of the
Licensee Workstation Software Upgrades that is owned by a third party other than
any entity that Licensee controls or has the ability to control, and that
Licensee is not authorized to disclose. Licensee shall have no right, either
during or after the term of this License Agreement, to sell or disclose to third
parties, or to use, other than as part of the Radio Location System in the
Territory, Licensee Workstation Software Upgrades that are derived from or
include any part of the RLS Licensed Software or RLS Licensed Technical
Information. Licensee shall have no obligation to deliver Licensee Workstation
Software Upgrades to Teletrac until test versions of such Upgrades are
available.

(b) Stand-alone Upgrades. As to those Licensee Workstation Software Upgrades
that are neither derived from nor include any part of the RLS Workstation
Software or RLS Licensed Technical Information, Licensee hereby grants to
Teletrac a world-wide, nonexclusive, perpetual, royalty free, license to use,
market, distribute, sublicense, reproduce and have reproduced such Licensee
Workstation Software Upgrades solely for the purposes of land-based radio
location systems that locate animate or inanimate objects, including people, and
for ancillary activities such as data messaging or voice messages. Such licenses
shall not include any portion of the Licensee Workstation Software Upgrades that
is owned by a third party other than any entity that Licensee controls or has
the ability to control, and that Licensee is not authorized to disclose.
Teletrac shall have no right to sell or disclose stand-alone Licensee
Workstation Software Upgrades as a product independent from its provision of a
radio location service. Other than the limitations on business activities set
forth in Section 8 above, there shall be no restrictions on Licensee's rights
with respect to Licensee Workstation Software Upgrades that do not include and
are not derived from any of the RLS Licensed Software or RLS Licensed Technical
Information. Licensee shall have no obligation to deliver Licensee Workstation
Software Upgrades to Teletrac until test versions of such Upgrades are
available.

10.2.2 RLS Licensed Software Other Than RLS Licensed Customer Workstation
Software.

(1) Authority to Make Upgrades. Licensee may make upgrades, improvements,
additions, enhancements or modifications to RLS Licensed Software other than the
RLS Licensed Customer Workstation Software ("Licensee Executable Software
Upgrades"). Licensee shall notify the Teletrac Technical Coordinator in writing
of the Licensee Executable Software

                                       14


Upgrades within thirty (30) days after License commences work on them. Licensee
acknowledges and assumes all risks that Licensee Executable Software Upgrades
may affect the functionality or operation of the RLS Licensed Software or Radio
Location System, or both.

(2) Ownership and License of Upgrades. Licensee will be the sole owner of
Licensee Executable Software Upgrades.

(a) Derivative Upgrades. As to those Licensee Executable Software Upgrades that
are derived from or include any part the RLS Licensed Software or RLS Licensed
Technical Information, Licensee hereby grants to Teletrac a world-wide,
exclusive (except in the Territory where such license shall be nonexclusive)
perpetual, royalty free, license to use, market, distribute, sublicense,
reproduce and have reproduced such Licensee Executable Software Upgrades solely
for purposes of land-based radio location systems that locate animate and
inanimate objects, including people, and for ancillary activities such as data
messaging or voice messages. Such licenses shall not include any portion of the
Licensee Executable Software Upgrades that is owned by a third party other than
any entity that Licensee controls or has the ability to control, and that
Licensee is not authorized to disclose. Licensee shall have no right, either
during or after the term of this License Agreement, to sell or disclose to third
parties, or to use, other than as part of the Radio Location System in the
Territory, Licensee Executable Software Upgrades that are derived from or
include any part of the RLS Licensed Software. Licensee shall have no obligation
to deliver Licensee Executable Software Upgrades to Teletrac until test versions
of such Upgrades are available.

(b) Stand-alone Upgrades. As to those Licensee Executable Software Upgrades that
are neither derived from nor include any part of the RLS Licensed Software or
RLS Licensed Technical Information, Licensee hereby grants to Teletrac a
world-wide, nonexclusive, perpetual, royalty free, license to use, market,
distribute, sublicense, reproduce and have reproduced such Licensee Executable
Software Upgrades solely for purposes of land-based radio location systems that
locate animate or inanimate objects, including people, and for ancillary
activities such as data messaging or voice messages. Such licenses shall not
include any portion of the Licensee Executable Software Upgrades that is owned
by a third party other than any entity that Licensee controls or has the ability
to control, and that Licensee is not authorized to disclose. Teletrac shall have
no right to sell or disclose stand-alone Licensee Executable Software Upgrades
as a product independent from its provision of a radio location service. Other
than the limitations on business activities set forth in Section 8 above, there
shall be no restrictions on Licensee's rights with respect to Licensee
Executable Software Upgrades that do not include and are not derived from any of
the RLS Licensed Software or RLS Licensed Technical Information. Licensee shall
have no obligation to deliver Licensee Executable Software Upgrades to Teletrac
until test versions of such Upgrades are available.

10.2.3 RLS Licensed Technical Information.

(1) Authority to Make Modifications. Licensee may make modifications, upgrades,
additions, enhancements and improvements to the RLS Licensed Technical
Information ("Licensee Technical Modifications"). Licensee shall notify the
Teletrac Technical Coordinator in writing of the Licensee Technical
Modifications within thirty (30) days after Licensee commences work on them.
Licensee acknowledges and assumes all risks that Licensee Technical
Modifications

                                       15


may affect the functionality or operation of the RLS Licensed Software or Radio
Location System, or both.

(2) Ownership and License of Modifications. Licensee will be the sole owner of
Licensee Technical Modifications.

(a) Derivative Upgrades. As to those Licensee Technical Modifications that are
derived from or include any part of the RLS Licensed Technical Information,
Licensee hereby grants to Teletrac a world-wide, exclusive (except in the
Territory, where such license shall be nonexclusive), perpetual, royalty free,
license to use, market, distribute, sublicense, reproduce and have reproduced
such Licensee Technical Modifications solely for purposes of land-based radio
location systems that locate animate or inanimate objects, including people, and
for ancillary activities such as data messaging or voice messages. Such licenses
shall not include any portion of the Licensee Technical Modifications that is
owned by a third party other than any entity that Licensee controls or has the
ability to control, and that Licensee is not authorized to disclose. Licensee
shall have no right, either during or after the term of this License Agreement
to sell or disclose to third parties, or to use, other than as part of the Radio
Location System in the Territory, Licensee Technical Modifications that are
derived from or include any part of the RLS Licensed Technical Information.
Licensee shall have no obligation to deliver Licensee Technical Modifications to
Teletrac until test versions of such Modifications are available.

(b) Stand-alone Upgrades. As to those Licensee Technical Modifications that are
neither derived from nor include any part of the RLS Licensed Technical
Information, Licensee hereby grants to Teletrac a world-wide, nonexclusive,
perpetual, royalty free, license to use, market, distribute, sublicense,
reproduce and have reproduced such Licensee Technical Modifications solely for
purposes of land-based radio location systems that locate animate or inanimate
objects, including people, and of ancillary activities such as data messaging or
voice messages. Such licenses shall not include any portion of the Licensee
Technical Modifications that is owned by a third party other than any entity
that Licensee controls or has the ability to control, and that Licensee is not
authorized to disclose. Teletrac shall have no right to sell or disclose
stand-alone Licensee Technical Modifications as a product independent from its
provision of a radio location service. Other than the limitations on other
business activities set forth in Section 8 above, there shall be no restrictions
on Licensee's rights with respect to Licensee Technical Modifications that do
not include and are not derived from any of the RLS Licensed Technical
Information. Licensee shall have no obligation to deliver Licensee Technical
Modifications to Teletrac until test versions of such Modifications are
available.

10.2.4 Newly Developed Equipment. If Licensee develops equipment related to the
Radio Location System, Licensee shall not be required to disclose to Teletrac
the engineering and manufacturing specifications for the equipment, but Licensee
shall within sixty (60) days after the development thereof, notify and provide
to the Teletrac Technical Coordinator the performance specification and Radio
Location System interface information for such equipment, and shall offer to
Teletrac the opportunity to purchase such equipment at a reasonable price, which
shall be no higher than the lowest price at which Licensee sells such equipment
to third parties purchasing similar quantities.

                                       16


10.3 Delivery; Licensee Assistance Concerning Upgrades and Modifications. As to
all Licensee Workstation Software Upgrades, Licensee Executable Software
Upgrades and Licensee Technical Modifications that Licensee delivers to Teletrac
under this Agreement, Licensee will deliver to Teletrac the software source code
and information concerning the source and authorship of delivered material and
inventions and copies of all printed or written materials related thereto.
Licensee agrees to make its engineering and production personnel reasonably
available, at Teletrac's cost, for consultation with Teletrac at Teletrac's
facilities in the United States of America, or at such other location selected
by Teletrac, in order to provide training, advice and assistance with respect to
the Licensee Workstation Software Upgrades, Licensee Executable Software
Upgrades and Licensee Technical Modifications.

10.4 Teletrac Obligations With Respect to Licensee Upgrades and Licensee
Modifications. Licensee's implementation of Upgrades and Modifications
authorized under Section 10.2 will not relieve Teletrac of its obligations under
this License Agreement. However, the Parties acknowledge and agree that Teletrac
will have no obligation to modify the RLS Licensed Software or RLS Licensed
Technical Information or to modify the training, support and warranty provisions
that it is obligated to provide under this License Agreement, to make them
compatible with the Licensee Workstation Software Upgrades, Licensee Executable
Software Upgrades or Licensee Technical Modifications.

10.5 Protection of Licensee Upgrades and Licensee Modifications. Licensee will
cooperate with Teletrac in taking such actions as Teletrac reasonably requests
for the purposes of filing, any where in the world, patent, copyright and other
intellectual property registration applications with respect to the Licensee
Workstation Software Upgrades, Licensee Executable Software Upgrades and
Licensee Technical Modifications. Such applications, shall, where applicable,
list Licensee as the author, owner or inventor. Nothing in this Section 10.5
shall limit Licensee's right to file or prosecute to issuance any such
applications with respect to the Licensee Workstation Software Upgrades,
Licensee Executable Software Upgrades or Licensee Technical Modifications, and
Licensee shall be free to file such applications, provided that (i) Licensee
notifies Teletrac in writing of such action prior to the time it is taken and
(ii) any such application by Licensee concerning rights that are derived from,
or include any part, of the RLS Licensed Software or RLS Licensed Technical
Information shall acknowledge and protect Teletrac's sole ownership of, and such
right's derivative use of, the RLS Licensed Software and/or RLS Licensed
Technical Information. Teletrac shall have the right, at its expense, but,
except as set forth in Section 11.2 below, no obligation, to bring, defend and
maintain any appropriate suit, action or proceeding involving the infringement
or misappropriation of the Licensee Workstation Software Upgrades, Licensee
Executable Software Upgrades or Licensee Technical Modifications. If Teletrac
finds it necessary to join Licensee in such suit, action or proceeding, Licensee
shall execute all papers and perform such other acts as may reasonably be
required and may, at its option and expense, be represented by counsel of its
choice. Should Teletrac lack standing to bring any such suit, action or
proceeding, then Licensee, at the request of Teletrac, shall do so, or, at
Teletrac's request, Licensee shall assign such rights and interest to Teletrac
as will enable Teletrac to gain such standing.

                                       17


11. Teletrac Indemnity; Infringement Claims.

11.1 Indemnity. Subject to Sections 13.2 and 14 below, Teletrac will defend,
indemnify and hold harmless Licensee, and its directors, officers, employees and
agents, from and against any and all claims, demands, liabilities, actions,
suits, proceedings (including reasonable attorneys' fees) asserted by a third
party arising out of or relating to Teletrac's performance under or breach of
this License Agreement, and Teletrac agrees to undertake the cost of defending
the same, and will pay resulting costs and damages finally awarded, provided
that:

(1) Licensee promptly notifies Teletrac of the claim;

(2) Licensee cooperates with Teletrac in the defense, provided that Teletrac
reimburses Licensee for its seasonable out-of-pocket expenses (including
reasonable outside counsel legal fees) associated with such cooperation; and

(3) Teletrac has sole control of the defense and all related settlement
negotiations, using counsel reasonably satisfactory to Licensee.

11.2 Teletrac's Obligations Regarding Infringement Claims.

11.2.1 No Warranty; Licensee Due Diligence. Teletrac represents and warrants to
Licensee that as of the Effective Date it has not been notified of any claim
that Teletrac's use of the RLS Licensed Software and RLS Licensed Technical
Information in the United States violates the legally protected trade secret,
proprietary right or other interest of a third party, or infringes a patent,
copyright or other intellectual property right of a third party (a "Third Party
Infringement Claim"). Licensee acknowledges and agrees, however, that Teletrac
makes absolutely no representation or warranty regarding Third Party
Infringement Claims arising from Licensee's use of the RLS Licensed Software and
RLS Licensed Technical Information in the Territory. Teletrac strongly
encourages Licensee to conduct patent and copyright searches, and other
appropriate due diligence, in the Territory to ensure that Licensee's use of the
RLS Licensed Software and RLS Licensed Technical Information in the Territory
will not result in a Third Party Infringement Claim, prior to investing any
substantial funds in the construction of the Radio Location System in the
Territory. Licensee acknowledges and agrees that it is assuming all risk and
liability that a Third Party Infringement Claim may result from Licensee's use
of the RLS Licensed Software or RLS Licensed Technical Information in the
Territory.

11.2.2 Third Party Infringement Claims. If a Third Party Infringement Claim
occurs in the Territory with respect to one or more elements of the RLS Licensed
Technical Information or RLS Licensed Software, or in Teletrac's opinion is
likely to occur, Teletrac will use reasonable commercial efforts, at its option
and expense, either to challenge such Third Party Infringement Claim or
otherwise procure for Licensee the right to continue to use, maintain and
provide support for the Radio Location System, or to replace or modify the
alleged infringing element so that such element becomes non-infringing, provided
that such replacement or modification does not materially affect performance of
the Radio Location System. If Teletrac has spent, or anticipates that it will be
required to spend, more than U.S. $100,000 for such efforts, then Teletrac may
give Licensee a ninety (90) day option to pursue such efforts on its own and at
its own expense. If Licensee elects to pursue such efforts on its own, then
Licensee may deduct

                                       18


from the Annual Royalty Payments due to Teletrac in the future, the reasonable
expenses Licensee has incurred in obtaining non-infringing elements, up to a
maximum amount of U.S.$250,000. If Licensee has not elected to pursue such
efforts on its own within such ninety (90) day option period, then Licensee must
notify Teletrac in writing either (i) that this License Agreement shall continue
in full force and effect without regard to such Third Party Infringement Claim
and without any reduction in the Annual Royalty Payment, or (ii) that Licensee
elects to terminate this License Agreement due to such Third Party Infringement
Claim, which shall be deemed to be a termination under Section 7.1. If the use
of any RLS Licensed Software or RLS Licensed Technical Information is enjoined
and the foregoing remedies cannot reasonably be accomplished, or if Licensee
elects to continue this License Agreement but fails to procure the right to use
the infringing element or to replace or modify the infringing element so that it
becomes non-infringing, then Teletrac may require the return of the infringing
RLS Licensed Software or RLS Licensed Technical Information, and Licensee's
right to use such RLS Licensed Software or RLS Licensed Technical Information
shall thereupon terminate. In no event shall Teletrac have any obligation to
repay or refund any amounts previously paid to it by Licensee.

11.2.3 Limitation on Teletrac's Obligations. Teletrac shall have no obligation,
and Licensee shall have no rights, under Section 11.2.2 if the Third Party
Infringement Claim: (a) could have been avoided by Licensee's use of the most
current, unaltered release of RLS Licensed Software or RLS Licensed Technical
Information; (b) resulted, in whole or in part, from a modification to the Radio
Location System made or owned by Licensee or by one or more of its affiliates;
(c) resulted, in whole or in part, from Licensee's use, sale or modification,
enhancement or improvement of RLS Location Units, RLS Customer Workstations, RLS
Network Control Center or any equipment, software or other items not obtained
from Teletrac; (d) resulted, in whole or in part, from Licensee's combination of
the RLS Licensed Software or RLS Licensed Technical Information with any other
software, equipment or technology; (e) resulted, in whole or in part, from
Licensee's Workstation Software Upgrades, Licensee Executable Software Upgrades
or Licensee Technical Information Upgrades; or (f) resulted, in whole or in
part, from Licensee's breach of its obligations under this Licensed Agreement.

11.2.4 Sole Remedy for Infringement Claims. The foregoing states the entire
obligation of Teletrac, and the sole remedies of Licensee, with respect to
infringement of patents, copyrights, trade secrets and other proprietary rights
or interests.

12. Licensee Indemnity. Licensee shall defend, indemnify and hold harmless
Teletrac, and its directors, officers, employees and agents from and against any
and all claims, demands, liabilities, actions, suits, proceedings or expenses
(including reasonable attorney's fees) asserted by a third party: (a) arising
out of or relating to Licensee's marketing, sale, use, design, construction,
manufacture, maintenance, repair, modification, upgrade, enhancement,
improvement or support of the Radio Location System in the Territory, or any
part thereof, including Licensee Workstation Software Upgrades, Licensee
Executable Software Upgrades or Licensee Technical Modifications, the RLS
Location Units, RLS Customer Workstations, RLS Network Control Center or any
equipment, software or other items not obtained from Teletrac, or any
combination thereof; or (b) arising out of or relating to Licensee's performance
under or breach of this License Agreement, and Licensee agrees to undertake the
cost of defending the same, and will pay resulting costs and damages finally
awarded, provided that:

                                       19


(1) Teletrac promptly notifies Licensee of the claim;

(2) Teletrac cooperates with Licensee in the defense, provided that Licensee
reimburses Teletrac for its reasonable out-of-pocket expenses (including
reasonable outside counsel's legal fees) associated with such cooperation; and

(3) Licensee has sole control of the defense and all related settlement
negotiations, using counsel reasonably satisfactory to Teletrac.

13. Teletrac Representations and Disclaimer.

13.1 Exhibits. Teletrac represents that to the best of its knowledge the RLS
Licensed Software listed on Exhibit A and the RLS Licensed Technical Information
listed on Exhibit B to this License Agreement is all of the RLS Licensed
Software and all of the tangible RLS Licensed Technical Information that has
been released to at least fifty percent (50%) of Teletrac's U.S. Radio Location
Systems as of the date of this License Agreement. If Teletrac has omitted any
such software or information, upon discovery of such omissions, it will amend
Exhibits A and B and deliver such software or information to Licensee.

13.2 NO WARRANTY. EXCEPT AS PROVIDED IN SECTION 11.2.1, TELETRAC MAKES
ABSOLUTELY NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE RADIO LOCATION
SYSTEM OR ANY PART THEREOF, INCLUDING, BUT NOT LIMITED TO, THE RLS COMPONENTS,
RLS LICENSED SOFTWARE AND RLS LICENSED TECHNICAL INFORMATION. BY WAY OF EXAMPLE,
BUT NOT OF LIMITATION, TELETRAC MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR WARRANTY THAT THE RADIO LOCATION SYSTEM, OR ANY PART
THEREOF, IS ERROR-FREE OR THAT ITS USE WILL BE UNINTERRUPTED OR THAT ITS SALE OR
USE WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADE SECRET, TRADEMARK, SERVICE
MARK OR OTHER PROPRIETARY RIGHT OR THAT THE RADIO LOCATION SYSTEM WILL BE A
PROFITABLE ENTERPRISE FOR LICENSEE. LICENSEE ACKNOWLEDGES THAT IT HAS MADE AN
INDEPENDENT INVESTIGATION OF THE RADIO LOCATION SYSTEM BUSINESS THAT IT WILL
CONDUCT UNDER THIS LICENSE AGREEMENT. TELETRAC AND EACH OF ITS AFFILIATES
EXPRESSLY DISCLAIM THE MAKING OF, AND LICENSEE ACKNOWLEDGES THAT IT HAS NOT
RECEIVED OR RELIED UPON, ANY GUARANTEE OR REPRESENTATION, EXPRESS OR IMPLIED, AS
TO THE FEASIBILITY OF OPERATING A RADIO LOCATION SYSTEM IN THE TERRITORY, AS TO
LICENSEE'S ABILITY TO DESIGN, CONSTRUCT, OPERATE OR MAINTAIN A RADIO LOCATION
SYSTEM IN THE TERRITORY OR AS TO THE COSTS LICENSEE MAY INCUR OR THE REVENUES IT
MAY RECEIVE WITH RESPECT TO A RADIO LOCATION SYSTEM IN THE TERRITORY. LICENSEE
FURTHER ACKNOWLEDGES THAT IT HAS NO KNOWLEDGE OF ANY REPRESENTATIONS BY ANY
OFFICER, EMPLOYEE, OR AGENT OF TELETRAC THAT ARE CONTRARY TO THIS SECTION 13.2.

14. LIMITATION OF LIABILITY. OTHER THAN WITH RESPECT TO THIRD-PARTY DAMAGE
CLAIMS FOR WHICH THE PARTIES MAY BE OBLIGATED TO INDEMNIFY

                                       20


EACH OTHER AS SET FORTH IN SECTIONS 11 AND 12 ABOVE, IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER FOR ANY DAMAGES OR FOR ANY LOST REVENUES, LOST
PROFITS, OR OTHER, INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES CAUSED, IN WHOLE OR IN PART, BY THE LICENSING, USE OR SALE OF THE RADIO
LOCATION SYSTEM OR ANY PART THEREOF, INCLUDING, BUT NOT LIMITED TO, RLS LICENSED
SOFTWARE AND RLS LICENSED TECHNICAL INFORMATION, OR OTHERWISE ARISING OUT OF OR
RELATING TO THIS LICENSE AGREEMENT. NOTHING IN THIS SECTION 14 SHALL RELIEVE
LICENSEE OF ANY OBLIGATION TO PAY TO TELETRAC AMOUNTS DUE AND OWING UNDER
SECTION 4 AND DEVELOPMENT, TRAINING AND SUPPORT CHARGES UNDER SECTION 15.3.

15. Obligations and Responsibilities of Teletrac. Teletrac will have the
following obligations and responsibilities in addition to those specified
elsewhere in this License Agreement:

15.1 Delivery of RLS Licensed Technical Information. Teletrac will deliver the
RLS Licensed Technical Information to Licensee, as applicable, during the
training sessions available pursuant to Section 15.3 below. Notwithstanding
anything to the contrary in this License Agreement, all deliveries of RLS
Licensed-Technical Information shall be subject to Teletrac's receipt of all
necessary export licenses and all required consents from third parties with
proprietary rights in such information, which Teletrac shall use reasonable
efforts to acquire. If there are delays in obtaining any such licenses or
consents, Teletrac will make partial deliveries of RLS Licensed Technical
Information, in accordance with the terms and conditions of this License
Agreement, to the extent feasible.

15.2 Delivery of RLS Licensed Software. Teletrac will deliver the components of
the RLS Licensed Software to Licensee, as and when needed by Licensee during the
design and construction of the Radio Location System and the Territory, within
thirty (30) days after receiving a written request therefor from Licensee.
Notwithstanding anything to the contrary in this License Agreement, all
deliveries of RLS Licensed Software shall be subject to Teletrac's receipt of
all necessary export licenses and all required consents from third parties with
proprietary rights in such software, which Teletrac shall use reasonable efforts
to acquire. If there are delays in obtaining any such licenses or consents,
Teletrac will make partial deliveries of RLS Licensed Software, in accordance
with the terms and conditions of this License Agreement, to the extent feasible.

15.3 Training and Support. Teletrac shall provide 50 hours of training and
support to Licensee as set forth in this Section 15.3. Licensee acknowledges and
agrees that Teletrac shall have an obligation to provide only the 50 hours of
training and support for Licensee and that any additional training or support
shall be provided at Teletrac's sole discretion, subject in all cases to the
availability of sufficient qualified personnel of Teletrac to provide such
services to Licensee. Notwithstanding any training or support provided to
Licensee hereunder, Teletrac shall have no responsibility or liability for the
design, construction, operation or maintenance of the Radio Location System.

15.3.1 Training. Licensee may request that Teletrac provide, at Licensee's cost
following the first 50 hours of training and support, the training courses set
forth below. The scope and subject

                                       21


matter to be covered by each training course shall be determined by the mutual
agreement of the parties at least thirty (30) days in advance of the scheduled
date for the training course. All training courses shall be conducted in English
at Teletrac's facilities, or at such other location within the United States as
Teletrac may specify.

15.3.1.1 The training courses available to Licensee shall be:

(1) Technician Training Courses;

(2) Master Control Center Operator Training Course;

(3) RLS Customer Support Training Course; and

(4) RLS Customer Service Training Course.

15.3.1.2 Licensee shall provide Teletrac with at least ninety (90) days advance
notice of a requested date for a training course. If Teletrac is not able to
provide the training course, then Teletrac shall so notify Licensee.

15.3.1.3 At Licensee's request, Teletrac will prepare a non-binding estimate of
the cost for a particular training course each time it is to be provided.

15.3.1.4 Teletrac will bill Licensee monthly for the costs that Teletrac incurs
in preparing and providing each training course, each time it is provided. Such
costs shall include all of the out-of-pocket costs and expenses that Teletrac
incurs in preparing and providing such course, plus a rate of U.S. $125.00 per
person hour for time Teletrac employees or consultants spend preparing and
providing such course. Such rate shall be adjusted annually after the fast year
of this Agreement to reflect percentage changes in the U.S. CPI during the
preceding year.

15.3.1.5 Licensee shall be responsible for all travel arrangements, including
obtaining all visas that may be required, and shall pay all travel costs and
expenses, including transportation, meals, lodging and any per diem pay and
other salary and benefits arrangements, for Licensee's personnel in connection
with the training courses provided under this Section 15.3. As to training
courses provided at Teletrac facilities, Licensee acknowledges that its
employees participating in such training are not employees of Teletrac, and
Licensee will obtain such insurance coverage as Teletrac may reasonably request
for such Licensee employees, including, but not limited to, workers'
compensation insurance. Licensee shall provide Teletrac with a certificate of
such insurance that names Teletrac as an additional insured.

15.3.2 Telephone Support. Licensee may request that Teletrac provide, at
Licensee's cost, telephone support to Licensee. Licensee shall pay for such
telephone support at a rate of U.S. $125.00 per person hour, with such rate to
be adjusted annually after the first year of this Agreement to reflect
percentage changes in the U.S. CPI during the preceding year. In addition,
Licensee shall be responsible for placing and paying for all telephone calls
made in connection with telephone support to be provided under this Section.

15.3.3 Payments for Training and Support. Teletrac will bill Licensee monthly
for training and support provided under this Section 15.3, and Licensee's
payments will be due and payable in

                                       22


U.S. dollars within thirty (30) days of receipt of the invoice. In the event
Teletrac pays overtime pay to its personnel providing such training and support,
Licensee's charges for such training and support shall be increased accordingly.

15.4 Completion of RLS Episode Software. Teletrac is obligated to finalize the
development of the RLS Episode Software by April 30, 1999. Teletrac acknowledges
that Licensee has informed Teletrac that completion of this development is vital
to Licensee's business prospects and failure to complete the work may have a
significant adverse effect on Licensee's business.

16. Obligations and Responsibilities of Licensee. Licensee will have the
following obligations and responsibilities in addition to those specified
elsewhere in this License Agreement.

16.1 Compliance With Laws; Enforceability. Licensee represents, warrants,
covenants and agrees with and to Teletrac that, during the term of this License
Agreement (and thereafter with respect to those provisions which survive the
termination of this License Agreement), this License Agreement, and all
agreements executed and delivered in connection herewith, and the performance by
both Parties of their respective obligations and duties under this Agreement and
such other agreements, will not violate any law, rule or regulation in effect in
the Territory. Licensee further represents, warrants, covenants and agrees with
and to Teletrac that, during the term of this License Agreement (and thereafter
with respect to those provisions which survive the termination of this License
Agreement), all of the provisions of this License Agreement are fully
enforceable under the laws in effect in the Territory and that each party can
fully and completely enforce the obligations, covenants, agreements and
restrictions of the other Party under this License Agreement.

16.2 Spectrum License. Prior to commencing the construction and operation of the
Radio Location System in the Territory, a Spectrum License shall be held by
Licensee or a sublicensee as permitted by this License Agreement, and Licensee
or the sublicensee will use reasonable efforts to expand the Spectrum License to
obtain approval for paging, data messaging and other activities via a land-based
radio location system.

16.3 Reasonable Diligence. Licensee shall use reasonable diligence, at its own
expense, to build, operate and maintain a Radio Location System in the Territory
and to promote, market, sell and support RLS Customer Equipment and RLS Customer
Services in the Territory.

16.4 Confidentiality and Proprietary Protection.

16.4.1 Confidentiality and Nondisclosure Agreement. Teletrac and Licensee shall
execute, and deliver, as part of this License Agreement, the Nondisclosure
Agreement that is attached as Exhibit D and incorporated by reference in this
License Agreement.

16.4.2 Proprietary Rights Reserved. It is expressly agreed that neither title to
the Radio Location System, nor title to any part thereof, including, but not
limited to the RLS Licensed Software and RLS Licensed Technical Information,
passes to Licensee. Licensee's license and right to use any part of the Radio
Location System is as set forth in this License Agreement, and Teletrac reserves
all proprietary rights in the Radio Location System. This reservation of
proprietary rights survives any termination of this License Agreement.

                                       23


16.4.3 Copyright and Patent Registration and Notices. Licensee agrees not to
remove from view any copyright, trademark, confidentiality or other proprietary
notice, mark, or legend appearing on any of the RLS Licensed Software, on output
generated by such software or on RLS Licensed Technical Information, and agrees
to reproduce and include the same on each copy of the RLS Licensed Technical
Information and RLS Licensed Software.

16.5 Insurance. Licensee agrees that at all times during the term of this
License Agreement it will maintain property and liability insurance in an amount
adequate to cover the value of and risks associated with the Radio Location
System in the Territory.

16.6 Teletrac Marks. The rights and licenses granted under this License
Agreement do not constitute a grant of any right or license to use Teletrac's
marks, including but not limited to the "Teletrac" trade name, trademark and
service mark. Upon Teletrac's request, Licensee will cooperate with and, if
necessary, consent to, any registration by Teletrac or any of its affiliates of
the "Teletrac" mark in the Territory. Licensee and Licensee's affiliates are
estopped from challenging the validity of the Teletrac mark or from setting up
any claim adverse to Teletrac with respect to the Teletrac mark, and any good
will arising with respect to such mark in the Territory shall inure solely to
the benefit of Teletrac.

16.7 Other Marks. Other than as set forth in Section 16.6 above, Licensee shall
be the sole owner of valid marks that Licensee uses to identify the Radio
Location System, or any part thereof.

16.8. Infringement by Others. Licensee agrees to inform Teletrac promptly of any
possible infringement of, or unfair competition affecting, the Radio Location
System in the Territory, including the RLS Licensed Software and RLS Licensed
Technical Information, that comes to the attention of Licensee. If Teletrac
decides to take action against any such possible infringement or act of unfair
competition, Licensee agrees to assist Teletrac, in whatever manner Teletrac may
direct, and, provided that neither Licensee nor one or more of its affiliates
is, in whole or part, responsible, directly or indirectly, for such
infringement, at the expense of Teletrac.

16.9 Restriction Regarding Reverse-Engineering. Licensee agrees that it will not
derive or attempt to derive the source code or structure of all or any portion
of the RLS Licensed Software by reverse engineering, disassembly, decompilation,
or any other means, and that it will not decompile, disassemble, reverse
engineer, port, translate, modify, copy, transfer, make derivative works of, or
otherwise use the RLS Licensed Software, except as expressly authorized by this
License Agreement.

17. Relationship of the Parties. The relationship of the parties established by
this License Agreement shall be that of independent contractors. Nothing in this
License Agreement shall be construed to create an agency, partnership, joint
venture or employment relationship between Licensee and Teletrac, nor to make
Licensee the agent of Teletrac, or Teletrac the agent of Licensee, for any
purpose. Neither party is granted authority by the other to undertake
commitments, transact business, create or assume any obligation (express or
implied) or otherwise act (or represent that it can act) in the other's name or
on the other's behalf.

                                       24


18. Force Majeure. If the performance of either Party required by this License
Agreement (other than payment of amounts due under this License Agreement) is
prevented, restricted or delayed by fire, other casualty or accident, war or
violence or serious threat of the same, arrest or restraint of government,
requisition of vessel or aircraft, explosion, governmental request, guidance,
order or regulation, or any other circumstance beyond the reasonable control of
the Party and without such Party's fault or negligence, the affected Party, upon
giving due notice to the other Party, shall be excused from such performance,
but only to the extent directly attributable to the circumstance and the excused
party shall not be liable for loss or damage or failure of or delay in such
performance.

19. Governing Law. The governing law of this License Agreement shall be that of
the State of California, U.S.A., as if both parties hereto were resident and
doing business in such state.

20. Dispute Resolution.

20.1 Good Faith and Fair Dealing. The parties intend to carry out the provisions
of this License Agreement in accordance with principles of good faith and fair
dealing and to respect and observe the spirit as well as the letter of this
License Agreement. The parties shall exercise their best efforts to settle
between themselves in an amicable way any dispute which may arise out of or in
connection with this License Agreement.

20.2 Arbitration. Except as set forth in Sections 20.3 and 20.4 below, any
controversy or claim arising out of or relating to this License Agreement, or
the breach, termination or invalidity thereof, shall be settled by arbitration
in accordance with the rules and regulations of the American Arbitration
Association for resolving commercial disputes, as modified by this Section 20.2.
The number of arbitrators shall be three (3). The place of arbitration shall be
San Diego, California and the arbitration shall be conducted in English. The
arbitrators shall be bound by stare decisis, and the arbitral award shall be
final and binding, shall be rendered in writing and shall state the reasons for
the award. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. The costs of arbitration, including the
cost of legal counsel, shall be awarded in the discretion of the arbitrators.
The arbitrators shall have the ability to grant all relief available at law and
in equity, to the extent permitted under this License Agreement.

20.3 Legal Proceedings. Either Party may elect to initiate litigation, rather
than arbitration, but only with respect to claims for nonpayment of the Annual
Royalty Payment (other than accounting disputes covered by Section 20.4), or for
specific performance or injunctive relief to enforce the terms of this agreement
or prevent a breach thereof. In particular, Licensee acknowledges that its
failure to comply with the provisions of this License Agreement concerning use
of the RLS Licensed Software, RLS Licensed Technical Information or Teletrac's
trade names, trademarks or service marks will result in immediate and
irreparable harm to Teletrac for which there is no adequate remedy at law.
Teletrac shall be entitled to bring an action or proceeding for specific
performance, injunctive relief, declaratory relief or other equitable relief to
compel Licensee to cease and desist all unauthorized use of the RLS Licensed
Software, RLS Licensed Technical Information or any trade name, trademark or
service mark of Teletrac, to require Licensee to perform its obligations with
respect to such software, technology and marks, and to obtain such other relief
as may be necessary and proper. Teletrac shall not be

                                       25


required to post a bond in connection with any such proceeding. The Parties'
consent to the nonexclusive venue and jurisdiction of the state and federal
courts serving San Diego, California in any legal proceeding commenced pursuant
to this License Agreement.

20.4 Annual Royalty Payment Disputes. If the sole subject of a dispute under
this License Agreement concerns the manner of accounting for the Annual Royalty
Payment and the amount of royalties due to Teletrac, then such dispute shall be
settled by a mutually agreeable independent accountant (the "Neutral
Accountant"). Either Party may initiate resolution of an accounting dispute by
the Neutral Accountant by requesting a meeting with the Neutral Accountant, and
by sending at least forty-five (45) days' notice of such meeting to the other
Party. If the Parties are unable to agree on a Neutral Accountant within ten
(10) days of the date of such notice, then, within ten (10) days each Party
shall select one accountant (the "Party Accountant"). The Party Accountants
shall then select a Neutral Accountant within a further ten (10) days and
schedule the first meeting with the Neutral Accountant. If a Party fails to
select a Party Accountant, then the Neutral Accountant shall be the other
Party's Party Accountant. At least thirty (30) days prior to the first meeting
with the Neutral Accountant each Party may submit to the Neutral Accountant a
written explanation of the dispute, together with any relevant documents. Within
thirty (30) days after the meeting, the Neutral Accountant shall conduct an
audit of Licensee, if in the opinion of the Neutral Accountant such an audit is
necessary. Within sixty (60) days after the meeting, the Neutral Accountant
shall issue a decision on the accounting matter. The Neutral Accountant's
decision shall be final and binding, shall be rendered in writing and shall
state the reasons for the decision.

Judgment upon the decision rendered by the Neutral Accountant, and any costs to
be awarded as set forth below, may be entered in any court having jurisdiction
thereof. Each Party shall bear its own costs of the proceeding and the Parties
shall share equally the costs of the Neutral Accountant; provided, however, that
if the Neutral Accountant decides that Licensee's position has resulted or would
result in an under calculation or underpayment in excess of two (2) percent of
the amount owed, paid or to be paid to Teletrac, then Licensee shall be
responsible for Teletrac's costs of the proceeding, including reasonable legal
fees, and for the entire cost of the Neutral Accountant, and if the Neutral
Accountant decides that Teletrac's position has resulted or would result in an
overpayment to Teletrac that in excess of two percent (2%), then Teletrac shall
be responsible for Licensee's costs of the proceeding, including reasonable
legal fees, and for the entire cost of the Neutral Accountant. During all
proceedings under this Section 20.4, each Party shall continue timely payment of
all amounts owed to the other Party under this License Agreement.

21. General.

21.1 Designation of Contract Administrators and Contract Technical Coordinators.
Each party shall designate a Contract Administrator and Contract Technical
Coordinator within ten (10) business days of the Effective Date. If a Party
fails to make such designation, then that Party's Contract Administrator and
Technical Coordinator shall be the person designated by such Party in Section
21.2 below, or such other person as either Party may notify to the other from
time to time.

                                       26


21.2 Notices. All notices under this License Agreement shall be in writing and
may be given by delivering the same by hand, or by sending the same by an
overnight courier that maintains verification of delivery, or by facsimile, to
the relevant person and address set out below or such other person and address
as either Party may notify to the other from time to time. Any such notice given
as set forth above shall be deemed to have been given or received at the time of
delivery (if delivered by hand) and upon verified receipt (if sent by post,
facsimile or overnight courier). In the case of facsimile, the transmission
report shall constitute the verified receipt. Each Party may, at any time,
change the persons or address to which its notices are to be sent by notifying
the other Party of such change in accordance with this Section 21.2.



Teletrac                                          Licensee
--------                                          --------

Teletrac, Inc.                                    Greenport Enterprises A.V.V.
3220 Executive Ridge Drive, Suite 100             Sun Plaza, Suite 306
Vista, CA 92083                                   Lloyd G. Smith Boulevard 160
(760) 597-0510 (Tel)                              Oranjestad, Aruba
(760) 597-9906 (Fax)

Attn: General Counsel                             Attn: General Manager


21.3 English Language. All communications, notices and records required to be
kept under and materials provided pursuant to this License Agreement shall be in
English.

21.4 No Publicity. Each Party agrees not to disclose the contents of this
License Agreement to anyone other than its employees and affiliates with a need
to know, without the prior written consent of the other Party. Consistent with
the requirements of law and any legal process, neither Party will issue any
press or news release, make any public disclosure with respect to the substance
of this License Agreement or the relationship of the Parties, or make any such
general disclosure to either Party's customers, or potential customers, without
the prior written approval of the other Party.

Notwithstanding the foregoing, if either Party is required, by any law or
regulation to which such Party is subject, to make any public disclosure
regarding this License Agreement, and it is impracticable to obtain written
approval of the other Party prior to making such disclosure, the Party may make
such disclosure without the other Party's approval, provided that the other
Party is provided with a copy of the news or press release or other disclosure
prior to or concurrently with the public disclosure of such information.

21.5 Scope and Amendment of License Agreement. The parties acknowledge that each
has read this License Agreement, understands it and agrees to be bound by its
terms. This License Agreement may be amended only by a subsequent writing that
specifically refers to this License Agreement and that is signed by both
Parties, and no other act, document, usage or custom shall be deemed to amend
this License Agreement.

21.6 Assignment. Neither Party may assign or delegate any of its rights, duties
or obligations under this License Agreement in whole or in part without the
other Party's written consent. Any attempt by either Party to assign or delegate
any rights, duties or obligations which arise under

                                       27


this License Agreement, without the other Party's written consent, shall be
void. Teletrac may, however, upon notice to Licensee, assign or delegate, or
both, its rights, duties and obligations under this License Agreement to an
entity: (a) that Teletrac controls or has the ability to control, or that
controls or has the ability to control Teletrac and that receives and assumes
all of Teletrac's rights and obligations under this License Agreement; or (b)
that has purchased all or substantially all of the assets of Teletrac utilized
in connection with its Radio Location Systems, and receives and assumes all of
Teletrac's rights and obligations under this License Agreement, provided that,
in either case, the same entity provides engineering support to Radio Location
Systems located in the United States, and also will be available to provide to
Licensee the engineering support that Teletrac is required to provide under this
License Agreement. Notwithstanding the foregoing, Licensee may sublicense its
rights hereunder to another entity (a "Sublicensee") for the purpose of
permitting the Sublicensee to operate a Radio Location System hereunder in a
country in the Territory, provided that (i) the Sublicensee is an entity
organized and existing under the laws of, and authorized to operate a Radio
Location System under a Spectrum License in, such country, (ii) Licensee has an
equity ownership interest in the Sublicensee, (iii) if Licensee has less than a
twenty five percent (25%) equity ownership interest in the Sublicensee, Licensee
shall pay to Teletrac twenty percent (20%) of any "lump sum payment" (as defined
below) received from Sublicensee, (iv) the Sublicensee shall pay to Teletrac all
royalties due to Teletrac under this License Agreement with respect to revenues
received from the operation of the Radio Location System in the country and the
Licensee shall remain liable for such royalties in the event they are not
promptly paid by the Sublicensee, (v) the Sublicensee shall agree in writing to
comply with all of the terms and conditions of this License Agreement and that
Teletrac shall have the right to enforce its rights hereunder directly against
the Sublicensee as if the Sublicensee was the licensee hereunder, (vi) Licensee
shall provide Teletrac with copies of all agreements between Licensee and
Sublicensee, and any amendments thereto, and (vii) Licensee shall provide
Teletrac with detailed information regarding the Sublicensee and its principals
as reasonably requested by Teletrac. In the event any payment is made to
Teletrac pursuant to clause (iii) above, the royalty payments to be made to
Teletrac by Sublicensee pursuant to clause (iv) above shall be paid to Licensee
until such time as Licensee has been paid an amount equal to the amount received
by Teletrac pursuant to clause (iii) above. For the purposes of this Section,
"lump sum payment" shall mean any payment received from the Sublicensee, either
upon commencement of the sublicense or thereafter, which is not based on a
percentage of the Sublicensee's revenues or income, or the number of customers
of Sublicensee or RLS Location Units in service in the country.

Notwithstanding the foregoing, Licensee may assign all of his rights, duties or
obligations under this License Agreement, provided the assignment will take
place within ninety (90) days of the Effective Date and the assignee will be an
entity controlled by the Licensee. Licensee will be obligated to inform Teletrac
of the assignment within seven (7) days following the assignment. Upon
Licensee's request, Teletrac and the assignee will execute an identical Radio
System License Agreement with appropriate Exhibits and deliveries that shall
replace this License Agreement.

21.7 Binding Effect. This License Agreement shall be binding on and inure to the
benefit of the respective successors and permitted assigns of the parties.

                                       28


21.8 Authority. Each of the respective persons executing this License Agreement
hereby covenants and warrants that such person has full legal power, right and
authority to bind the entity on whose behalf such person is signing to each and
every term and provision herein.

21.9 Severability. If any provision of this License Agreement shall be held
illegal or invalid by and court, this License Agreement shall be construed and
enforced as if such illegal or invalid provision had not been contained herein
and this License Agreement shall be deemed an agreement of the Parties to the
full extent permitted by law. If any provision shall be declared invalid or
unenforceable because of its breadth, scope or duration, such provision shall be
deemed modified to the extent necessary to make it valid and enforceable and
shall remain in full force and effect as so modified, or if not so modified,
shall be severable from the rest of this License Agreement.

21.10 Headings. All headings are for reference only and shall not be considered
in construing this License Agreement.

21.11 Expenses of Litigation. In case of litigation arising out of or in
connection with this License Agreement, the substantially prevailing Party shall
be entitled to recover its reasonable attorneys' fees, costs and expenses from
the other Party. In case of arbitration or Neutral Accountant proceedings, such
fees, costs and expenses shall be recovered asset forth in Sections 20.2 and
20.4 above.

21.12 Waiver. The failure of either Party at any time to require performance by
the other Party of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter. Nor shall the waiver by either
party of a breach of any provision hereof be a waiver of any succeeding breach
of the same or any other such provisions or be a waiver of the provision itself.

21.13 Entire Agreement. This License Agreement together with its Exhibits and
the Nondisclosure Agreements constitute the entire agreement of the parties with
respect to the license of the RLS Licensed Software and RLS Licensed Technical
Information to Licensee and supersede any and all prior negotiations,
correspondence, understandings and agreements between the parties respecting the
subject matter of this License Agreement, and the full understanding of the
Parties is embraced herein.

21.14 Re-Export Assurances.

21.14.1 Licensee agrees to comply with the terms of the Export Administration
Act of 1979 (the "Act") of the United States of America, as amended, and the
rules and regulations promulgated thereunder, and any other law or regulation of
the United States of America which restricts, regulates or prohibits the export
or license of the RLS Licensed Software and RLS Licensed Technical Information,
or any portion thereof, or any other technical data relating to the Radio
Location System, now or hereafter in effect, Licensee agrees that it will not
knowingly, either directly or indirectly, export or re-export such technology or
products without the prior authorization of Teletrac and the United States
Office of Export Administration to Country Group P, Q, W, Y or Z, as defined in
the regulations, or to Afghanistan, or otherwise in violation of any requirement
or prohibition contained in the Act or such laws, rules and regulations.

                                       29


21.14.2 Teletrac agrees that it will comply with-the terms of any export laws,
rules or regulations in the Territory with respect to the export of software and
technical data and components licensed to Teletrac under Section 10.2 above.

21.14.3 Licensee, hereby agrees to pay for all fees and expenses (including
reasonable attorney's fees) incurred by Teletrac in complying with the
provisions of Section 21.14.2 and in ensuring that Licensee has complied with
the provisions of Section 21.14.1.

21.15 Exhibits. The following are a part of this License Agreement:

Exhibit A - List of RLS Licensed Software
Exhibit B - List of RLS Licensed Technical Information
Exhibit C - Territory Description
Exhibit D - Nondisclosure Agreement
Exhibit E - Escrow Agreement

21.16 Construction of Agreement. This License Agreement has been negotiated by
the Parties and their respective attorneys and the language of this Agreement
shall not be construed for or against either party.

21.17 Counterparts. This License Agreement may be executed in counterparts, each
of which shall be an original as against any Party whose signature appears on
such counterpart and all of which together shall constitute one and the same
instrument.

21.18 Escrow of RLS Licensed Software. The parties agree to execute and deliver
the Escrow Agreement attached as Exhibit E and incorporated by reference in this
License Agreement on the Effective Date.





                                       30


IN WITNESS WHEREOF, the Parties executed and delivered this License Agreement as
of the day and year first above written.

TELETRAC, INC.

By     /s/ Steven D. Scheiwe
       ---------------------
Name   Steven D. Scheiwe
Title  CEO
Date:  12/21/99

GREENPORT ENTERPRISES A.V.V.

By
       ---------------------
Name
       ---------------------
Title
       ---------------------
Date:
       ---------------------




                                       31


IN WITNESS WHEREOF, the Parties executed and delivered this License Agreement as
of the day and year first above written.

TELETRAC, INC.

By
       ---------------------
Name
       ---------------------
Title
       ---------------------
Date:
       ---------------------

GREENPORT ENTERPRISES A.V.V.

By     /s/ Easi Sheratzky
       ------------------
Name   Easi Sheratzky
Title  Proxy Holder
Date:  22/12/99




                                       32




                                   EXHIBIT A

                             RLS LICENSED SOFTWARE

Component                 O/S         Purpose
---------                 ---         -------
RXIF                      QNX4        Interface to Tadiran Receiver sites
TXIF                      QNX4        Interface to transmit sites using
                                      Simulcast Paging Controller
SOLVR                     QNX4        Multilateration position determination
ITH                       QNX4        Inbound transmission handler
RMGR                      QNX4        Request Manager for user service requests
TP                        QNX4        Transaction Processor to capture
                                      transaction data for billing
CAM                       QNX4        Customer Access Monitor for FD3.x access
                                      lines
SCHED                     QNX4        Transmission Scheduler for Simulcast
                                      Paging System
ASMGR                     QNX4        Process messages initiated from mobile
                                      units
CAL                       QNX4        Calibrate receiver site timing
SF                        QNX4        Message store and forward services
Traccess                  QNX4        Dial in access for FD3.x protocol
Traccess II               QNX4        TCP/IP Access for FDEE protocol
Mqueue                    QNX4        Message queuing between QNX tasks on same
                                      LAN
QWIS                      QNX4        Message queuing between QNX tasks on same
                                      WAN
SMC Server                QNX4        Network management server
SMC Workstation           NT4         Network management workstation
DBClient                  QNX4        Route database queries from QNX to WINDOWS
                                      NT
Eventlogger               QNX4        Performance analysis database capture
Eventlogger               NT4         ODBC Interface to MS-SQL Server for
                                      Eventlogger
WDBServer                 NT4         ODBC Interface to MS-SQL Server for
                                      DBCLIENT
CAB                       NT4         Customer Access Bridge
CDPDMgr*                  NT4         CDPD Network Interface
CustomerDB                SQL         Customer database schema
EventLogStat              SQL         Eventlogger statistical database schema
SimonClient               W95         Data entry for MS-SQL Server
Pasmdb                    W95         Performance analysis user interface
                                      (MSACCESS)


* This component is required only for CDPD network access.

No later than April 30, 1999, Teletrac shall deliver certain additional software
for the management of Episode situations. The Episode software shall include:





                                       33




Component                 O/S         Purpose
---------                 ---         -------
EMSDatabase               SQL         Critical Event database schema
EMSAgent                  NT4         Notify operators of events
EMSIncipient              NT4         Episode generator
EMSScheduler              NT4         Schedule events to operator
EMSVerifier               NT4         Customer Verification
EMSUser/GUI Services      W95         Operator Graphical User Interface
Wintrak                   W95         Episode location workstation






                                       34


                                    EXHIBIT B

RLS LICENSED TECHNICAL INFORMATION

A brief description of Teletrac's radio location system technical information
library is attached. The description sets out the format of the information as
being either HC (hard copy) EC (electronic copy or both. The assigned document
number is indicated as is the status on the current revision, if any. The title,
use description, author and other comments are also indicated.






                                       35


                                   EXHIBIT C

TERRITORY

EUROPE/ASIA
-----------
Poland*
Czech Republic*
Hungary*
Russia

SOUTH AMERICA
-------------
Argentina*
Bolivia
Brazil*
Chile
Colombia*
Ecuador
Guyana
Paraguay
Peru*
Suriname
Uruguay
Venezuela*

CENTRAL AMERICA
---------------
Costa Rica
El Salvador
Guatemala*
Honduras
Belize
Nicaragua
Panama*
Mexico*

* Designates Tier I Countries


                                       36


                                   EXHIBIT D

                            NONDISCLOSURE AGREEMENT

                                    between

                          GREENPORT ENTERPRISES A.V.V

                                      and

                                 TELETRAC, INC.

THIS NONDISCLOSURE AGREEMENT ("Agreement") is entered into between GREENPORT
ENTERPRISES A.V.V, a company organized under the laws of Aruba ("Greenport"),
and Teletrac, Inc., a Delaware corporation ("Teletrac"). This Agreement shall be
effective on the Effective Date of the License Agreement, as defined in
Paragraph 1 below.

NOW, THEREFORE, it is hereby agreed as follows:

1. In connection with the exercise and implementation of those rights and
obligations set forth in that certain Radio Location System License Agreement
between Greenport and Teletrac, dated December ____, 1999 (the "License
Agreement"), which License Agreement pertains to the (i) licensing of certain
software and technical information to Greenport and (ii) development of a radio
location system in certain countries described therein (hereinafter the
"Project"), each party may disclose to the other certain confidential or
proprietary information (hereinafter "Information") which may include, but is
not limited to, (1) trade secrets, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blue prints, diagrams, flow
charts data computer programs, and other technical information; (2) certain
information and analyses concerning the relevant marketplaces; (3) certain
operations, data including internal marketing, sales information, customer
services, engineering and support services, financial data (including revenues,
overhead expenses, profitability, and other like financial information); and (4)
certain information regarding future product and technology plans as well as
market development plans and vendor information. Information shall include the
items in (1) through (4) that are provided by or are regarding the disclosing
company, its present or future divisions, parents, subsidiaries, and/or
affiliates.

2. With respect to Information to be disclosed in either oral or written form
pursuant to this Agreement or already disclosed in anticipation of this
Agreement, the recipient shall:

a. hold such Information in confidence, using the same degree of care the
recipient uses for its own information of the same materiality;

b. restrict disclosure of the Information solely to those of its employees and
employees of its present or future divisions, parents, subsidiaries, and
affiliates (hereinafter "employees") with a need to know, solely to advance the
Project, and not disclose it to any other third persons;

                                       37


c. advise those employees of their binding obligations with respect to such
Information and take such measures to protect the confidentiality of such
Information as is commensurate with recipient's liability with regard to the
same; and

d. use the Information only as needed to advance the Project, except as may
otherwise be mutually agreed upon in writing, and in particular, will not employ
the Information in competition with the disclosing party nor will it use it in
any unlawful manner.

3. As part of recipient's obligations under Paragraph 2.c. above, (i) recipient
shall ensure that each of its employees, directly or indirectly involved in the
Project, executes a written nondisclosure agreement with recipient (in the form
attached hereto as Exhibit "A" for Greenport, and as Exhibit "B" for Teletrac)
prior to such employee's receipt of the Information; and (ii) recipient shall
provide to each such employee written notice of such employee's obligations
under the recipient/employee nondisclosure agreement with a specific reference
in such notice being made to the applicability of said nondisclosure agreement
to the Project.

If there is any violation of this Agreement by any current or former employee of
recipient, recipient shall immediately notify the other party and shall, at
recipient's sole cost and expense, pursue the enforcement of the
recipient/employee nondisclosure agreement against any such current or former
employee. The recipient shall be fully liable to the other party for any damages
caused to the other party as a result of the breach of a recipient/employee
nondisclosure agreement by a current or former employer of recipient, provided
that recipient's negligence contributed to the breach by the current or former
employee.

4. The recipient of Information shall not copy, reproduce, or reverse engineer
any hardware, computer program, tape, disk, or other Information which may be
provided pursuant to this Agreement other than as expressly authorized in the
License Agreement.

5. The recipient of Information under this Agreement shall have no obligation to
preserve the confidential or proprietary nature of any Information which:

a. was previously known to the recipient free of any obligation to keep it
confidential/proprietary; or

b. is disclosed to third persons by the disclosing party without restriction; or

c. is or becomes publicly available by other than unauthorized disclosure; or

d. is independently developed by the recipient, except when such development is
prohibited by the terms of the License Agreement.

6. Nothing contained herein shall be construed to preclude the recipient from
disclosing any Information pursuant to a lawful subpoena or other civil process
having the compulsion of law, except that in such case the recipient shall
promptly notify the disclosing party prior to such disclosure or submission so
that it may appear and defend its interests in a timely manner.

7. The Information shall be deemed the property of the party which provides it,
and unless the recipient is permitted by the License Agreement to retain said
Information, the recipient shall,

                                       38


upon request, promptly return to the providing party all Information in its
possession that is in a tangible form and will not retain copies, extracts,
plans, schematics, or other reproductions in whole or in part of such
Information. Unless based on Information that may be retained by recipient
pursuant to the License Agreement, all documents, memoranda, notes, and other
writings whatsoever prepared by the recipient based on the Information shall be
destroyed and such destruction shall be certified in writing to the providing
party by an authorized officer supervising such destruction.

8. Nothing contained in this Agreement shall be construed as granting or
conferring any rights by license or otherwise in any Information disclosed to
either party.

9. All Information disclosed in the course of the Project will be provided under
the terms of the License Agreement. Each party agrees that all remedies and
damages that might otherwise be available to a party for claims arising out of
or related to this Agreement or to the use of the Information shall be subject
to the limitations set forth in the License Agreement, including, but not
limited to the limitation of liability set forth in Section 14 of the License
Agreement.

10. Information provided to either party hereunder does not, and is not intended
to, represent a commitment by the other party to license, purchase, or sell any
products or services or enter into a business relationship. If any party desires
to pursue business opportunities stemming herefrom, the parties will execute a
separate written agreement to govern such business relationship.

11. Section 18, 20.1.2, 20.3 through 20.11, 20.13, 20.15, 20.16, and the
applicable dispute resolution provisions of Section 19 of the License Agreement
are hereby incorporated by reference in this Agreement, and all references to
the "License Agreement" in such Sections shall be deemed to be references to
this "Agreement" for purposes of this Agreement.

12. This Agreement, together with the License Agreement, constitutes the entire
agreement of the parties with respect to the matters that are the subject of
this Agreement and supersede any and all prior negotiations, correspondence,
understandings, and agreements between the parties with respect to the subject
matter of this Agreement.

13. This Agreement shall continue until termination of the License Agreement;
provided however, that all obligations hereunder with respect to Information
received prior to termination of cancellation shall survive the termination or
cancellation of this Agreement for a period of five (5) years from such
termination or cancellation.

14. This Nondisclosure Agreement may be executed in counterparts, each of which
shall be an original as against any Party whose signature appears on such
counterpart and all of which together shall constitute one and the same
instrument.

                                       39


IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective duly authorized representatives.

GREENPORT ENTERPRISES A.V.V

By:
   --------------------------------------------------
Name:
     ------------------------------------------------
Title:
      -----------------------------------------------
Date:
     ------------------------------------------------

TELETRAC, INC.


By:
   --------------------------------------------------
Name:
     ------------------------------------------------
Title:
      -----------------------------------------------
Date:
     ------------------------------------------------



                                       40


                                   EXHIBIT A
                   GREENPORT EMPLOYEE NONDISCLOSURE AGREEMENT

                     UNDERTAKING CONCERNING CONFIDENTIALITY

I, the undersigned, _________________, I.D. _________________ of
__________________ ______________ hereby covenant towards GREENPORT ENTERPRISES
A.V.V and towards any corporation controlled by it (hereinafter "Greenport") as
follows:

1. To keep absolutely secret, and, during the period of my employment and/or the
provision by me of services to Greenport as well as subsequent thereto, to not
disclose and not convey at any time whatsoever -- to any person and/or body
whatsoever, any information, knowledge and confidential documents concerning
Greenport's plans and/or activities, and/or manufacturing procedures used
therein, and/or concerning its products and/or the development thereof and/or
any defense, commercial or industrial information owned by it and/or any
professional secret whatsoever (all the foregoing being hereinafter referred to
as the "Information"), coming to my knowledge, directly and/or indirectly,
during the course of and in consequence of my employment and/or the provision of
my services to Greenport.

2. Not to make any use of and not to convey the Information and/or any part
thereof in any form and manner either personally or through others, directly or
indirectly, at any time, and, not to make use of nor convey all or any of the
Information now and/or hereafter reaching my knowledge in the circumstances
detailed above, without receiving the prior written consent of Greenport
thereto. In the event I wish to use the Information or any part thereof, I shall
apply Greenport with a request to grant me permission to do so in consideration
of such payment and on the terms as shall be agreed upon between us in writing.
Nothing herein contained shall affect my obligations under paragraph 6 hereof.

3. Not, after my employment and/or the performance of my task and/or providing
the services provided by me to Greenport have been completed, to keep in my
possession any document, instrument or item given to me and/or which has reached
me by reason of my employment, performance of such task and/or provision of my
services to Greenport.

4. a. I have read the section annexed hereto taken from the Penal Law Revision
(State Security, Foreign Relations and Official Secrets) Law, 3717-1957
(hereinafter "the Law") from which my obligation to keep information and secrets
connected with the security of the State and reaching me either in writing or
orally following the performance of my function is clear to me, and to refrain
from conveying the same to the knowledge of any unauthorized person and/or body
unless and to the extent that the performance of my task with which I am charged
obliges me to do.

b. It is clear to me that if I fail to obey all or any of the provisions of the
Law, I shall be liable to prosecution and to the penalties prescribed in the
Law.

5. I am aware that the breach of my obligations under this Affidavit will cause
damage to Greenport and which shall be entitled to obtain any legal remedy
against me including for damages and compensation.

                                       41


6. As an integral part of these obligations by me to keep the Information
absolutely secretly, I hereby undertake not, for a period of two years at least
after the completion of my employment at Greenport, to work in those enterprises
in Aruba which engage in the manufacture of products of the type in which I
engage in Greenport and which are in competition with Greenport.

7. I hereby confirm that I have read and understood the contents of this
Undertaking.

Date
     ---------------------------------------

Signature
          ----------------------------------





                                       42


                                   EXHIBIT B
                   TELETRAC EMPLOYEE NONCOMPETITION AGREEMENT

                    CONFIDENTIALITY AND INVENTIONS AGREEMENT

In consideration of your employment by Teletrac, Inc., its affiliates,
successors, or assigns (collectively referred to herein as the "Company"), or
your being retained on a temporary basis to do work on behalf of the Company,
either as an independent contractor or as an agency employee on assignment at
the Company, you hereby enter into the following Confidentiality and Inventions
Agreement (the "Agreement").

1. Confidentiality.

(a) Confidential Information. You agree that the Company's business and success
depend upon the development, use and protection of confidential and proprietary
information (hereinafter referred to as "Confidential Information"), including,
but not limited to, information relating to (i) the Company's trade secrets,
products, equipment, inventions, discoveries, ideas, designs, processes,
research, manufacturing techniques, production methods, technical, professional
or scientific know-how, drawings, sketches, layouts, formulas, specifications,
reports, software systems and processes, customer, vender or supplier lists,
addresses, telephone numbers, contact persons, product or pricing information,
methods of doing business or the like, (ii) information that is classified for
purposes of national security, (iii) information that is the property of a
client or any other person or entity that has a business relationship with the
Company, (iv) information that is designated by the Company as "Limited",
"Private" or "Confidential" or similarly designated, (v) marketing research and
the Company's corporate and financial structure and operations and (vi)
communications by or to attorneys (including attorney-client privileged
communications) and memos and other material prepared by attorneys or under
their direction (including attorney work product).

(b) Non-Disclosure. You acknowledge that the Confidential information is secret,
confidential and proprietary to the Company and will be (or has been) disclosed
to you or obtained, discovered, created or developed by you in confidence and
trust for the sole purpose of using the same for the sole benefit of the Company
and its customers. You agree to hold such Confidential Information in the
strictest confidence in accordance with the provisions of this Agreement, and
agree not to take or use for your own purposes or for the purposes of others, or
to disclose or permit to be disclosed to any other person or entity for its own
use or the use of any other persons or entities, any of the Confidential
Information either during your employment or after the termination of your
employment (whether voluntary or involuntary), except as authorized in writing
by the Company.

(c) Confidential Materials. You agree that all records, books, documents,
materials and other media containing or relating to the Confidential
Information, or any copy thereof (the "Confidential Materials") are and will
remain the Company's sole and exclusive property and that you will make no
copies of them except as required in the course of your employment by the
Company. You agree to deliver immediately to the Company all property belonging
to the Company, including Confidential Materials, in your possession or control
in the event of the termination of your employment, whether voluntary or
involuntary.

                                       43


2. Inventions and Discoveries.

(a) Disclosure of Inventions and Discoveries; Grant of Rights to the Company.
You agree, without further consideration other than reimbursement of expenses to
the extent hereinafter provided, to disclose in writing and assign to the
Company, and hereby grant to the Company the sole and exclusive ownership of,
including the sole and exclusive right to reproduce, use, or disclose for any
purpose, all right, title and interest in all ideas, designs, improvements,
works of authorship, inventions and discoveries (including, without limitation,
all reports, drawings, blueprints, data, software, writings, technical
information or discoveries devised or conceived by you or by you jointly with
others during any past, current or future employment with the Company), whether
or not such inventions or discoveries are patentable or protectable by
copyright, which relate at the time of conception or reduction to practice of
the invention, to the Company's business or to actual or demonstrably
anticipated research of the Company ("Inventions and Discoveries").

(b) Certain Inventions Excluded. The term "Inventions and Discoveries" does not
include any ideas, designs, improvements, work of authorship, inventions or
discoveries for which no equipment, supplies, facility or Confidential
Information or Confidential Materials was used and which was developed entirely
on your own time, and which neither (a) relates to the business of the Company
or to the Company's actual or demonstrably anticipated research or development,
nor (b) results from any work you performed for the Company. In addition, the
provisions of this Section 2 do not apply to the list of patented or unpatented,
copyrighted or copyrightable inventions owned or controlled or conceived by you
on the date of your entering employment, which inventions (including a
description of any documents relating to the same or evidencing your rights
therein) are specified on Exhibit A annexed hereto. If no such Exhibit is
attached to this Agreement, you represent that no such inventions have been made
by you on or prior to the date of this Agreement.

(c) Company Property. You acknowledge that all Inventions and Discoveries are
the sole and exclusive property of the Company and that you are required to
disclose in writing and assign to the Company all Inventions and Discoveries.
All Inventions and Discoveries are the Company's property whether or not they
are disclosed.

(d) Assignments. You agree to execute, acknowledge and deliver assignments,
affidavits and other instruments prepared by the Company or its nominee and do
such other things as will assist the Company or its nominee in obtaining, for
the benefit of the Company or its nominee, ownership rights in Inventions and
Discoveries (including, without limitation, patents or copyrights relating to
Inventions and Discoveries) during the term of your employment and after
termination of your employment (whether voluntary or involuntary). The expenses
for which the Company or its nominee shall be obligated to reimburse you shall
be limited to mailing charges and notary fees and to such payments to others
that the Company or its nominee have given prior written authorization. You
hereby irrevocably designate and appoint the Company and it's duly authorized
officers and agents as your agents and attorney-in-fact to act for and on your
behalf to execute any applications and documents required to obtain, renew or
enforce copyrights, mask work rights, or patents for the Inventions and
Discoveries.


                                       44


3. Conflicting Agreements.

You have not entered into any assignment of inventions, confidentiality, or
similar agreement other than those specified in Exhibit B annexed hereto (copies
of which have been provided to the Company). You represent that your performance
of all the terms of this Agreement and that your employment by the Company does
not and will not breach any agreement to keep in confidence proprietary
information acquired by you in confidence or trust prior to your employment to
the Company. You have not brought and will not bring with you to the Company or
use in performance of your responsibilities at the Company any equipment,
supplies, or trade secret information of any former employer, which are not
generally available to the public, unless you have obtained written
authorization for their possession and use.

4. Non-competition During Employment.

You understand that the Company expects you to devote your full energies,
efforts, and abilities to your employment with the Company. During your
employment you shall not, without the express written consent of the Company,
either as an independent contractor, employee, employer, consultant, agent,
principal, partner, stockholder (holding shares representing more than ten
percent of the voting control of a corporation), corporate officer, director, or
in any other individual or representative capacity, engage or participate in any
business that is in competition in any manner whatsoever with the business of
the Company.

5. Unfair Competition, Non-Solicitation

(a) Unfair Competition. You acknowledge and agree that the names and addresses
of the Company's customers constitute Confidential Information and that the sale
or unauthorized use or disclosure, either during or after the termination of
your employment (whether voluntary or involuntary), of any of the Confidential
Information that you obtained during the course of your employment will
constitute unfair competition. You agree not to engage in any unfair competition
with the Company.

(b) Non-Solicitation. You agree that you will not, for a period of two years
immediately following the termination of your employment, whether voluntary or
involuntary, directly or indirectly, either (i) recommend that a competitor of
the Company solicit for employment (or solicit for employment on behalf of a
competitor of the Company) any employee of the Company or (ii) call on or
solicit, or attempt to call on or solicit, any of the Company's customers with
whom you become acquainted during the course of your employment by the Company
in order to offer such customers products or services that compete with products
or services being sold to such customers by the Company.

6. General Provisions.

(a) Breaches. You acknowledge that your failure to adhere to the terms of this
Agreement will cause the Company irreparable damage for which the monetary
damages alone would be inadequate compensation. If there is a breach or
threatened breach of any provision of this Agreement, you agree that the Company
is entitled to injunctive relief without posting a bond or other security, in
addition to all other remedies. If any legal action is brought to enforce the

                                       45


terms of this Agreement, the prevailing party shall be entitled to recover
reasonable attorney's fees from the other party, in addition to any other relief
to which the prevailing party may be entitled.

(b) Changes. All changes to this Agreement will be effective only if they are in
writing and signed by you and the Company's Chief Executive Officer.

(c) Governing Law. This Agreement shall be governed by the laws of the State in
which you are employed without regard to the choice of law provisions thereof.

(d) Entire Agreement. This Agreement is our entire agreement and understanding
and superseded all other agreements, whether written, oral express or implied
concerning the subject matter of this Agreement. Neither you nor the Company has
made any representation to the other relating to the matters covered by this
Agreement that are not set forth in this Agreement. No waiver by you or the
Company of any failure to perform any obligation under this Agreement shall
constitute a waiver of further obligations.

(e) Severability. If any provision of this Agreement is held to be invalid,
illegal or unenforceable, all other provisions, sections or parts of this
Agreement that can be effective without such invalid, illegal or unenforceable
provision shall, nevertheless, remain in full force and effect to the extent
permitted by law of the state in which you are employed.

(f) Binding Effect; Assignment. This Agreement shall be binding upon you, your
heirs, executors and administrators, and shall inure to the benefit of the
Company, its successors and assigns. This Agreement (i) shall not be assignable
by you without the Company's prior written consent and (ii) may be assigned by
the Company without your consent to any successor in interest to substantially
all of the assets or business of the Company (whether by merger, sale of stock
or assets or otherwise.)

(g) Review. You agree that you have had a full opportunity to discuss the terms
and conditions of this Agreement, that you have had the opportunity to review
and analyze this Agreement, that you have been advised to have independent
counsel to do so, that you fully and completely understand all of the terms and
conditions of this Agreement and that you are signing this Agreement
voluntarily, freely and knowingly.


                                       46


(h) Effective Date. This Agreement shall be effective as of the first day of
your employment with the Company.




ACCEPTED AND AGREED                             Very truly yours
                                                TELETRAC, INC.

                                                By:
--------------------------------------------       -----------------------------
Print employee name

                                                Title:
--------------------------------------------          --------------------------


                           /
--------------------------------------------
Signature                         Date          Dated:
                                                      --------------------------





                                       47


ASSIGNMENT

Pursuant to the Radio Location System License Agreement dated December 21, 1999
(the "Agreement") by and between Teletrac, Inc., a Delaware corporation
("Teletrac"), and Greenport Enterprise A.V.V. ("Licensee") and to the Software
Sub-License Agreement dated December 20, 1999 by and between Licensee and Burns
Rohar B.V. (the "Sub Licensee"), a corporation organized under the laws of the
Netherlands (the "Sub License Agreement") and to the Royalties Agreement dated
January 1, 2002 by and between Licensee and Ituran Location and Controls, ltd.
("Ituran"), a company organized under the laws of Israel (the "Royalties
Agreement"), Licensee desires to assign, transfer and convey to Ituran NY Corp
("Assignee"), a company organized under the laws of Delaware and an __________
affiliate of Licensee and wholly-owned subsidiary of Ituran, all of Licensee's
rights under the Agreement and the Sub License Agreement and the Royalties
Agreement (the "Assignment").

NOW THEREFORE, in consideration of the mutual promises contained in the
Agreement and in this Assignment and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, Licensee, for itself and its successors and assigns, does
hereby assign to Assignee all of the rights, title and interest in, to and under
the Agreement.

IN WITNESS WHEREOF, Licensee has caused this Assignment to be executed by its
duly-authorized officer on January 1st, 2002.

In consideration for the above assignment, Assignee shall pay Licensee the sum
of USD 2,800,000, equal to the sum paid by Licensee to Teletrac pursuant to that
Agreement. The above payment can be made by remaining Licensee obligations to
third parties equal to the consideration mentioned above, therefor The above
payment shall be made directly to Ituran - transfer of _______________ at the
same amount.

                                                    /s/ RON SHAMAT
                                                    --------------



                                       48


Without derogating from the above, Assignee shall be entitled to any rights and
payments paid to Licensee by Sub Licensee, pursuant to the Sub License
Agreement.

GREENPORT ENTERPRISES, A.V.V.
By:     /s/ [illegible]
        ---------------
Name:   Karo Trust International N.V.
Title:  Managing Director

ITURAN NY CORP.
By:     /s/ Ron Shamat
        --------------
Name:   Ron Shamat
Title:  C.E.O.

ITURAN __________ B.V.
By:     /s/ [illegible]
        ---------------
Name:
Title:

ITURAN LOCATION AND CONTROL LTD.
By:     /s/ [illegible]
        ---------------
Name:
Title







                                       49




                                                                   EXHIBIT 10.13

                                          CONFIDENTIAL TREATMENT REQUESTED.
                                          CONFIDENTIAL PORTIONS OF THIS DOCUMENT
                                          HAVE BEEN REDACTED AND HAVE BEEN
                                          SEPARATELY FILED WITH THE COMMISSION.


                            CONTRACT NO: LSA 20040831

                          LICENSE AND SUPPLY AGREEMENT

                            FOR RADIO LOCATION SYSTEM

                                     BETWEEN

                                VISION PLANT INC.

                                   (CUSTOMER)

                                       AND

                            TELEMATICS WIRELESS LTD.

                                   (SUPPLIER)

                                 AUGUST 31, 2004



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

                          LICENSE AND SUPPLY AGREEMENT
                           FOR RADIO LOCATION SYSTEM
             BETWEEN VISION PLANT INC. AND TELEMATICS WIRELESS LTD.

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

This Agreement, is made this 31st day of August 2004, between on the one hand
the Korean company under the name of Vision Plant Inc. (hereinafter referred to
as the "Customer"), having its registered office at 13th FL., Sewoo Building,
837-12, Youksam-dong, Kangnam-ku, Seoul, Korea and on the other hand the Israeli
company under the name of Telematics Wireless Ltd. (hereinafter referred to as
the "Supplier"), having its registered office at 26 Hamelacha st., Holon,
Israel.

RECITALS

WHEREAS, the Customer intends to do the business of Location Based Services in
the Republic of Korea and to obtain the Business License and/or the Spectrum
License ranging 377-380? as well as 322-328.6? for the operation of a land-based
radio location system, and for that purpose the Customer plans to submit the
application for the business license to the Korean government. After the license
is granted, a new company which will run the business (hereinafter the
"Operation Company") will be formed at the initiative of the Customer;

WHEREAS, the Customer wishes to set up the System in the Territory and Region to
provide services for mobile location, short message and emergency alarm to the
Customer's subscribers;

WHEREAS, the Parties entered into Memorandum of Understanding (MOU) on 28 June
2004 as a step to discuss and sign this Agreement for mutual collaboration and
benefit of the Parties;

WHEREAS, the Supplier is in the business of supplying such Systems including the
training of personnel and pursuant to this Agreement is responsible for the
total System guarantee, provided that certain base station equipment and end
units are manufactured in the Territory;

WHEREAS, the Supplier developed base stations, vehicular units and personal
units for the identification of the units' location and receiving/transmitting
messages and is in the business of manufacturing, supplying and supporting of
such components;

WHEREAS, Special Equipment of the System have been developed by the Supplier.
The Supplier shall retain the title and ownership of the intellectual property
rights or know-how relating to the special equipment of the System, and will
possess all the licenses for other components of the System.

WHEREAS, the Customer declares that it will be able to finance the deployment of
the System in the Territory and to establish the Operation Company to
commercially operate the System, and to provide qualified and skilled personnel;
and declares that it will have the ability and personnel to manage and supervise
the operation of the System in the Territory, after the Business License and/or
Spectrum License if applicable is granted and the Operation Company is formed;
and


Agreement                                                                 Page 2



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

WHEREAS, the Supplier wishes to associate with the Customer and to provide to
the Customer the Contractual Items as described herein, relying exclusively on
the terms and conditions of this Agreement and its Annexes which shall
constitute an integral part thereof;

NOW THEREFORE, in consideration of the mutual promises, covenants, and
conditions herein contained, the Customer and the Supplier agree as follows:



ARTICLE 1 DEFINITIONS

The following terms shall have the meaning that is provided hereunder (it is
understood that other terms and acronyms / abbreviations may be additionally
defined in other locations of this Agreement):

--------------------------------------------------------------------------------
TERM                          DEFINITION
--------------------------------------------------------------------------------
Advance Payment               The sum of ___ USD to be paid in cash by the
                              Customer to the Supplier on the Commencement Date.

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

Agreement                     This Agreement executed this 31st day of August,
                              2004 between the Customer and the Supplier
                              inclusive of its Articles and Annexes which shall
                              constitute an integral part thereof.

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

Business License              Means the license. to be granted by the Korean
                              Government for the Customer or the Operation
                              Company to operate the Radio Location System in
                              the Territory and may include the Spectrum
                              License.

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

CDR                           Indicates the schedule for each Phase defined in
                              paragraph 3.2 of Annex I and stands for Critical
                              Design Review.

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

Commencement Date(s)          The date that the Advancement Payment for each
                              Phase is paid to the Supplier by the Customer
                              together with the LOC as described in Article 5.4.

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

Contractual Items             All of the items provided by the Supplier to the
                              Customer in accordance with this Agreement,
                              (including Products, Services and System specified
                              in this Agreement, Annexes, and Appendixes), as
                              specified in this Agreement, as the object of the
                              Supplier's contractual obligation.

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

the Customer                  Vision Plant Inc.

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

Customer Furnished            The equipment to be furnished by the Customer for
Equipment(FE)                 the implementation of this Agreement as specified
                              in Annex I.

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

Customer Furnished            The information to be furnished by the Customer
Information (FI)              for the implementation of this Agreement as
                              specified in Annex I.

                              For the purposes of the above definitions, i.e.
                              FE, FIN and FS the term the Customer shall include
                              the Customer's subcontractors and its suppliers.

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


Agreement                                                                 Page 3



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

--------------------------------------------------------------------------------
TERM                          DEFINITION
--------------------------------------------------------------------------------
Customer Furnished            The installations to be performed by the Customer
Installations (FIN)           for the implementation of this Agreement as
                              specified in Annex I.

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

Customer Furnished Services   The services to be furnished by the Customer for
(FS)                          the implementation of this Agreement as specified
                              in Annex I.

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

Defect(s)                     Any defect that concerns the material and / or the
                              workmanship of the Products or/and the System
                              which causes operational noncompliance with the
                              specifications of the System.

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

Demonstration System          Means the partial System to be deployed for the
                              verification of the performance of the System for
                              Phase One as specified in paragraph 3.2 of Annex
                              I.

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

Estimated Price               Shall have the meaning as described in Article
                              5.1.2.

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

Final Acceptance              Shall mean the issuance by the Customer of the
                              certification of completion of FAT following the
                              successful completion of the Processes and Final
                              Acceptance Tests in accordance with Article 10 and
                              based on the principles as outlined in Annex I or
                              upon the fulfillment of the conditions provided in
                              Article 10.1.2 hereto.

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

Final Acceptance Test (FAT)   All the tests to be conducted for Final Acceptance
                              as defined in Articles 9 and 10 and Annex I.

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

Full System Delivery (FSD)    Full System Delivery (FSD) means the acceptance of
                              the full System as described in Annex I (SOW).

                              The System shall be fully functional and shall
                              satisfy the Specifications and requirements of the
                              Agreement and they shall be ready for full
                              operational use.

                              All the following have been completed:

                              o program management,

                              o the requirements of the System including
                              definition, engineering, adaptation, installation,
                              integration, commissioning, certification of
                              conformity, training and the fulfillment of
                              Articles 9 and 10 of the Agreement and

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

                              o all contractual documentation in English and the
                              User training, operational and maintenance manuals
                              in the English language.

                              o All specified infrastructure and quantities of
                              equipment, software and services according to
                              Expected Quantity specified in Annex III have been
                              delivered and installed.

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


Agreement                                                                 Page 4



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

--------------------------------------------------------------------------------
TERM                          DEFINITION
--------------------------------------------------------------------------------
Handover Date(s)              Shall mean one (1) month after Final Acceptance
                              Date for each Phase specified in Article 10 and as
                              further specified in item k of paragraph 3.2 of
                              Annex I.

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

Integration                   The integration by the Supplier of the System and
                              the relevant parts thereof under the participation
                              and support by the Customer, as described in
                              paragraphs 4 and 5 of Annex I of the Agreement, in
                              the integration of the System.

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

Ituran Technologies           Has the meaning of all the technologies and core
                              infrastructure held by the Supplier with regard to
                              Radio Location System.

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

Letter of Credit              Letter of Credit issued by First Class
                              International Bank in the form as specified in
                              Appendix A of Annex II for the total sum of the
                              deployment cost less the Advance Payment for each
                              Phase

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

Local Licenses                Any permits, licenses and authorizations needed to
                              execute this Agreement in the Territory or Region.

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

(the) Party/Parties           The parties of this Agreement, i.e the Customer
                              or/and the Supplier.

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

PDR                           Indicates the schedule for each Phase defined in
                              paragraph 3.2 of Annex I and stands for
                              Preliminary Design Review.

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

Performance Bond              Has the meaning and form as specified in Article
                              5.5.1 and Appendix B of Annex II.

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

Phase                         Has the meaning defined in paragraph 3.1 of Annex
                              I and consists of Phase One, Phase Two and Phase
                              Three.

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

Products (or Special          Any individual item specified to be delivered by
Equipment)                    the Supplier in accordance with the terms of this
                              Agreement as part of the System including
                              hardware, software and any spare parts that may be
                              ordered by the Customer and delivered to by the
                              Supplier, as further defined in Annex I and Annex
                              III.

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

Radio Location System         This is the entire complete and operational system
(System)                      based on Ituran Technologies to provide services
                              for mobile location, short message, and emergency
                              alarm to the Customer's subscribers.

                              The System shall consist of components, including
                              but not limited to, mobile units,
                              receiving/transmitting base stations, a control
                              center, paging units, terrestrial communication
                              lines management organization and logistic
                              control.

                              This System is made up of the following separate
                              Systems:

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


Agreement                                                                 Page 5



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

--------------------------------------------------------------------------------
TERM                          DEFINITION
--------------------------------------------------------------------------------

                              o    Base Stations - for receiving and processing
                                   of the Vehicle Location Units and Personal
                                   Alarm and Locator transmissions.

                              o    Vehicle Location Units - vehicular units for
                                   receiving and transmitting messages and
                                   signals for identification of the units'
                                   location.

                              o    Personal Alarm and Locator Units - personal
                                   units for receiving and transmitting messages
                                   and signals for identification of the units'
                                   location.

                              o    Network Control Center (NCC).

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



Radio Location System         The License described in Article 4.
License

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

Region                        The Republic of Korea, the Far East and South East
                              Asian countries, including Japan but excluding:
                              China, Hong Kong SAR and Taiwan. On the
                              Commencement Date, if there is no significant
                              progress of the business by the Supplier in
                              Malaysia or Singapore or Thailand, the countries
                              in which no progress has achieved, shall be
                              included in the Region. If, on the other hand,
                              four (4) years after the Commencement Date, there
                              is no significant progress of the business by the
                              Customer in any other country as stated above, the
                              countries in which no progress has been achieve,
                              shall be excluded from the Region.

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

Services                      All services that shall be provided by the
                              Supplier under the terms of this Agreement,
                              including the design, integration, the updating of
                              software & hardware of the System, and the
                              training for the Customer's personnel.

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

Spare Parts Availability      Means that the Supplier shall for a period of
                              seven (7) years from the Handover Date for each
                              Phase, have available all spare parts required in
                              accordance with the provisions of Articles 12 and
                              41.3.

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

Spectrum License              Spectrum License to be granted by the Korean
                              Government which may be included in the business
                              license ranging 377-308? as well as 322-328.6? for
                              the operation of a land-based radio location
                              system.

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

the Supplier                  Telematics Wireless Ltd.

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

Technical Documentation       The technical documentation/ bibliography to be
                              provided by the Supplier to the Customer in
                              accordance with Article 37.

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

Territory                     the Republic of Korea

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


Agreement                                                                 Page 6



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

--------------------------------------------------------------------------------
TERM                          DEFINITION
--------------------------------------------------------------------------------
Training                      The Supplier is obliged to train selected
                              personnel of the Customer. This personnel shall
                              have, following completion of the training
                              program, the knowledge required to train the
                              personnel of the Customer in order to operate and
                              maintain the System,

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

Type Approval                 Has the meaning as specified in Article 19.

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

Warranty Bond                 Has the meaning and form as specified in Article
                              12.8 and Appendix C of Annex

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

Warranty or Warranty          Means the warranty to the Products to be provided
Obligation                    by the Supplier in accordance with the terms of
                              Article 12 hereto for a period of one (1) year
                              following the Handover Date.


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

ARTICLE 2 SUBJECT AND SCOPE OF THIS AGREEMENT

2.1 Pursuant to the stipulations, the terms and the conditions of this
Agreement, the Supplier undertakes the obligation to participate in a site
survey, design in detail, manufacture, install, test, complete, develop,
integrate, sell and deliver to the Customer the System, as specified in Annex I
and provide the Services in accordance with Annex I as well as fulfill all of
its obligations as defined in this Agreement. The Supplier shall provide the
Customer with specific hardware and software manufactured by the Supplier and
shall provide the engineering and technical planning and design of the System
and designate the qualified personnel to train and participate in the
establishment of the System as specified in this Agreement.

2.2 The Contractual Items shall be delivered and installed by the Supplier to
the installations specified in the terms and conditions of this Agreement (Annex
I). The Customer shall purchase the Contractual Items, exclusively from Supplier
during the entire period in which the Customer will run the business and
operation of the Radio Location System in the Territory or Region. The Customer
shall procure exclusively from the Supplier software, equipment and facilities,
except those developed by the Customer and not competing with Contractual Items,
required for the provision of the Radio Location System in the Region.

2.3 All Products to be delivered to the Customer shall be new and complete, have
the technology and construction defined in Annex I and shall be constructed from
high quality, new, unused material in accordance with the requirements of this
Agreement.

2.4 The Parties shall localize the Ituran Technologies for the purpose of
meeting all the mandatory technical requirements specified by the Korean
Government. The Supplier shall assist and support the Customer in the
localization of relevant portions of Ituran Technologies. The local
manufacturing of certain equipment and facilities by the Supplier shall meet the
licensing conditions set forth by the Korean Government.


Agreement                                                                 Page 7



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

ARTICLE 3 TERM OF THE AGREEMENT / EFFECTIVITY

3.1 This Agreement shall become effective at the date (Effective Date) that it
has been duly executed by both Parties hereto. This Agreement shall be
terminated unless the Customer has submitted to the Supplier the Advancement
Payment and the Letter of Credit (LOC) within twelve (12) months from the
Effective Date or the date to be extended by mutual agreement.

3.2 The duration of this Agreement (hereinafter as "Term") is ten (10) years.
The Term shall be extended automatically for a further period of ten (10) years
subject to the Customer not being in breach and/or default of any material term
or material condition of this Agreement. Upon the expiry of the second period of
ten (10) years, the currency of this Agreement shall continue indefinitely
subject to either Party giving to the other not less than three (3) calendar
years termination notice. Unless the Parties otherwise agree in writing at any
time, the provisions of this Agreement shall continue in force and effect on the
same terms and conditions.

ARTICLE 4 RADIO LOCATION SYSTEM LICENSE

4.1 The Supplier on its own behalf and on behalf of other companies that license
Ituran Technologies including Teletrac (a U.S. Company), shall grant the
Customer a sole and exclusive license to use the Ituran Technologies in the
Territory, including without limitation the System, and certain solutions and
all software of the Supplier, as long as they are incorporated in the System,
for the purpose of operating, maintaining and promoting the terrestrial
location-based services to the potential subscribers and end-users including but
not limited to, the general public, military, marine, police, and security
forces, within the Territory pursuant to the terms of this Agreement.

4.2 The Radio Location System License by the Supplier shall be comprised of the
license for the total system and the license for NCC (Network Control Center)
software per NCC. Any monthly service fee or royalty fee per subscriber or
transponder shall not be charged to the Customer in any case.

4.3 The Supplier (inclusive of Ituran and Teletrac) shall not directly, or shall
not grant any license, concerning Ituran Technologies, to any company that
intends to, provide any license for the Radio Location System in the Territory
or sublicense the Ituran Technologies to any Korean company which may engage in
such services in the Territory. The Supplier hereby declares that it possesses
all necessary licenses from other Parties (including Teletrac) to fulfill its
obligations under this Agreement.

4.4 After signing this Agreement between the Parties, the Customer or its
related companies shall not engage with other companies that provide location
technology competitive with Ituran Technologies.

ARTICLE 5 PRICE, PAYMENT AND INVOICING REQUIREMENTS

5.1 Price.

5.1.1 The total amount of the Estimated Price to be paid by the Customer to the
Supplier for the fulfillment of the Supplier's obligations under this Agreement
is described in Annex III.


Agreement                                                                 Page 8



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

5.1.2 The Estimated Price, as defined in Annex III, is calculated, among others,
on the basis of the Expected Quantity defined in Annex III, i.e. unit prices
multiplied on the basis of quantity supplied, plus the lump sum not directly
related to the quantity. For reasons of clarity, it is specified that while the
number of items defined in the Expected Quantity in Annex III may vary (increase
or decrease) the price per unit for each Phase shall remain fixed with respect
to Phases I, II and III. Accordingly, in cases of increase or decrease of the
number of the items defined in the Expected Quantity, the Price shall be
modified proportionately to such change, as aforementioned (the "Price") at
Commencement Date or later date as may be agreed between the Parties for each
Phase. Payment shall be made in US Dollars. The Estimated Price for each Phase
is quoted in Annex III. The Total Contract Price for each Phase (hereinafter
"Contract Price) is the price on the Commencement Date when the Customer
finalizes the Expected Quantity in Annex III.

5.1.3 The Estimated Price, as defined above, is FOB Tel - Aviv Israel. However,
the Customer has the right to ask the Supplier change it to CIF or other
available shipping method at his own discretion. In such case, its corresponding
price modification including transportation and insurance costs will be
applicable.

5.2 Payment Terms

5.2.1 The Customer shall pay the Contract Price to the Supplier in accordance
with the terms and conditions set forth in this Article and Annex III.

5.2.2 A fourteen (14) business days delay by the Customer in the scheduled
payment dates is considered as an Excusable Delay to accommodate fixed scheduled
payment dates of the Customer.

5.3 Income Tax

The Supplier and its subcontractors shall pay their corresponding income tax in
accordance with the provisions of the Korean or the Israeli Law or the
applicable bilateral agreement for the avoidance of double taxation, as the case
may be. The Customer is authorized for the deduction and payment by the Customer
of certain withholding taxes imposed under the Korean law. Provided that the
Customer shall provide the Supplier with an official tax receipt issued by the
competent tax authorities in Korea evidencing the payment of such withholding
tax in the content, and form sufficient for the Supplier to facilitate any tax
credits in Israel. However, if the percentage of the withholding tax will become
above ten (10) percent, the price for the relevant item which is subject to the
above withholding tax shall be increased by the difference between the actual
percentage of the withholding tax and ten (10) percent

5.4 Letter of Credit (LOC) issued by First Class International Bank for the
total sum of the Estimated Price less the Advance Payment will be provided on
the day of the Advance Payment. The content of this LOC is provided in Appendix
A of Annex II. The payment of the Advance Payment to the Supplier shall be made
directly to the bank account specified in writing by the Supplier. The payment
of the Contract Price (other than the Advancement Payment) less any withholding
tax of Korea to the Supplier shall be made through LOC.


Agreement                                                                 Page 9



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

5.5 Commencement Date(s)

Commencement Date(s) is the date that the Advance Payment for each Phase is
received to the bank account designated by the Supplier in accordance with the
payment schedule shown in this Article and Annex III. The deployment schedule
for each Phase will start from this Commencement Date.

5.5.1 Performance Bond

Within fourteen (14) calendar days of the Commencement Date for each Phase the
Supplier shall provide a Performance Bond in the face amount equal to the ten
(10) percent of the Contract Price for each Phase. The expiry date for the
Performance Bond of each Phase shall be the Handover Date for each Phase. If the
Supplier can not perform material obligations specified in this Agreement, which
are critical to the overall performance of the System, the Performance Bond
shall be withdrawn from the bank as specified in Appendix B of Annex II. If,
however, the above material obligations are eventually completed and do not
cause subsequent Termination, the amount withdrawn from the Performance Bond
shall be returned to the Supplier.

5.5.2 Anticipated Commencement Date for Phase One

After the business license from the Korean government is granted, the Operation
Company will be formed and the company will collect investment from its share
holders. The Operation Company will pay the Advance Payment within ninety (90)
days from its foundation.

5.6 Reconciliation of Accounts

Within one (1) month from the fulfillment of the Final Acceptance, the final
account reconciliation for the delivered Contractual Items shall be performed.
If a difference exists between the amount of the final account reconciliation
and the Price of this Agreement corresponding to the obligations of the Supplier
related to the Final Acceptance, this difference shall be resolved within one
(1) month from the final account reconciliation, as follows:

a. If the difference is in favor of the Customer, by payment of this difference
in cash by the Supplier in accordance with the Customer's written instructions.

b. If the difference is in favor of the Supplier, by payment of this difference
in cash by the Customer in accordance with the Supplier's written instructions.

On completion of the final account reconciliation, the Customer and the Supplier
shall sign a certificate stating that neither Party has any claims with regard
to the payment of the Price under this Agreement.

5.7 Payment for Contract Variation

Any contract Variation shall be invoiced and paid in accordance with the terms
of the Contract Variation as specified in Article 8 of this Agreement.

5.8 Banking Charges

Any banking charges, commissions, levies and other costs associated with the
payment by the Customer to the Supplier shall be for the account of and payable
by the Customer.


Agreement                                                                Page 10



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

ARTICLE 6 SPECIFICATIONS

The Contractual Items to be delivered by the Supplier to the Customer in
accordance with this Agreement shall be new, fully compatible and
inter-operational between them and in accordance with Annex I. Detailed System
Specifications will be submitted at PDR in accordance with Annex I.

ARTICLE 7 SPECIFICATION AMENDMENTS

7.1 No modifications to the specifications are allowed unless otherwise
prescribed in this Agreement or otherwise agreed between the Parties.

7.2 If the Supplier, during the implementation of the Agreement, discovers that
its technical solution does not conform to the operational Specifications
described in Annex I, the Supplier shall notify the Customer in writing,
specifying the details of the non conformance.

7.3 In this event, the Supplier shall be obliged to propose for acceptance to
the Customer, a respective modification of the specifications of the System or
part of them, for the fulfillment of the requirements of the operational
specifications that are described in Annex I, taking into consideration the
timeframe. The Customer shall provide to the Supplier approval or comments
forthwith upon the approval or comments. If the Supplier chooses to implement
modification, the cost shall be discussed and borne by the Supplier and the
timeframe shall be adjusted accordingly.

7.4 In the event the Customer requires modification of the operational
Specifications of the System or part of them not specified in this Agreement,
the Supplier shall present the reasonable cost the implementation and
incorporation of modifications asked by the Customer taking into consideration
the timeframe. If the Customer chooses to implement modification, the cost shall
be discussed and borne by the Customer and the timeframe shall be adjusted
accordingly.

7.5 Following the Agreement for the acceptance of the specifications'
modification, the procedures for the amendment of the Agreement shall be taken
in accordance with Article 40.

ARTICLE 8 CONTRACT VARIATION

8.1 Either Party may request in writing, during the course of the validity of
this Agreement, a contract variation requiring additions, deletions or
modifications to the terms of this Agreement. If the other Party consents, in
its sole discretion, to such variation then the change will be formalized as an
amendment to this Agreement.

8.2 Notwithstanding the provisions of 8.1 above, the Customer may request supply
of extra Base station equipment up to a quantity equal to a half of the original
supply quantity at prices defined in Annex I for each Phase and the Supplier
shall be bound to accept such amendment. The terms and conditions for such
supply, including timing, shall be reasonably agreed between the Parties.

8.3 A contract variation shall not become effective unless the amendment
documentation is signed by an authorized representative of each Party.


Agreement                                                                Page 11



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

8.4 The Parties shall use commercially reasonable efforts to mutually agree to a
detailed administrative procedure for the approval and documentation of Contract
Variation.

ARTICLE 9 ACCEPTANCE PROCEDURES

9.1 The Final Acceptance of the System shall be deemed to be effected in
accordance with the terms and provisions of this Article and of Article 10 and
in accordance with the principal guidelines defined in Appendix D of Annex I.
The detailed Final Acceptance Procedures will be provided on CDR. The Supplier
shall make ready the System for testing procedures in accordance with the
timetable provided in Annex I of this Agreement. A copy of the Completed
Acceptance Plan of the System regarding the testing procedures shall be drafted
and submitted by the Supplier to the Customer and shall be approved by Customer
at least thirty (30) calendar days prior to the dates the testing procedures are
scheduled to take place. The Acceptance Test Principles are described in
Appendix D of Annex I of this Agreement.

9.2 The Customer shall be responsible for a proper number of authorized
personnel to participate in the acceptance procedure.

9.3 If the tests performed during the application of the Complete Acceptance
Plan for the acceptance of the System are not successful according to the
Complete Acceptance Plan, these tests shall be repeated immediately and within
the timetable defined in the Complete Acceptance Plan, until they are completed
successfully. The Supplier shall repair malfunctions and/or failures/Defects,
which may occur in the System observing however the delivery timetable of this
Agreement.

9.4 The acceptance procedure shall be completed as soon as the following are
achieved:

a. The tests for the System have been completed by the Parties, through the
signature of the System Acceptance Report ("SSAR").

b. Every and all of the materials, equipment and other items provided in the
Bill of Quantities have been delivered, installed and tested for each one of the
System,

c. The training has been completed and the Customer's trainees have been
certified with the Certificate of Training for the operation and maintenance of
the System.

d. All of the written documentation has been delivered to the Customer.

9.5 Delay Penalty

In the event of any anticipated delay in achieving the FAT date (item j)
specified in paragraph 3.2 of Annex I, due solely to the default of the
Supplier, the Supplier shall be required to immediately notify the Customer that
such a delay will occur. Upon such notification, the Customer shall grant a
grace period of sixty (60) days to remedy the delay. If the delay has not been
remedied within the grace period of sixty (60) days, the Supplier shall pay, as
liquidated damages, for its default and as a penalty, the amount of zero point
one five (0.15%) of the total Contract Price for each Phase per day, beginning
from the thirty (30) days after the FAT date (item j), not to exceed ten percent
(10%) of the total Contract Price for each Phase. The


Agreement                                                                Page 12



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

foregoing states the entire obligation of the Supplier, and the sole remedy of
the Customer, with respect to the delay as mentioned above.

ARTICLE 10 DELIVERY - ACCEPTANCE - RISK OF LOSS OR DAMAGE

DELIVERY - ACCEPTANCE

10.1.1 The, Supplier shall deliver the System, ready for operational use, and in
accordance with the timetable specified in paragraph 3.2 of Annex I of this
Agreement.

10.1.2 The System shall be accepted by the Customer one month after the Final
Acceptance Tests have been successfully completed and the final test reports
have been approved by the Customer. In the event that the Customer has not sent
to the Supplier, any written notice regarding a Defect or non successful Final
Acceptance Test, as defined in Article 9 above, then the System shall be deemed
to have achieved Final Acceptance for the purposes of this Agreement and shall
be considered to have been accepted by the Customer within thirty (30) days
after the submission of the final acceptance test reports of the System. The
Supplier is considered to have fulfilled all contractual obligations related to
the delivery of the System and shall have the right to receive the respective
final payment.

10.1.3 All Contractual Items shall be delivered in accordance with the terms and
conditions specified in this Agreement.

10.1.4 The training shall be considered to have been provided properly, upon the
issuance and execution by the Supplier of a Certificate certifying that the
training has been completed and provided in accordance with the terms and
conditions of this Agreement.

10.2 The Supplier, upon the date of the issuance of the Final Acceptance
Certificate, shall transfer and deliver to the Customer all Contractual Items,
free from Defects, any claims of third parties, liens, encumbrances and other
legal defects.

RISK OF LOSS OR DAMAGE

10.3 All risks of loss or damage to the Products or any other Contractual Item
shall be transferred from the Supplier to the Customer on FOB basis, unless
otherwise agreed to by the Parties in writing.

10.4 In the event of loss or defect of a Product, prior to the transfer of risk
of loss and damage in accordance with this article, the Supplier shall be
required to replace it with a new one, at its own expenses.

ARTICLE 11 QUALITY ASSURANCE

11.1 The Supplier is ISO 9001 certified and during the implementation of the
Agreement shall implement a quality assurance system.


Agreement                                                                Page 13



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

11.2 The Contractual Items shall be accompanied at the time of their delivery by
a Certificate of Conformance to the requirements of the Agreement, which will be
issued and signed by the Supplier.

11.3 All quality assurance certificates related to the Contractual Items shall
be in accordance with the Quality Plan. The aforementioned certificates shall
certify that the Supplier is in conformance with the requirements of contractual
terms and the specifications in accordance with ISO 9001.

11.4 All equipment, material and supplies provided under this Agreement shall be
inspected and tested by representatives designated by Supplier to the extent
reasonably practical to assure that the quality of the equipment, materials and
supplies being incorporated, is sufficient to realize the System Acceptance Test
criteria. The inspection and test program established for such equipment,
materials and supplies shall be consistent with the commercial practices
normally employed by Supplier in the construction of System.

11.5 Factory Acceptance Test (FAT) by the Customer may be conducted at the
Supplier's premises at least 30 calendar days prior to the shipment of the
equipment. The schedule and procedure shall be presented to the Customer in due
course. At the time of FAT, all the test data for each equipment or Product
shall be presented to the Customer or its representatives. The foregoing shall
not be construed as limiting any of the Supplier's obligations under this
Agreement.

ARTICLE 12 WARRANTY

12.1 The Supplier shall provide, for the Products a warranty for a period of one
(1) year from the Handover Date. The spare parts for each Phase are listed in
Annex I.

12.2 In the event that, during the warranty period, any Defect of material may
appear, which is capable of affecting the operation of the System by the
Customer, and for which Defect the Supplier is responsible in accordance with
the terms and conditions of this Article, the following shall apply:

a. The Customer shall send the defective Product/part to the Supplier. The
Supplier shall repair or replace the defective material and send it back to the
Customer. All transportation, packaging and any custom duties costs shall be
borne by the Supplier, provided that the defect of Product/part is not caused by
any as specified in Article 12.6.

b. The Supplier shall apply the warranty period in Article 12.1 for the any
replacement by a new one from the date the Customer receives the replaced
material. The warranty period for any repaired and/or returned material shall be
extended for the repairing period.

12.3 Throughout the warranty period, the following must be observed:

a. The notification of the Supplier by the Customer, for any appearance of
material defect which is covered by this warranty, by sending a written Event
Report to the Supplier immediately after the defect's detection.


Agreement                                                                Page 14



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

b. The obligation of the Customer to avoid further use of the defective item
immediately after the defect's detection, in order to avoid further damage to
the related System.

c. The compliance with the Supplier's written and/or oral, directions for the
measures the Customer must take until operations are restored, in accordance
with the specifications.

12.4 Ownership of every item replaced in accordance with the terms of the
Warranty shall be transferred to the Supplier. Every item repaired within the
frame of the warranty shall be covered under the warranty until its extension in
accordance with Article 12.2(b).

12.5 The Products shall be stored, used, tested/ inspected and placed in
operation in accordance with the Technical Manuals and all other written
instructions issued by the Supplier.

12.6 The Warranty provided by the Supplier shall not cover defects resulting
from:

a. Damages or malfunctions caused by the use of unauthorized individuals, bad
use or non compliance or non-conformity with the Supplier's written directions.

b. Damages or malfunctions caused by:

(1) Electric power overload, fire, (excluding fire caused by defect of material)
and / or force majeure,

(2) Accidents (except for accidents caused by defects of material),

(3) Improper storage,

(4) Products from which the manufacturer's serial numbers have been removed, or,

(5) Products that have been opened or dissembled by the Customer, without the
Supplier's authorization for such action.

(6) Normal wear or tear.

(7) Vandalism or other criminal activity of third parties.

12.7 This warranty also covers the cost of parts, materials, and mechanical
parts which have suffered damages of any nature exclusively due to the defective
Contractual Item, and which damage was notified to the Supplier in a timely
manner, so that the System may be returned to a state of full and proper
operation. The Spare Parts which will be kept at the Customer's premises are
recommended and listed in Annex I.

12.8 Warranty Bond

On the Handover Date for each Phase the Supplier shall provide a Warranty Bond
in the face amount equal to the ten (10) percent of the amount of the Contract
Price (less licensing fee) for each Phase. If the Supplier cannot perform the
obligations specified in this Article, the Warranty Bond shall be withdrawn from
the bank as specified in Appendix C of Annex II and shall be used for the
replenishment of any damage, loss, costs and expenses incurred or suffered by
the


Agreement                                                                Page 15



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

Customer due to the Supplier's failure to perform its warranty obligation(s).
The Warranty Bond shall expire at the end of the warranty period.

ARTICLE 13 MAINTENANCE

The Supplier shall provide to the Customer the Maintenance Services (maintain
the System) up to Handover Date (one. month after the Final Acceptance
Certificate is issued), according to the terms and conditions stated in Annex I.
After the above period, the Parties shall negotiate the terms of a separate
Maintenance Agreement.

ARTICLE 14 TRAINING

14.1 The Supplier is obliged to provide training in accordance with this
Article, and Annex I to the trainees of the Customer in the use and operation of
the System.

14.2. The Customer, in order to facilitate the Supplier to fulfill its training
obligation as defined in Article 14.1 above and in Annex I, agrees to provide to
the Supplier the following services under the terms and conditions defined
hereinbelow:

14.2.1 The Customer shall designate the personnel to be trained by the Supplier.
The training shall be in the English language to the Customer's designated
trainees as set forth in Annex I. The training material which shall be free of
charge and used during the training shall be in the English language.

14.2.2 The Supplier shall supply a training facility in Israel free of charge as
required, in accordance with Annex I.

14.3 Following the training to be provided by the Supplier to the personnel
designated by the Customer, the latter will train the all of his additional
employees.

14.4 The personnel designated by the Customer to act as instructors (after their
training) will have the responsibility to translate the training material to the
Korean language. English versions of the training material will be provided to
the trainees with the English one being the official.

14.5 The Supplier shall, at the end of each training course, provide a
Certificate of Successful Completion of Training to each trainee who
successfully completes the training course.

ARTICLE 15 INSURANCE

15.1 Notwithstanding any provision contained herein, any Party and its
employees, agents, representatives, consultants, subcontractors and suppliers,
are not insured by the other Party, and are not covered under any policy of
insurance that the other Party has obtained or has in place.

15.2 The Contractual Items shall be insured against loss and damage during
transportation, at the Customer's cost, for their full contract value. This
insurance shall cover all risks relative to the nature of the goods, including,
without limiting the generality of the foregoing, war, strikes.


Agreement                                                                Page 16



Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

15.3 For the implementation of this Agreement, every Party and its
subcontractors shall have insurance coverage against general risks and civil
liability, which they usually conclude for their own protection. In addition,
they shall maintain the aforementioned insurance coverage in force until the
Handover Date.

ARTICLE 16 INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS

16.1 Indemnity

Subject to Article 16.3 below, the Supplier will defend, indemnify and hold
harmless the Customer, and its directors, officers, employees and agents, from
and against any and all Intellectual Property Rights claims, demands,
liabilities, actions, suits, proceedings (including reasonable attorneys' fees)
asserted by a third party arising out of or relating to, the Supplier's
performance or System or Contractual Items based upon Ituran Technologies under
this Agreement, and the Supplier agrees to undertake the cost of defending the
same, and will pay resulting costs and damages finally awarded, provided that:

16.1.1 The Customer promptly notifies the Supplier of the claim;

16.1.2 The Customer cooperates with the Supplier in the defense, provided that
the Supplier reimburses the Customer for its reasonable out-of-pocket expenses
(including reasonable outside counsel legal fees) associated with such
cooperation; and

16.1.3 The Supplier has sole control of the defense and all related settlement
negotiations, using counsel reasonably satisfactory to the Customer.

16.2 The Supplier's Obligations Regarding Infringement Claims.

The Supplier represents and warrants to the Customer that as of the Effective
Date it has not been notified of any claim that the Supplier's use of the System
violates the legally protected trade secret, proprietary right or other interest
of a third party, or infringes a patent, copyright or other intellectual
property right of a third party (a "Third Party Infringement Claim").

16.3 Third Party Infringement Claims.

If a Third Party Infringement Claim occurs as described in Article 16.1 above
with respect to one or more elements of the System, or in the Supplier's opinion
is likely to occur, the Supplier will use reasonable efforts, at its option and
expense, either to challenge such Third Party Infringement Claim or otherwise
procure for the Customer the right to continue to use, maintain and provide
support for the System, or to replace or modify the alleged infringing element
so that such element becomes non-infringing, provided that such replacement or
modification does not materially affect performance of the System and shall not
be prejudicial to the right of the Customer under Article 16.1.

ARTICLE 17 PROGRESS REVIEWS - MONITORING OF THE IMPLEMENTATION OF THE AGREEMENT

PROGRESS REVIEWS

17.1 The Supplier shall meet with the Customer to review the progress of the
Agreement implementation. The scheduled meetings shall be a means of
communication with the Customer


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Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

to examine the agenda issues which have been agreed upon or those for which the
Customer shall be required to be briefed on from time to time.

17.2 The Supplier shall submit specific issues of the agenda prior to the
scheduled review meeting. The Agenda issues shall cover, inductively, but not
limited to, issues of the development for specific Contractual Items, design and
production reviews, modifications, contractual and logistics issues, possibly
requested tests, financial issues and deliveries. The Customer must respond
within 15 calendar days from receipt of the aforementioned issues. The Customer
may request modifications and/or additional items to be discussed, so that the
scheduled agenda shall include other issues under the condition that these
changes are included in the object of this Agreement.

17.3 The specific meeting dates and the location of the meetings shall be agreed
upon between the Parties.

MONITORING OF THE IMPLEMENTATION OF THE AGREEMENT

17.4 The representatives of each Party shall adhere to the regulations and
limitations imposed by the other Party at the facilities where they shall be
housed or in the locations they shall visit.

17.5 Under the terms and conditions of the above paragraph, the Supplier shall
ensure that the Customer's representative will have access to all locations
related to the production, use and testing, performance use and testing, and the
completion, verification and quality control of the System. The Customer shall
notify the Supplier 14 calendar days in advance, regarding the visits of the
Customer's representatives and shall inform the Supplier of the number and
identities of the representatives, the purpose of the visit. The visit shall
take place during business hours. The Customer's representatives shall avoid all
acts which may hinder the smooth operation of the facilities.

ARTICLE 18 WAIVER OF RIGHTS

18.1 The waiver or the non exercise of any term of this Agreement by either of
the Parties shall not constitute a waiver of any of the rights of the said
Party. Such resignation shall be valid only if it is agreed upon in writing
between both Parties, in accordance with Article 40.

18.2 Failure or omission of either of the two Parties to impose upon the other
Party, at anytime, the application of the provisions of this Agreement or to
exercise any right provided by this Agreement shall not be interpreted as being
a present or future resignation from these provisions or rights and shall not
affect the existence/validity, enforcement of the Agreement.

18.3 The explicit resignation of any of the Parties from any of the rights
resulting from any Article or any provision contained in this document, does not
constitute a waiver/ resignation from any future right or obligation in
accordance with this Article or provision, or waiver/ resignation from any other
right which derives from any term of this Agreement, unless it has been agreed
otherwise between both Parties.

18.4 Any omission by the either Party to immediately claim any indemnification
from the other Party for any damage, costs or other expenses that will be paid
by it for the other Party's account,


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Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

shall not constitute resignation of the Party from its right to claim
indemnification for the damages, costs or other expenses and the Party has the
right to claim the aforementioned indemnification at any time, in accordance
with this Agreement.

ARTICLE 19 LOCAL LICENSES, PERMITS AND APPROVALS

The Customer will be responsible to procure the Business License, Spectrum
License, any Local Licenses and permits necessary to establish and operate the
System in the Territory. The Customer shall be responsible to obtain any other
licenses, permits and approvals necessary for the Supplier to perform its
contractual obligations, including any and all permits and approvals related to
the Supplier's and its subcontractors personnel, such as security provision
requirements, visas, work and residence permits if required, etc. Without
derogating from the above, the Customer shall assist and support the Supplier
and shall use its best efforts to arrange for the residence permits as well as
for the necessary work permits for the Supplier's personnel. With respect to the
application by the Customer for the Type Approval of end user terminal and Base
station equipment which is mandatory by the Korean governmental law, the
Supplier shall co-operate diligently with the Customer for the application.

For the above purposes, the Supplier shall make its best efforts, including
business and technical supports, to assist the Customer for the Term including
but not limited to the period from the signing of this Agreement and the
Customer's obtainment of the Business License from the Korean Government.

ARTICLE 20 COMPLIANCE WITH LAWS

20.1 The Parties specifically acknowledge that each of them and their respective
supplier's employees, agents, subcontractors, and consultants shall conduct
business within the letter and spirit of all applicable laws and regulations.

20.2 Should either Party be found to be non-compliant with any of the provisions
of the aforementioned laws; as well as of Article 19, such Party shall indemnify
the other Party for any penalty, loss or expenses incurred by the other Party as
a result of the defaulting Party's breach of any of its obligations under this
Article.

20.3 Each Party is responsible for the supervision and safety of its personnel
and the personnel of its subcontractors/suppliers. All delivered products, work
or services provided or performed under this Agreement by each Party shall be
safe for all uses contemplated by the present Agreement. The Customer is
responsible for the supervision and safety of its personnel and the personnel of
its subcontractors/suppliers.

ARTICLE 21 GOVERNING LAW / ARBITRATION

21.1 This Agreement shall be governed by and construed in accordance with the
laws of the state of New York, USA (LAW) without regard to its conflict or
choice of law provisions. This Agreement and all related correspondence shall be
written in the English language, which shall take precedence over any
translation.


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Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

21.2 Any dispute arising out of or in connection with this Agreement, including
its existence, validity or termination, shall be handled in accordance with the
following process:

21.3 The Customer and the Supplier's in-country Representative as specified in
Articles 27 and 34 shall agree to enter into negotiations to resolve such
dispute. Both parties agree to negotiate in good faith to reach a mutually
agreeable settlement within a reasonable amount of time. If after a period of
twenty (20) calendar days the dispute remains unresolved, it shall then be
solely and finally settled by binding arbitration under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce (ICC),
which rules are deemed to be incorporated by reference into this article. The
tribunal shall consist of three (3) arbitrators appointed pursuant to the rules
of the ICC and as follows: one arbitrator shall be appointed by the Customer,
one by the Supplier. The third arbitrator shall be appointed by the other two
arbitrators and shall be the president of the tribunal. The place of the
arbitration shall be the state of New York, USA. The English language shall be
used throughout the arbitral proceedings. The judgment rendered by the
arbitrators upon the award shall be final and binding upon the Parties and may
be submitted in any court having jurisdiction for the purposes of obtaining an
order of enforcement or judicial acceptance of the award, as the case may be.

21.4 The Parties shall not be entitled for any reason whatsoever, to stop the
implementation of this Agreement or/ and any of the obligations hereto. As an
exception to the aforementioned, in the event that the Customer delays the
payment to the Supplier of any overdue amount of the Price, for a period which
is longer than fourteen (14) days from the date that this amount became due and
payable in accordance with the terms and conditions of this Agreement, then the
Supplier shall have the right to stop the implementation of its obligations
until the date that the Customer will fulfill its respective obligation for
payment.

ARTICLE 22 LIMITATION OF LIABILITY EXCUSABLE DELAY

22.1 Aggregate Liability

Irrespective of the number of claims and the basis of such claims, the maximum
aggregate liability of either Party in connection with this Agreement for any
direct damages or losses, whether such claim arises in contract, tort or
otherwise, shall not exceed a sum equal to the amounts actually paid by the
Customer to the Supplier in terms of this Agreement with the addition of ten
(10) percent of the above sum. In addition, this limitation shall not apply to
any claims as a result of a Party's breach of its obligations with regard to the
other Party's intellectual property rights, in which case Section 16 shall be
applied.

22.2 Sole Liability

Either Party's (and its suppliers') obligations and liability under this Article
and this Agreement shall be either Party's sole obligations and liability to the
other Party and any third party and the Party's exclusive remedy, and the other
Party shall have no other liability whatsoever.

22.3 Excusable Delay

The liability do not apply when the Supplier is unable to complete or is late in
fulfilling its contractual obligations towards the Customer exclusively and
solely as a result of the culpable ("ipetia siberifora") behavior of the
Customer or of any of the Customer's subcontractors and/or the culpable failure
of fulfillment of the Customer's responsibilities in accordance with this


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Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

Agreement, or due to reasons of force majeure in accordance with Article 24
hereto ("Excusable Delay"), nevertheless the Parties will make their best
efforts to retain the time schedule and meet the program milestones. In cases of
excusable delays, the Customer will hold the Supplier harmless from damages and
shall not impose penalties to the Supplier.

ARTICLE 23 ASSIGNMENT OF RIGHTS AND OBLIGATIONS

Neither Party shall assign or transfer its rights or obligation under this
Agreement, in whole or in part, to a third party without the prior written
consent of the other Party. Provided, however, that Customer may at any time at
sole discretion of Customer, transfer or assign, subject always to this
Agreement and the provisions hereof, in part or in whole, the benefit of this
Agreement to any other assignee or transferee provided the same is a responsible
solvent and competent party and able to carry out and perform the provisions of
this Agreement to be performed or observed by Customer, and is not a competitor
of Supplier, and whose normal place of business is located in the Territory. It
is agreed that all the rights and obligations of the Customer shall be
automatically transferred to and assumed by the Operation Company, tentatively
named as "KLIC" (Korea Location-based Information and Communication Company
Ltd.) which will be established at the initiative of the Customer in accordance
with the Korean government business license; and in such event the Customer
shall be discharged entirely from any obligation under this Agreement, provided
that the Operation Company shall formally accept all the rights and obligations
of the Customer under this Agreement in written form. In the event the Customer
and the Operation Company agree upon the sublicense of the rights, in whole or
in part, granted to the Customer under this Agreement in lieu of the assignment
of this Agreement (as prescribed above), the Customer may sublicense its rights
granted under the Agreement, in whole or in part, to the Operation Company, at
its sole discretion without any approval of the Supplier but subject to the
timely notification of such sublicensing to the Supplier. In case of such
sublicensing, any references to the Customer in the Agreement shall be deemed as
inclusive of the Operation Company as the sublicensee of the Customer, provided
that the Operation Company has formally agreed to this in written form;
provided, always, that the Customer shall be fully responsible for the breach
of, or deviation from, this Agreement by the Operation Company (as the
sublicensee).

ARTICLE 24 FORCE MAJEURE

24.1 If either Party, due to reasons of force majeure, is not able to fulfill
its contractual obligations, and particularly to deliver the Contractual Items
within the time limits specified in Article 10 - "Delivery- Acceptance - Risk of
Loss or Damage" then the time limits for the fulfillment of its obligations and
for the delivery of the Contractual Items shall be extended for a time period
equal to the duration of the event which constitutes Force Majeure and of its
results, without imposing any applicable sanctions, under the condition that the
Supplier shall act as specified in the following paragraphs of this Article.

24.2 The proof of the event which constitutes Force Majeure and the duration of
its results, as well as the size of the negative implications of the occurring
of such an event to the smooth implementation of this Agreement, shall be the
responsibility of the Party appealing a Force Majeure event, who shall be
obliged to submit to the other Party a notification together with the proper
documents issued by the competent authorities, as the case maybe, within, at the
latest, thirty (30) calendar days from the time the Force Majeure event
occurred, while, in the event that


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Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

they are continuous, the Party appealing a Force Majeure event shall within the
same time period, specify their estimated end if possible.

24.3 Taking into consideration the special conditions of the implementation of
this Agreement, Force Majeure Events shall be deemed only those which: a) are
beyond the control of the Party suffering the events, b) they take place without
being caused by such Party's culpability, c) hinder this Party from fulfilling
its obligations despite the reasonable attempts to implement alternative means
and ways for this fulfillment. The following events shall be considered to
constitute Force Majeure, under the aforementioned conditions:

24.3.1 Destructive fires, floods, earthquakes or other natural disasters.

24.3.2 Generalized war that hinders specifically the implementation of the
Agreement.

24.3.3 Embargo or accidents that influence the transportation and delivery of
the Contractual Items.

24.3.4 Political upheaval, terrorist acts, vandalism and sabotage.

24.3.5 Interruption of power supply and other utilities or verified machinery
damage.

24.3.6 General or partial strike, declared by the legally recognized unions, at
the Supplier's facilities.

24.3.7 The announcement by the foreign affairs ministry, which on whatever
reason warn, or limits or forbids one side to travel to the other Party state.

24.4 The forgoing Force Majeure shall not be applicable to the granting and
validity of the Radio Location System License and any other matters as
contemplated in Article 4 and Extension of Business as contemplated in Article
30.

24.5 If the Parties do not agree as to the characterization of events as
constituting force majeure and / or as to their consequences to the inability of
the Party who pleads them for the nonfulfillment of its contractual obligations,
the provisions of Article 21 ("Governing Law / Arbitration") shall apply. No
Party shall unjustifiably refuse, the acceptance of a proven event of Force
Majeure.

The Party that will have been notified regarding the occurring of an event
constituting Force Majeure is obliged, within eight (8) calendar days after
receiving the information documenting the event which constitutes Force Majeure,
to notify the other Party in writing, of its acceptance or refusal to accept
that the event constitutes force majeure; otherwise, the event and its
consequences shall be considered accepted.

24.6 The Party appealing a force majeure event, shall continue to perform the
part of its contractual obligations which is not affected by the force majeure
event and shall make all reasonable efforts in order to minimize the negative
impact of this event in the fulfillment of its obligations. After the occurring
of the force majeure event, the implementation of this Agreement shall continue
in the most beneficial manner for both parties. In case that


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Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

modifications are required in the delivery timetable, the payment timetable,
etc. these shall be defined and shall be mutually agreed to within eight (8)
calendar days in accordance with Article 40 "Amendments of the Agreement", from
the time that the affected Party provided written notification that the force
majeure event is terminated.

ARTICLE 25 LOCAL MANUFACTURING AND TECHNOLOGY TRANSFER

25.1 The Parties acknowledge and confirm the need for the Local Manufacturing
and Technology Transfer in accordance with the policy of the Korean Government.

25.2 The Supplier shall supply to the Customer all necessary information and
data for relevant subsystems of the NCC required to enable the Customer to
produce Korean language versions of such software. The Customer must ensure that
all reasonable steps are taken to protect the Supplier's Intellectual Property
rights in the use of such information and data.

25.3 The Parties understand that enough samples of initial quantities for Phase
One, of mobile units and base station systems, at the discretion of the Supplier
for the purpose of initial setup and stabilization of local systems, will be
manufactured in Israel; after which, will be locally manufactured in Korea to
facilitate the delivery and operation and maintenance support, and to minimize
customs duties and any other miscellaneous costs. The local manufacturers, shall
be chosen from the list of candidate companies provided by the Customer and
shall be evaluated and approved by the Supplier. The Supplier shall be
responsible for the Local Manufacturing process and the Customer shall be
constantly updated on the progress and any problems with regard to the Local
Manufacturing process.

25.4 The System, including without limitation the mobile units and Base Station
systems manufactured locally, shall be guaranteed by the Supplier

25.5 Further Development

It is acknowledged that the Customer desires that the Supplier shall expedite
its current miniaturization plan for the mobile units (2 ASICs - digital and RF)
preferably with the target to start testing of the prototypes in December, 2004
with mass production starting in the third quarter of 2005. The schedule of
supply of Korean version of the mobile units, based on the above ASICs, will be
agreed upon between the Parties. The Parties agree that the mass production of
base stations and handsets for Korean and other markets in the Region shall be
done in Korea, under mutual agreement between the Parties. The Parties further
agree that the mobile units should be continuously miniaturized after the
initial plan described above so that the mobile units can be ultimately
integrated into mobile and stationary assets, and any other applications. The
terms and conditions for further development and improvement of Base Station
system and mobile units shall be mutually discussed and agreed between the
Parties.

25.6 Procurement for the Standard. Equipment

The Parties agree that the Standard Equipment (equipment which is readily
available from different vendors) can be procured directly from local
manufacturing companies who will be elected by the Customer in accordance with
the specifications provided by the Supplier, provided that the performance of
such standard equipment shall not be detrimental to the total system guarantee
by the Supplier.


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Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

25.7 Supply of the Supplier's Software

25.7.1 From the commencement Date and prior to the Handover Date, the Supplier
will have the following obligations to the Customer, as specified in paragraphs
12 and 13 of Annex I of this Agreement:

a. Supply the Supplier's software required to operate the System provided by the
Supplier;

b. Supply the Supplier's software required to operate the Customer's fleet
management system at the cost as specified in Annex III upon the Customer's
request.

c. Provide necessary training in the System as described in paragraph 3.3 of
Annex I to enable the Customer's personnel to operate fleet management system
and to assist the Customer in the marketing of the Products and Services and
render maintenance.

25.7.2 Except as otherwise provided in this Agreement, the Supplier shall supply
the Supplier's software to the Customer on the terms and conditions set out in
Annex I. From the Handover Date, the Supplier will, at the Customer's request
and the Customer's expense:

a. Provide additional training to the Customer;

b. Provide the Supplier's software and infrastructure hardware support not
included in Annex I.

25.7.3 From the Handover Date the Supplier will at the Customer's request
undertake development work requested by the Customer not otherwise specified in
this Agreement, on fair commercial terms and providing such development is
consistent with the Supplier's overall development strategy and resource
availability.

ARTICLE 26 SUCCESSORS

This Agreement shall inure to the benefit of, and shall be binding upon the
Parties hereto and their successors, and legal representatives.

ARTICLE 27 TECHNICAL AND CONTRACTUAL REPRESENTATIVES

27.1 The Parties shall designate and notify in writing to the other Party
technical and contractual authorized representatives.

27.2 All communications shall be in English. Communications that could affect
the Agreement's Price, schedules, statement of work, or these terms and
conditions shall be made only with the authorized contractual representatives
noted above. No changes to this Agreement shall be binding upon either Party
unless incorporated in a written modification to the Agreement and signed by the
contractual representatives of both Parties.

ARTICLE 28 COOPERATION

Each Party and their respective employees, agents, subcontractors, vendors and
consultants shall fully cooperate and not interfere with the performance of
employees, agents, other


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Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

subcontractors, vendors or consultants of other persons or entities working for
the implementation of the System. Each Party shall be fully responsible for any
breach of this Agreement attributable to the fault of its subcontractors.

ARTICLE 29 RELATIONSHIP OF PARTIES

The Parties and their respective subcontractors are independent contractors and
nothing contained in this Agreement shall be deemed or construed to create a
partnership, joint venture, or other relationship other than that of the
Supplier and the Customer or those mentioned in any other Agreement between the
Parties. Each Party will be solely responsible for payment of all compensation
owed to its employees, its subcontractors as well as employment related taxes
and for the performance of the works by its subcontractors.

ARTICLE 30 EXTENSION OF BUSINESS

It is agreed that, for the purpose of securing mutual benefits, the Customer
will be authorized to explore potential business opportunities based on the
Ituran Technologies in the Region by means of equity investment, joint venture
or the license of Ituran Technologies on behalf of the Supplier and/or Ituran.

More specifically, the Customer will be authorized to perform the following:

a. To search for any potential investor(s) or licensee for the engagement in
System business in a country within the Region;

b. To introduce, present and promote to such potential investor(s) or licensee
major aspects of the Supplier's Technologies and the Systems;

and

c. To establish certain terms and conditions related to the creation,
performance, development and expansion of any potential business with such
investor(s).

It is also acknowledged that the Customer will have the first right of refusal
for the System in the Region and confirmed that all potential deals and terms
and conditions are subject to the prior consent of the Supplier.

ARTICLE 31 CONFIDENTIALITY

31.1 All information obtained by the Customer and the Supplier relative to the
Supplier or the Customer, for or in connection with this Agreement, including
but not limited to information obtained during proposal and pre-proposal efforts
and Agreement negotiations, site visits and meetings shall be considered
confidential. Accordingly, each Party agrees that it will not disclose to any
person such confidential information unless that person has a need to know for
the implementation of this Agreement, and is bound by confidentiality
obligations consistent with those in this Article. Further, each party shall use
confidential information solely for the performance of this Agreement and for no
other purpose. Confidential information shall include, but not be limited to,
the features of any equipment, tools, gauges, patterns, designs, drawings,


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Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

specifications, engineering data or other technical, financial, business, or
proprietary information furnished by or relating to the Supplier or the
Customer. Each Party also agrees to abide by any restrictive legends placed on
such information. Upon completion or termination of this Agreement, each Party
shall return all such information to its owner or make such other disposition
thereof as may be directed or approved by such party.

31.2 The Parties may be required to disclose certain information in order to
acquire certain approvals required by each Party's Government or under any law.
Such information may include specifications, technical and financial
information, plans, technical reports and other similar information required for
export/import license acquisition. Each Party shall inform the other before
making such disclosures. Prior to disclosing such information, the disclosing
Party shall notify the receiving party in writing, or by appropriate markings on
the documents, that the information is confidential, proprietary, or for "strict
official use," as applicable. Proprietary or confidential information shall not
include information which, at the date of signature hereof, or thereafter (i)
becomes public domain, by no fault of either Party, (ii) is known to each Party
prior to being disclosed by the other Party (iii) is developed independently by
each Party (iv) becomes generally known in the industry to which it pertains, or
(v) is legally obtained by each Party at anytime from other sources who are not
subject to proprietary restrictions. The Party shall have the burden of proof in
establishing any of the above mentioned exceptions.

31.3 Any Party may disclose any information, required by any law.

31.4 Similarly, it may be necessary to disclose certain information to the
subcontractors and suppliers of each Party for the performance of the Agreement.
In that case also, each Party shall observe the same restrictions as described
above. In addition, each Party shall execute with such subcontractors and
suppliers a non-disclosure Agreement with terms consistent with this Article.

ARTICLE 32 INTELLECTUAL PROPERTY, OWNERSHIP, PATENTS

32.1 The Supplier agrees to pay all license fees owed by the Supplier to any
third party by reason of performance of the Supplier on this Agreement. The
Customer agrees to pay all license fees owed by the Customer to any third party
by reason of performance of the Customer on this Agreement.

32.2 The Supplier and the Customer shall each retain ownership of, and all
right, title and interest in and to, their respective, pre-existing technology.
For matter of clarity, all trademarks, trade names, copyrights, patents and
other intellectual property rights used or embodied in or in connection with the
Contractual Items developed by the Supplier, and all documentation and manuals
relating thereto shall be and remain the sole property of Supplier, and Customer
shall not during or at any time after the expiry or termination of this
Agreement in any way question or dispute the ownership by the Supplier of any
such rights.

32.3 Licenses and Technical Documentation.

a. The Supplier grants the licenses to the Customer for the technology as set
forth in Article 4. Such licenses shall be non transferable except as specified
in Article 23. The intellectual property rights associated with such licenses
shall be owned by the Supplier or the Supplier's subcontractors and suppliers.
The licenses are granted in this Agreement for use by the


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Vision Plant Inc.           CONTRACT NO: LSA 20040831   Telematics Wireless Ltd.

Customer or any permitted assignee. The licenses shall not grant the right to
reverse engineering, copy, manufacture or reproduce any of the Contractual Items
delivered hereunder by the Supplier.

b. All of the documentation provided to the Customer and in accordance with this
Agreement shall be complete and shall correspond to the most current version of
the accompanying products as they have been delivered to the Customer.

ARTICLE 33 PUBLICITY AND DISCLOSURE

Neither Party shall use the name or logo of the other Party in any news release,
public announcement, advertisement or other from of publicity, or disclose any
of the terms or subject matter of this Agreement to any third party except as
may be required by the law and for the performance of this Agreement, without
securing the prior written consent for the other party's Contractual
Representative.

ARTICLE 34 NOTICE

Any notice to be given hereunder by either Party to the other shall be in
writing and signed by an authorized representative in the English language and
shall be deemed received when delivered by confirmed facsimile or recognized
courier. The Parties agree that notices delivered orally, or by electronic mail
on the Internet or by intranet, do not constitute official, enforceable notices
under this Article. Notices to the Customer shall be addressed to:

VISION PLANT INC.

13th FL., Sewoo Building
837-12, Youksam-Dong
Kangnam-Ku, Seoul, Korea
Tel: +82-2-508-0010
Fax: +82-2-508-0062
Attn: Chief Technology Officer

Notices to the Supplier shall be addressed to:

TELEMATICS WIRELESS LTD

26 Hamelacha St., Holon, Israel
Tel: +972-3-5575757
Fax: +972-3-5575703
Attn: Vice President of Marketing

If either Party changes its address or facsimile number (or any part thereof)
during the Term, it shall so advise the other Party in writing. Any notice
thereafter required to be given shall be sent by a recognized courier or fax to
such new address or to the new or revised facsimile number.

ARTICLE 35 LIABILITY

IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY DAMAGES OR FOR ANY
LOST REVENUES, LOST PROFITS, OR OTHER, INDIRECT,


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Vision Plant Inc.          CONTRACT NO: LSA 20040831    Telematics Wireless Ltd.

SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES CAUSED, IN WHOLE OR IN
PART, BY THE LICENSING, USE OR SALE OF THE SYSTEM OR ANY PART THEREOF,
INCLUDING, BUT NOT LIMITED TO, ANY LICENSE OR OTHERWISE ARISING OUT OF OR
RELATING TO THIS AGREEMENT. NOTHING IN THIS ARTICLE SHALL RELIEVE THE CUSTOMER
OF ANY OBLIGATION TO PAY TO THE SUPPLIER AMOUNTS DUE AND OWING UNDER THIS
AGREEMENT AND DEVELOPMENT, TRAINING AND SUPPORT CHARGES UNDER THIS AGREEMENT.

ARTICLE 36 TERMINATION

36.1 The Customer may, by written notice of default to the Supplier, terminate
the whole or any art of this Agreement, in any one of the following
circumstances:

a. The Supplier fails for reasons due to his liable behavior to make delivery of
the Contractual Items within ninety (90) days after the each Milestone date set
forth in paragraph 3.2 of Annex I or any extension thereof due to Force Majeure
reasons or any extension due to Excusable Delay, as defined in Article 22.3 of
this Agreement; or

b. The Supplier fails for reasons due to his liable behavior to perform any of
its material contractual obligations, according to the principles of good faith,
despite the fact that it has been notified by the Customer in accordance with
Article 36.2; or

c. The Supplier becomes insolvent or the subject of proceedings under any law
relating to the relief of debtors or admits in writing its inability to pay its
debts as they become due.

36.2 Procedure for Termination

If one or more reasons stated in Article 36.1 hereinabove occurs, the following
procedure shall apply:

Termination by the Customer

a. The Customer shall send written notification to the Supplier regarding the
Customer's intent to declare this Agreement terminated, indicating the specific
breach of the Supplier's contractual obligation and requesting the Supplier to
take any action or actions necessary to remedy the situation.

b. The Supplier shall have the obligation to remedy the breach within ninety
(90) calendar days from the date the written notification was received, or, if
the breach for which the Supplier is responsible cannot be remedied within
ninety (90) calendar days, the Supplier shall have the obligation to propose a
remedy and timetable for fulfilling the proposed remedy.

c. If the Supplier fails to remedy the violation for which the Supplier is
responsible within ninety (90) calendar days from the time the written notice is
received, or the Supplier fails to propose a remedy and a timetable of
implementation of the proposed remedy within ninety (90) calendar days, the
Customer shall have the right to terminate the Agreement, in whole or in part,
by sending written notification to the Supplier specifying further the reasons
for calling the Agreement terminated and the effective date of the Termination.


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Vision Plant Inc.          CONTRACT NO: LSA 20040831    Telematics Wireless Ltd.

36.3 If this Agreement is so terminated, the Supplier shall be responsible for
the loss and damage of the Customer (including without limitation any amount
paid by the Customer prior to the Termination) attributable to the fault of the
Supplier, always subject to Articles 22.1, 22.2 and 35 above. In case of such
Termination, the Customer shall have the right to withdraw the Performance Bond
as a part of its remedy. In case of the occurrence of delay in excess of ten
(10) percent of the Contract Price for each Phase as contemplated in Article 9.5
above, the right of the Customer to terminate this Agreement pursuant to Article
36.1 and the foregoing obligation of the Supplier shall not be affected by the
Delay Penalty by the Supplier pursuant to Article 9.5 above. Provided, however,
that if, prior to the Termination, the Customer has exercised the option of the
Delay Penalty as specified in Article 9.5, the amount paid by the Supplier to
the Customer as the Delay Penalty shall be deducted from the sum to be paid to
the Customer due to the Termination as described above. Further, the Letter of
Credit shall become no more valid and effective upon the receipt by the issuing
bank of a written notice from the Customer for the Termination of this Agreement
pursuant to Article 36.1 above.

36.4 The Supplier shall continue performance of this Agreement to the extent not
terminated and so requested by the Customer.

36.5 In the event that the Customer terminates the Agreement for Force Majeure,
this Agreement shall be terminated without liability or claims by either party
as a result thereof. The Parties shall settle all open accounts, and the
Supplier shall not be entitled for any reason whatsoever, to claim lost profits
or consequential damages or costs resulting from such termination.

36.6 Termination by the Supplier

The Supplier shall be entitled to terminate this Agreement as stated in Articles
36.1 - 36.5 above, mutatis-mutandis.

36.7 Time Schedules

In a case either Party is in a breach of an obligation, all time schedules shall
be postponed respectively, for the period of the breach.

ARTICLE 37 TECHNICAL DOCUMENTATION (BIBLIOGRAPHY)

37.1 The Supplier shall provide at no separate cost to the Customer, enough
copies of each technical bibliography and -maintenance- training bibliography in
writing and electronic form if possible. The manuals shall accompany all
technical equipment provided, including the manuals of use as well as those of
the management of maintenance of the System. The documentation shall include:

a. Base Station Specifications

b. Base Station Infrastructure Requirements Specifications

c. Vehicle Location Unit Specifications

d. Vehicle Location Unit General Installation Instructions


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Vision Plant Inc.          CONTRACT NO: LSA 20040831    Telematics Wireless Ltd.

e. Personal Location Unit Specifications

f. Fleet Management Post Operating Manual

g. Control Center Diagrams

h. Control Center Infrastructure Requirements Specifications

i. Control Center Operating Procedures

j. VLU and PAL Registration and Activation Procedure

k. System Acceptance Test Procedures

l. Monthly Progress Reports

m. Design Reviews Documentation

n. Project Organization Chart

37.2 All the manuals of operation and other documentation shall be provided in
English language.

37.3 The manuals for standard commercial type (COTS: Commercial Off The Shelf)
shall be delivered in the same form they were created by the manufacturer in
English, provided however this equipment is supplied by Supplier.

37.4 The exact quantities of the bibliography shall be defined in PDR by the
Customer.

37.5 The Technical Documentation to be delivered to the end users shall cover
the operation and the maintenance of the first stage (first line maintenance) of
the System to the extent that is provided in this Agreement.

37.7 The Supplier guarantees the completeness and correctness of the Technical
Documentation to be provided to the Customer.

ARTICLE 38 SEVERABILITY

If any term of this Agreement is held or finally determined to be invalid,
illegal or unenforceable in any respect, in whole or in part, such term shall be
severed from this Agreement, and the Parties shall exercise their best efforts
in order that the remaining terms contained herein shall continue in force and
effect.

ARTICLE 39 INTERPRETATION

The captions and headings used in this Agreement are solely for the convenience
of the Parties, and shall not be used in the interpretation of the text of this
Agreement. Each Party has read and agreed to the specific language of this
Agreement; therefore no conflict, ambiguity or doubtful interpretation shall be
construed against the drafter.


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Vision Plant Inc.          CONTRACT NO: LSA 20040831    Telematics Wireless Ltd.

ARTICLE 40 AMENDMENTS OF THE AGREEMENT

This Agreement may not be modified unless in writing duly executed by the
authorized representatives of both Parties and with specific reference to this
Agreement.

ARTICLE 41 GENERAL TERMS

41.1 The Parties under the Agreements agree that the Supplier and its affiliated
companies shall not engage in any business connections in the Region regarding
the System except through the Customer or related companies that have major
participation from the Customer. The Parties under the Agreement agree that the
Customer and its affiliated companies shall not engage in any business
connections in the Region regarding location based service except through the
Supplier or related companies that have major participation from the Supplier.

41.2 Any future business changes of the Supplier, such as changes in share
holders, any merger with a third party, sale/assignment of entire and material
part of its business and/or assets, and change of names, etc, shall not affect
the full rights enjoyed by the Customer under this Agreement and accordingly any
future business changes of the Customer, such as changes in share holders, any
merger with a third party, sale/assignment of entire and material part of its
business and/or assets, and change of names, etc, shall not affect the full
rights enjoyed by the Supplier under this Agreement.

41.3 In the event that Spare Parts are ordered by the Customer, their prices
shall be as described in Annex III of this Agreement. The specification provided
for the Products apply also to Spare Parts.

ARTICLE 42 CUSTOMER FURNISHED EQUIPMENT - INSTALLATION -INFORMATION - SERVICES

42.1 The Customer shall make available to the Supplier all of the Customer
Furnished Equipment (FE), the Customer Furnished Information (Fl), the Customer
Furnished Installations (FIN) and the Customer Furnished Services (FS) free of
charge, in a timely manner, in accordance with the provisions set forth in
paragraph 11 of Annex I and in general, in such a manner so as not to delay the
time schedule. In the event of any delay, and / or if the FE, the FF, the Fl and
the FS prove not to be in compliance with the requirements of paragraph 11 of
Annex I or it is proven that they are defective or incorrect, the provisions of
Article 22.3 will apply.

42.2 The Supplier shall be responsible for the, Customer Furnished Equipment
(FE), the Customer Furnished Information (Fl), the Customer Furnished
Installations (FIN) and the Customer Furnished Services (FS), for the time that
they shall be in its possession. In the event of expiration or termination of
this Agreement, the Supplier shall be obliged to return them to the Customer,
forthwith, in the good condition that they were provided to it subject to normal
tear and wear.


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Vision Plant Inc.          CONTRACT NO: LSA 20040831    Telematics Wireless Ltd.

ARTICLE 43 ORDER OF PRECEDENCE

This Agreement and all of the Annexes attached hereto are intended to be read
and construed in harmony with each other, but in the event of an inconsistency
or conflict between provisions of this Agreement, the inconsistency or conflict
shall be resolved by giving precedence in the following order:

o In case of inconsistencies between the Articles and the Annexes, the Articles
will prevail for any commercial matters, but for any technical matters Annexes
will prevail.

o In case of inconsistencies between the Annexes and the Appendices, the Annexes
will prevail.

ARTICLE 44 ENTIRE AGREEMENT

This Agreement, including all documents enclosed and signed, shall constitute
the entire Agreement and understanding between the parties hereto and shall
supersede and replace any and all prior or contemporaneous representations,
agreements or understandings of any kind, whether written or oral, relating to
the subject matter hereof.

ARTICLE 45 COSTS

Each Party shall bear its own costs including local stamp duty or other taxes or
levies in relation to the negotiation, preparation and execution of this
Agreement.

ARTICLE 46 LIST OF ANNEXES

The following is the list of Annexes contained in this Agreement

ANNEX I - System Deployment in Korea Statement of Work (SOW)

ANNEX II - Letter of Credit, Performance Bond, Warranty Bond

ANNEX III - Estimated Price and Payment Terms


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Vision Plant Inc.          CONTRACT NO: LSA 20040831    Telematics Wireless Ltd.


In consideration of the mutual obligations assumed under this Agreement, the
Customer and the Supplier agree to this Agreement which is executed by duly
authorized representatives as of the dates below.

AGREED BY:

VISION PLANT INC.                                TELEMATICS WIRELESS LTD.


By:    /s/ Chi Young Kwack                       By:    /s/ Kafry Eddy
       -------------------------------                  ------------------------
Name:  Chi Young Kwack                           Name:  Eddy Kafry
Title: President and CEO                         Title: President and CEO
Date: August 31, 2004                            Date: August 31, 2004


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Vision Plant Inc. Telematics Wireless Ltd.

                                    ANNEX I

                           SYSTEM DEPLOYMENT IN KOREA

                            STATEMENT OF WORK (SOW)

1. GENERAL

This document provides a description of the activities to be carried out by the
Supplier and the Customer as a part of the deployment of Radio Location System
in the Territory, including the responsibilities of each Party.

To insure successful deployment and based on the experience of previous
deployments of this System in other countries, a "Phased" approach is proposed.
It is based on the initial deployment of Phase One System in Seoul metropolitan
and its vicinity areas. Phase One will serve as a basis for the future
deployments, will enable proper adaptation to specific local conditions, to
train local technical and operational personnel and to serve as an initial and
demonstration System for various marketing activities. After completion of Phase
One deployment, its initial trial run and performing all necessary further
modifications and adaptations, further deployment can be commenced. The Phase
One System will also serve as a basis for the System Acceptance Testing, after
successful completion of which the System and the issuance of System Acceptance
Certificate will be officially handed over to the responsibility of the Customer
(or the Operation Company).

The total System shall be guaranteed by the Supplier, provided that the Customer
shall do reasonably best efforts to collaborate with the Supplier.

2. SYSTEM DESCRIPTION

The System for locating vehicles, cargo; people and etc., and exchanging short
messages and receiving alarms is composed of the three following sub-systems:

i. Network Control Center (NCC)

ii. Base Stations

iii. End User Terminal

     o    PAL (Personal Alarm and Locator)

     o    VLU (Vehicle Location Unit)

     o    Transmitter/receiver installed in the cargo, asset or etc.

2.1  NCC

The NCC is usually installed in the same building with other offices of the
Operation Company. The NCC is composed of a number of computer systems with
dedicated software, workstations


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for operators, and communication systems that connect NCC with the Base
Stations. The NCC is the heart of the system, and its availability is of the
utmost importance. NCC's systems have a hot backup and all its infrastructures
(electricity, communication lines, air-conditioning, etc.) are also backed-up. A
general description of the NCC is provided in Appendix E of this Annex. The
Operator Station's language will be both the English language and the Korean
language. The back-office capabilities, including billing are not part of the
proposed System in this Agreement and should be chosen by the Customer based on
the local systems and regulations from local vendors. However, for the
clarification purposes, all the technical supports for the interface of the
capabilities shall be provided by the Supplier.

2.2 BASE STATIONS

The Base Stations are installed in the chosen locations scattered in required
coverage area and constitute receive-only or receive/transmit sites. The Base
Stations include computer-controlled receivers that receive signals from the VLU
or PAL and transfer the information to the NCC via the communication lines for
further processing and display.

Some of the Base Stations are equipped with standard paging transmitters
controlled by special controllers. The transmitters receive the information from
the NCC and transmit it to the VLU or PAL in a synchronized form. These
transmissions serve for synchronization of all active VLUs/PALs and
interrogation of the chosen unit. The transmitters are timed by GPS receivers
installed at the stations.

Some of the Base Stations contain special synchronization transmitters,
responsible for precise calibration of the stations. All of the stations are
equipped with appropriate antennas installed on masts, lightning protection
systems, air-conditioning and UPS systems.

2.3 GENERAL SYSTEM DESCRIPTION

The System and certain equipment and facilities to be provided by the Supplier
shall meet the following specifications:

2.3.1 The System shall be based upon TDOA (Time Difference of Arrival) and DSSS
(Direct Sequence Spread Spectrum) technology for location, messaging and alarm
on the uplink in the direction of mobile unit (end user terminal) to Base
Station, and *** FSK (Frequency Shift Keying) paging transmission technique for
both control signaling and messaging on the downlink in the direction of Base
Station to mobile unit. All the technologies shall be state-of-the-art and
field-proven with commercial and enough billable customers in at least three
other countries.

2.3.2 The System shall be able to support basically TDMA, and CDMA for
additional capacities on the uplink, and FDMA on the downlink.

2.3.3 The System shall operate on the following frequency and channel bandwidth:

i. Uplink: *** channel bandwidth ***



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ii. Downlink: *** allocated channel bandwidth

2.3.4 The chip rate of the Systems shall be *** chips/sec or higher.

2.3.5 Positioning reliability and accuracy for the System shall meet the
following criteria:

i. Service areas

     o    Open area, suburban, dense urban, urban canyon, indoors, underground,
          etc., the specific conditions of which is defined hereinunder

     o    Open area: An area where there is no obstacle like tall trees or
          buildings

     o    Sub-urban: A town scattered with buildings or houses lower than

     o    Urban: A city scattered with buildings or houses (10-15 stories)

     o    Dense Urban: A built-up city crowded with large buildings (higher than
          15 stories)

     o    Urban Canyon: In-between areas of higher than 20-story building

     o    Indoors: Inside building with typical wall substance

     o    Underground: Basement-1 (B-1) or B-2 (when achievable)

ii. Target objectives for positioning reliability and accuracy

     o    Mandatory requirement: *** Mandate (Handset-based)

     o    Best efforts to meet the: ***

iii. Testing and Analysis methods

Tested and averaged with sufficient number of samples on each service areas of
each Phase as specified in paragraph 3 of Appendix D of this Annex.

2.3.6 The mobile unit to be installed in the vehicle will be able to be
interfaced with sensors in the vehicle to deliver the velocity and driving
distance of the vehicle to NCC if necessary or requested.

2.3.7 The System shall meet spurious or unwanted emissions requirements
specified or to be further specified by the Korean government. Paragraph 2.4 of
this Annex are the technical specifications and the spectrum analyzer setting
for the measurement of the technical specifications as the minimum to be met. In
case the Korean Government modifies the specifications, the Customer shall
notify the Supplier of the change, in which case the Supplier shall have the
obligation to meet the reasonably modified specifications.

2.3.8 Broadcasting, multicasting, simulcasting and unicasting of paging
transmissions from NCC to mobile units shall be possible. The paging
transmissions shall perform the


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synchronization of the whole network by the transmission of the synchronization
signal ones every 16 frames. All mobile units as well as base stations receive
the synchronization signal and maintain the TDMA structure based on this. All
paging transmissions and location or message responses from mobile units shall
be synchronized according to this distributed timing.

2.4 DETAILED TECHNICAL SPECIFICATIONS OF THE SYSTEM

2.4.1 Frequency range for the service

i. Base Station to end user terminal ***

ii. End user terminal to Base Station ***

2.4.2 Transmission equipment to be installed at Base Station

i. Emission designation : ***

ii. Output power at the output of paging transmitter : ***

iii. Frequency error : *** of the designated frequency

iv. Occupied bandwidth : ***

v. Spurious emission requirements ***

2.4.3 Transmission at end user terminal

i. Emission designation : ***

ii. Output power (P) at the output of the end user terminal : ***

iii. Frequency error : *** of the designated frequency

iv. Occupied bandwidth : ***

v. Unwanted emissions requirements

     o    The total power of *** RBW (Resolution Bandwidth) range measured at
          the frequency farther than *** from the designated frequency shall
          be at least *** lower than the average power measured at
          the designated frequency.


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     o    The total power of *** RBW measured at the frequency farther

     o    than *** from the designated frequency shall be at least *** lower
          than the average power measured at the designated frequency.

2.4.4 Settings for Spectrum Analyzer for the measurement

i. General requirement

     o    The spectrum analyzer should be capable of the automatic measurement
          of power and occupied bandwidth (*** Series or more advanced)

ii. The power to the antenna measured at the output of paging transmitter

     o    Center frequency : ***

     o    Span : ***

     o    Channel power bandwidth : ***

     o    Average : ***

     o    RBW(Resolution bandwidth), VBW (Videobandwidth), Sweep : ***

iii. Occupied bandwidth

     o    Center frequency : ***

     o    Span : ***

     o    Average : measure more than *** times and averaged

     o    RBW, VBW, Sweep : ***

     o    Measure *** RF energy at the above setting

iv.  Unwanted emissions

     o    Average power of the designated frequency

          o    Center frequency : ***

          o    RBW : ***

          o    VBW, Sweep : ***

          o    Average : measure more than *** times and averaged


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          o    At the above conditions, move the marker at the center frequency
               and measure the level (example : *** )

          o    Average power of the designated frequency ***

     o Average power of the unwanted emissions

          o    Center frequency : ***

          o    RBW : ***

          o    VBW, Sweep: ***

          o    Average : measure more than *** times and averaged

          o    At the above conditions, move the marker at farther than *** from
               the center frequency and measure the level (example: *** ) is not
               applied in this case * (Regulation)]

          o    Average power of the designated frequency - Average power of the
               unwanted emissions = ***

2.4.5 Minimum capacity of location determination

i. *** locations per second per CDMA/FDMA on the uplink

ii. A multiple of "a" shall be achieved with each CDMA application (up to ***
CDMA) for additional capacity.

iii. The detailed procedures for the test shall be provided at PDR.

2.4.6 Transmission rate of short message transmission

i. Uplink : ***

ii. Downlink : up to ***

iii. The detailed procedures for the test shall be provided at PDR.

2.4.7 Minimum receiving sensitivity

i. Uplink (at the receiver of the Base Station)

     o    Location : ***

     o    Messaging : ***


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ii. Downlink (at the end user terminal) : ***

2.4.8. Requirements for end user terminals

The mobile units will have all the functions required for the normal operations
with user interfaces and Base Stations. Particularly, the units will be able to
identify the remaining capacity of the battery and inform the NCC. Other typical
and specific functions shall be provided.

3. SCOPE OF THE WORK

3.1 GENERAL

The number of Base Stations needed for the deployment depends on the size of the
required coverage area and environmental conditions.

It is roughly estimated that the following number of Base Stations will cover
the intended coverage for each Phase as shown in next page. The exact number of
the Base Stations will be determined when the final radio network design is
completed, preferably prior to the Commencement Date.

i. Phase One : *** Base Stations (approximately *** square kilometers)



ii. Phase Two : *** Base Stations (approximately *** square kilometers)

iii. Phase Three : *** Base Stations

[GRAPHIC OMITTED]


Note

1. The coverage in the map is just for illustration purpose and is not on the
same scale for each Phase.

2. Phase One : Seoul metropolitan and its vicinity areas

3. Phase Two : Five (5) other major metropolitan cities

4. Phase Three : Across-the-country coverage including Cheju-Do


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3.2 PROJECT MILESTONES

The following are the major milestones of each Phase and their corresponding
completion dates based upon the Commencement Date (CD) of Article 5.5 of this
Agreement:

<TABLE>

------------------------------------------------------------------------------------------
Activity (Completion date)                                  Milestone
------------------------------------------------------------------------------------------

i. Kick-off Meeting.                                        CD + one (1) month
------------------------------------------------------------------------------------------
ii. Preliminary Design Review (PDR) Meeting                 CD + three (3) months
------------------------------------------------------------------------------------------
iii. Handset and Base Station prototype (based on the new   CD + Eight (8) months
miniaturized design)
------------------------------------------------------------------------------------------
iv. Critical Design Review (CDR) Meeting                    CD + eight (8) months
------------------------------------------------------------------------------------------
v. Verification of the technical compliance with the        CD + Nine (9) months Korean
Government's specifications
------------------------------------------------------------------------------------------
vi. Integration and subsystem test                          CD + Nine (9) months
------------------------------------------------------------------------------------------
vii. System test and factory acceptance                     CD + Ten (10) months
------------------------------------------------------------------------------------------
viii. Shipping and delivery                                 CD +Ten and half (10.5) months
------------------------------------------------------------------------------------------
ix. Deployment design, site survey, NCC and sites           CD: Ten and half (10.5) months
construction and preparation (local company)
------------------------------------------------------------------------------------------
x. FAT (On-site installation and test)                      CD + Thirteen (13) months
------------------------------------------------------------------------------------------
xi. Handover Date (Commissioning and trial service)         CD + Fourteen (14) months
------------------------------------------------------------------------------------------
xii. Commercial service                                     CD + Fifteen (15) months
------------------------------------------------------------------------------------------
</TABLE>


It is anticipated that Phase Two will commences six (6) months after the
commencement of Phase One and Phase Three will commence six (6) months after the
commencement of Phase Two.

More detailed plans for each Phase shall be prepared after CD arid following the
preliminary phase of site/field survey, and shall be presented at PDR of Phase
One.

The Customer will have an option at his sole discretion to request a partial
shipment and deployment of the Demonstration System of Phase One that includes
approximately 10 Base Stations and fully functional NCC prior to the shipment of
the rest of remaining Base Stations.


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In this case the overall deployment schedule of the Phase One will be extended
by up to two months.

3.3 LOCAL ENGINEERING TEAM AND ITS TRAINING

The following is the list of the Customer's technical personnel (local
engineering team) recommended to participate at all the stages of System
deployment. This team will work in parallel with the Supplier team and will be
trained to perform further deployment, technical operation and maintenance of
the System.

i. Engineering Manager

This person will be the technical leader of the Customer's local team members
and will have overall responsibility for all the technical aspects of the
System's operation and support. This should be an electronics engineer,
preferably with wide experience in integration and technical support for large
scale infrastructure-based communications systems (e.g. cellular or paging) and
excellent management skills.

ii. Senior System Engineer

This person will be the manager of the NCC Engineering team. He should be
software engineer with experience in operating systems (e.g. QNX/UNIX) and real
time software.

iii. NCC Engineer

This should be software engineer working under the supervision of Senior System
Engineer.

iv. Base Station Engineer

This person will be responsible for the technical operation and support of Base
Stations. He and his team will actively participate in all the aspects of the
deployment and integration of Base Stations. This should be an electronics
engineer with experience in installation, operation and maintenance of RF,
communications equipment, antennas, modems, interfacing with telecom lines and
power supply infrastructure. Preferably, this person should have an experience
in integration and maintenance of cellular Base stations sites or paging
transmission sites.

v. Base Station Technicians

A few technicians or junior engineers with the experience in installation and
maintenance of cellular or paging sites and working under the supervision of
Base Stations Engineer.

The above team will actively participate in all stages of the deployment process
under the guidance and supervision of the Supplier's personnel. They all
(especially the engineers) must have good knowledge of English language. They
will receive an initial training at Ituran and the Supplier's facilities in
Israel for about two weeks.

Afterwards the team will work together with the Supplier's team in Korea,
continuing its training in OJT form. After the deployment, integration and
initial operation of the Phase One System, the local team will perform further
deployment of both Phase Two and Three in other areas in the Territory, under
the guidance and supervision and "as needed" involvement of the Supplier's team.
In parallel, the local team will prepare the required Installation and operating
instructions in Korean language, based on their training and experience gathered
during the deployment process and the documentation provided by the Supplier.


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Initial overseas training in Israel will consist of the following as minimum:

Base Station Installation and Maintenance (3 days).

This training aimed at the Customer's field maintenance staff will provide the
skills and information required to allow those staff to set up a Base Station,
to diagnose problems in the operation of a Base Station and to perform field
replacement of failed units.

The training will cover the material presented in the Base Station Maintainer's
Manual and comprise a mixture of presentation material and hands on training.

ii. NCC System Setup and Operation (3 days).

This training aimed at the Customer's operations staff will provide the skills
and information required to configure the data files used by the NCC system, to
customize the operation of the System and to monitor and control the System in
operation.

Training will cover the material presented in the System Software Reference
Manual and the System Console Operator's Manual.

iii. The Customer System Operation (1 day).

This training aimed at the end users of the System will provide the skills and
information required to perform user functions such as tracking, messaging and
alarm monitoring.

Training will cover the material presented in the customer server Operator's
Manual.

iv. End User Terminal Installation (2 days).

This training aimed at installers of terminals will provide the knowledge and
skills required to install the end user terminals in vehicles. The training will
cover the material presented in the Terminal Installation Manual to be provided
by the Supplier.

3.4  EQUIPMENT PURCHASE

The list of the main items required for the deployment of the Base stations and
NCC(s) is provided in the Appendix A of this Annex. This list is subject to
changes according to the specific local requirements. This list is based on the
experience of the Supplier and Ituran in their international deployments. Some
of the standard items mentioned in the list may be obsolete and should be
replaced by the compatible items. The updated purchased list for standard
equipment will be prepared by the Supplier immediately upon the CD. The list
includes recommended quantities for purchase. Exact quantities for maintenance
purposes will be separately agreed upon between the Supplier and the Customer.
The Supplier has the responsibility for special equipment supply. The Customer
will be responsible for the standard equipment supply and may propose
alternative vendors for specific items, equal in performance to the defined
items. The standard equipment items purchased by the Customer must be approved
by the Supplier in advance. Any changes in purchasing must be approved by the
Supplier. The purchased equipment will be shipped to the specific locations as
directed by the Supplier for further integration and installation. The equipment
for the NCC and Base Stations of Phase One will be integrated and tested in
Israel or other places to be agreed by the Parties prior to the shipment to
Korea. The Customer will be responsible for releasing the equipment from Korean
customs and transporting it to the NCC or other sites as required.


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Equipment "type approval" for the special equipment will be performed in full
coordination between the Supplier and the Customer. The application preparation
and submission will be performed by the Customer and fully supported by the
Supplier.

4. SETTING UP NCC

4.1 INFRASTRUCTURE

The Supplier will prepare the specifications for setting up NCC. The Customer
will choose local contractor(s) or on its own plan and set up infrastructure in
the NCC building in Seoul or other cities for subsequent Phases if necessary,
based on the Supplier's specifications. The infrastructure will permit the
operation of the NCC, including its operation during power failures and partial
malfunction of the air-conditioning. The infrastructure set up will include the
purchase and installation of a generator, UPS, electricity boards and their
integration in the building's electricity system.

Based on the Supplier specifications, the Customer will design and construct the
partitions required for the operation of NCC and the communication room, taking
into consideration all the needs of the Operating Company. A floating floor will
be installed in the NCC and the communication room for the passage of cables. A
platform for the operators will be constructed in the NCC, and contain
furnishings for several operating posts. The Customer will install electricity
and communication sockets underneath the floating floor and along the walls of
the NCC, fluorescent lighting in the ceiling with anti-glare covers. Electricity
boards and carrying equipment of communication to the sites will be installed in
the communication room.

The Customer will design, purchase and install a backed-up air-conditioning
system for the NCC and the communication room.

The Customer will present all plans to the Supplier and, after their approval,
will continue with the implementation stage.

The Customer will ensure that the design and implementation is performed
according to all applicable regulations. The Customer's work will be considered
completed upon full acceptance by the Supplier.

4.2 COMPUTERS AND COMMUNICATION

The Customer will install NCC's and operators' posts equipment in accordance
with specifications and guidelines of the Supplier.

Integration and testing of NCC's equipment will be performed by the Supplier
team together with the Customer Engineering team. Initial integration of the
equipment for the first NCC will be performed in Israel or other place(s) to be
agreed by the Parties with participation of the Customer Engineering team.

Appendix E of this SOW provides general description of the operational NCC.
Digital Mapping Content will be supplied by the Customer according to the
requirements presented in Appendix F


Annex I                                                                  Page 11



Vision Plant Inc.                                       Telematics Wireless Ltd.

of this SOW. In addition, the Customer will supply a DTM file (in known format)
that includes the altitude data for all the required coverage area in a
definition of at least 1 minute.

5. SETTING UP BASE STATIONS

5.1 LOCATING AND PURCHASE OF SITES

Upon completion of the field review by the Supplier's team, the Customer will be
responsible for the location of appropriate sites for Base Stations of each
Phase, on the basis of a primary deployment map and a list of sites that will be
prepared by the Customer and confirmed by the Supplier. This list will be based
on a special analysis using DTM information ("altitude" maps). For each
potential site the Customer will present more than one alternative, stating the
technical and economic advantages and disadvantages of each. Among other issues,
the Customer will check the possibility of long-term rental, access to the site
during all hours, the existence of an appropriate electricity feeding line,
place for a mast (or existence of a usable mast) appropriate grounding, and the
feasibility of obtaining a data line. The Supplier and the Customer engineering
team will verify if there is a risk of possible existence of electro-magnetic
interference from nearby radio equipment of third parties as well as general
level of electro-magnetic noise that may have influence on System sensitivity.
After one of the alternatives has been approved by the Supplier, the Customer
will handle the rental contract and obtain from the municipal or other relevant
authorities all required permits for setting up a Base Station.

5.2. COMMUNICATION LINES

The Customer will order for each site intended for the receiving and
transmission station some of the following communication infrastructures subject
to the discussion with local telecom carrier(s):

i. Two PTP (Point to Point) data lines between the site and the NCC at a rate of
minimum 9.6 Kbps leased lines

ii. ADSL-VPN (up: 640kbps, down 1Mbps)

iii. Two ordinary telephone lines

iv. The possibility of working with a line at a rate of 19.2 Kbps and a
multiplexer unit for two ports will be examined at these sites

5.3 BASE STATION SITE INFRASTRUCTURE

The Supplier will provide the specifications and requirements for the
infrastructure installations at Base Station sites. The Customer will design the
infrastructure for each site intended for Base Station. The Customer will plan
the type and height of the mast (if necessary), the location for the
building/construction (if necessary), the routing of the RF, communication,
power and grounding cables, and submit the design to the Supplier for approval.
The mast will be equipped with a lightning arrester with grounding cable, mast
illumination (if necessary), a cable ladder, and arms appropriate for the
system's antennas. The Customer will submit to the Supplier for approval the
type of the construction, the air conditioning system, the method of deployment
of the communication infrastructure. The construction will contain the antennas
concentrator board for the entry of RF cables, lighting, a smoke/fire sensor, a
standard fire extinguisher and a door-opening sensor.


Annex I                                                                  Page 12



Vision Plant Inc.                                       Telematics Wireless Ltd.

After approval of the plans by the Supplier, the Customer will set up the
infrastructure at the site. This will include the mast and the construction,
installation of RF cables and antennas on the arms, connecting the construction
to the electricity source, the grounding, the communication lines, and the RF.
The Customer will purchase all the needed equipment for the above activities
except antennas.

If necessary, the Customer will design and erect a fence around the station, and
make arrangements with a security company to guard the site.

5.4 GEODETIC MEASUREMENT

At each site the Customer via local contractor, specifically chosen for this
task, will perform geodetic measurements for the placement of the antennas. The
accepted measuring system is Differential GPS. The required precision is +/- a
few tens of centimeters or 1 meter at the worst case.

5.5 INSTALLING A BASE STATION

Upon completion of the infrastructures deployment at the site, the Customer will
transport the Base Stations racks to each site and will put it at the
construction location. The Supplier and the Customer engineering teams will
perform all connections between System's units and the various infrastructures.
The operation of the system at the site shall be performed in accordance with
the guidelines issued by the Supplier.

5.6 INTEGRATION WITH NCC

Integration of Base Stations with NCC will be performed by the Supplier's team
together with the Customer's engineering team. Each Base Station data will be
defined in NCC, including measured location, name, technical profile,
communication lines definitions etc. After verification of proper functioning of
communication lines using test equipment, each Base Station will be connected to
NCC over the designated line.

The System will provide real time information regarding the communication
performance and data validity received from the site.

5.7 ADDITIONAL REQUIREMENTS

In all installation works the Customer will mark all cables with markings to be
agreed upon with the Supplier. The cables will be marked at approximately 3 m
intervals and adjacent to end connectors. Routing of cables serving different
purposes (communication, electricity, grounding, etc.) shall be separated.

The Customer will meet the accepted standards for civil construction, mechanical
work, cabling work, and electrical safety. The Customer will ensure that the
design and implementation is performed according to all applicable regulations.


Annex I                                                                  Page 13



Vision Plant Inc.                                       Telematics Wireless Ltd.

5.8 DETAILED RESPONSIBILITY MATRIX

The following responsibility matrix shall be applied for the deployment of the
System. In the matrix, O indicates a primary responsible Party while 'd'
does a assisting Party. (C: the Customer, S: the Supplier)



5.8.1 BASE STATION

<TABLE>

SYSTEM                 SUBSYSTEM                                            PHASE ONE       PHASE TWO/THREE
--------------------   --------------------------------------------------   ---------       ---------------

                                                                             C     S         C           S
Antenna Installation                          ***                            O    'd'        O          'd'
                                              ***                            O    'd'        O          'd'
                                              ***                            O    'd'        O          'd'
Equipment                                     ***                           'd'    O        'd'          O
                                              ***                           'd'    O        'd'          O
                                              ***                           'd'    O        'd'          O
                                              ***                           'd'    O        'd'          O
                                              ***                            O    'd'        O          'd'
                                              ***                            O    'd'        O
                                              ***                            O    'd'        O
Feeder                                        ***                            O    'd'        O
                                              ***                            O    'd'        O
                                              ***                            O    'd'        O
Cabling                                       ***                            O    'd'        O
</TABLE>



5.8.2  NCC



<TABLE>

SYSTEM                 SUBSYSTEM                                            PHASE ONE   PHASE TWO/THREE
--------------------   --------------------------------------------------   ---------   ---------------

                                              ***                            C     S     C           S
NCC                                           ***                            O    'd'    O
                                              ***                           'd'    O     O          'd'
                                              ***                            O    'd'    O          'd'
                                              ***                           'd'    O    'd'          O
                                              ***                            O    'd'    O
                                              ***                            O    'd'    O
                                              ***                            O    'd'    O
                                              ***                            O    'd'    O
                                              ***                            O    'd'    O
                                              ***                            O    'd'    O
                                              ***                            O    'd'    O
                                              ***                            O    'd'    O
Environment                                   ***                            O    'd'    O
Power                                         ***                            O    'd'    O
Cabling                                       ***                            O    'd'    O
</TABLE>



Annex I                                                                  Page 14


***   Confidential material redacted and filed separately with the Commission.


Vision Plant Inc.                                       Telematics Wireless Ltd.



5.8.3 PROJECT MANAGEMENT

<TABLE>

MAJOR ITEM                                                                  PHASE ONE   PHASE TWO/THREE
--------------------                                                        ---------   ---------------

                                                                             C     S     C           S
Radio network design, propagation analysis, site preparations                O    'd'    O          'd'
NCC Assembly, Base Station subsystem and system tests                       'd'    O     O          'd'
Sub system Testing (Hardware Test, S/W Loading)                             'd'    O     O          'd'
Commercial operation and on-going Maintenance                                O    'd'    O          'd'
</TABLE>


6. MAINTENANCE

During the establishment and initial operation of the System, the Customer will
provide maintenance to the general infrastructure of the NCC and the Base
Stations, including masts installed by the contractor, under the guidance and
supervision by the Supplier. The Customer will keep a precise record of all
spare equipment stored in NCC warehouse for the purposes of maintaining the
system. When an item of equipment is replaced, the Supplier will send the
defective item to be repaired.

During the deployment, initial operation and CD for each Phase, the maintenance
of all the equipment supplied by the Supplier will be performed by the Supplier
as addressed in the Agreement. Further maintenance of this equipment will be
performed according to the Maintenance Agreement that will be executed between
the Parties.

The Customer will keep a sufficient level of spare units to insure the required
response times. Failed equipment will be shipped to Israel for repair and
replacement. The repair time in Israel will not be more than 30 calendar days
after receiving equipment.

The Customer will keep a detailed record with regard to the date and type of
malfunctions, the method in which each was handled, and the time it took to
repair the malfunction.

7. INFRASTRUCTURE ACCEPTANCE TESTS

These acceptance tests refer to the acceptance by the Supplier of the
infrastructure preparations and associated works performed by the Customer with
regard to NCC and Base Stations. Tests of Base Stations' infrastructure are
specified in Appendix B of this SOW. Tests of NCC infrastructure are specified
in Appendix C of this SOW. The tests will be performed by the Supplier in the
presence and the assistance of the Customer.

8. SYSTEM ACCEPTANCE TESTS

System Acceptance Testing will be performed according to the Acceptance Test
Procedures that will be agreed upon between the Parties at CDR. The System
Acceptance Testing will be divided into following phases:


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Vision Plant Inc.                                       Telematics Wireless Ltd.

i. Base Station Acceptance Testing.

These tests will demonstrate Base Station's equipment compliance with its
specifications.

ii. End user equipment Acceptance Testing.

These tests will demonstrate end use terminals, including VLU and PLU compliance
with their specifications.

iii. System Acceptance Testing.

This testing will be performed upon completion of the deployment of the System
which includes end user terminal, Base Station and NCC for each System. This
testing will demonstrate the overall performance of the System in terms of
operating procedures, location capability, messaging capability, coverage,
interrogation rate (capacity parameter) etc. The testing will be performed using
specified number of Vehicle and Personal Location Units. Upon one month from the
successful completion of System Acceptance Testing the System will be officially
transferred to the responsibility of the Customer.

9. REPORTS AND DESIGN REVIEWS

During the performance of the project the Supplier will submit a monthly
progress report to the Customer. The report will include a description of the
scope of the work planned for the preceding month in the original plan against
actual performance. The report will include a brief description of irregular
incidents and malfunctions in the implementation of the project which may delay
the schedule for each Phase. The Parties will hold a Kick-of Meeting and two
Design Reviews, PDR(Preliminary Design Review) and CDR(Critical Design Review)
where the detailed status of the project with a breakdown of activities
performed in relation to planning, and a detailed working plan for the future
will be presented. The Design Reviews will be performed at the location(s)
designated by the Customer. At Kick-off Meeting a Project Organization Chart
will be presented by the Supplier.

10. SYSTEM DOCUMENTATION

The Supplier will provide the following documentation as minimum in due course
to be requested by the Customer:

i. Base Station Specifications
ii. Base Station Infrastructure requirements specifications
iii. Vehicle Location Unit Specifications
iv. Vehicle Location Unit general installation instructions
v. Fleet Management post Operating Manual (optional)
vi. Personal Location Unit Specifications
vii. NCC Diagrams
viii. NCC Infrastructure requirements specifications
ix. NCC Operating Procedures
x. VLU and PAL Registration and Activation Procedure
xi. System Acceptance Test Procedures
xii. Monthly progress reports
xiii. Design Reviews documentation
xiv. Project Organization Chart


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Vision Plant Inc.                                       Telematics Wireless Ltd.

The above documentation will be in English.

The Customer or local contractors if applicable, responsible for NCC and Base
Station infrastructure preparation, will maintain documentation for each site to
be established. The documentation of NCC will include a detailed description of
the electricity system, including all interim boards and the main electricity
board, specifying the types of cables and automatic switches. The markings of
the switches in the documentation will be identical to their markings on
electricity boards. The documentation of the System will include diagrams of the
connections of all components of the System, specifying numbers of cables, types
of cables, and names of connectors. The markings in the diagrams will be
identical to the markings on cables and connectors.

For each Base Station the Customer will prepare a booklet, indicating the site
on a map with a scale of 1:100,000. The booklet will also contain a descriptive
diagram of the site and the mast, specifying the disposition of the dedicated
equipment, and digital photographs of the interior and exterior of the site. The
documentation will include a complete address of the site, precise coordinates
of the antennas, the name and telephone numbers of the site owner, the name and
telephone numbers of the contractor's liaison, details of electricity feeding up
to the structure's main board, and the paths of communication and grounding
lines. The Customer will provide a detailed description of the connections
between components of the system, including types of cables, their length, and
types of connectors. The Customer will specify the manufacturer's number of each
of the items of equipment installed at the site, including air-conditioner,
electricity board, and components of the locating system. The station's
infrastructure acceptance test report will be attached to the booklet. All of
the material will be submitted on magnetic media and in a hard copy.



11. THE CUSTOMER FURNISHED ITEMS

In accordance with Article 42 of the Agreement, the following are the Customer
Furnished Items which include Equipment, Installation, Information and Services.
The detailed Items not described in the annex shall be discussed at PDR or
subsequent project management.

<TABLE>

------------------------------------------------------------------------------------------
ITEMS                              CONTENT
------------------------------------------------------------------------------------------

The Customer Furnished Equipment   1.   ***
(FE)                               2.   ***
                                   3.   ***
                                   4.   ***
                                   5.   ***
------------------------------------------------------------------------------------------
The Customer Furnished             1.   ***
Information (FI)                   2.   ***
                                   3.   ***
                                   4.   ***
                                   5.   ***
------------------------------------------------------------------------------------------
</TABLE>





Annex I                                                                  Page 17


***   Confidential material redacted and filed separately with the Commission.


Vision Plant Inc.                                       Telematics Wireless Ltd.

<TABLE>

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

                                   6.   ***

------------------------------------------------------------------------------------------
The Customer Furnished             1.   ***
Installations (FIN)                2.   ***
------------------------------------------------------------------------------------------
The Customer Furnished Services    1.   ***
(FS)                               2.   ***
                                   3.   ***
                                   4.   ***
                                   5.   ***
                                   6.   ***
                                   7.   ***
                                   8.   ***
                                   9.   ***
                                   10.  ***
                                   11.  ***
                                   12.  ***
                                   13.  ***
------------------------------------------------------------------------------------------
</TABLE>


12. ADDITIONAL SOFTWARE TERMS AND CONDITIONS

This section contains additional terms and conditions relating to the Supplier's
software that are not included elsewhere in this Agreement and Annexes.

12.1 RECITALS RELATING TO SOFTWARE

The Supplier agrees to provide Support Services relating to the Supplier's
Software.

12.2 THE SUPPLIER'S SOFTWARE

12.2.1 Specification

i. The Supplier may alter, substitute or modify the specification of the
Supplier's Software from time to time. The Supplier shall notify the Customer as
soon as practicable of any such alteration, substitution or modification.

ii. The Supplier's Software will continue to be subject to this Agreement
notwithstanding any such alteration, substitution or modification.

iii. The Customer shall be under no obligation to install and implement such
changes as notified pursuant to paragraph 12.2.1.a.

iv. The Supplier shall have no obligation to support superseded versions of the
Supplier's Software beyond twelve (12) months following the date of notification
of supersession pursuant to paragraphs 12.2.1.a or 12.2.6.

12.2.2 Documentation

i. The Supplier shall provide the Customer with two (2) copies of System
Software Reference Manual, System Console Operator's Manual, Base Station
Maintainer's Manual and the Terminal Installation Manual (the "Associated
Documentation").

ii. The Associated Documentation shall not be used by the Customer except to
assist in the normal operation of the Supplier's Software by itself or its
customers.


Annex I                                                                  Page 18


***   Confidential material redacted and filed separately with the Commission.


Vision Plant Inc.                                       Telematics Wireless Ltd.

12.2.3 License

i. The Customer may only use the Supplier's Software in accordance with the
Associated Documentation.

ii. The Customer shall not use the Supplier's Software on equipment other than
Supplier's Network hardware without the prior written consent of the Supplier.

iii. The Customer shall not copy, alter, modify or reproduce the Supplier's
Software or the Associated Documentation without the Supplier's prior written
consent except for copies of manuals for its customers or own use.

iv. The Customer shall not permit the Supplier's software to be used by any
other person except as permitted under paragraph 12.5.

v. In addition to other remedies available to the Supplier under this Agreement
or otherwise, any unauthorized use, alteration, modification, reproduction,
publication, disclosure or transfer of the Supplier's Software will entitle the
Supplier to any available equitable or other remedy against the Customer,
including injunctive relief.

12.2.4 Installation

i. The Supplier shall install the Supplier's Software during the installation of
the initial Infrastructure Hardware.

ii. The Customer shall give the Supplier such reasonable assistance, including
the provision of personnel and equipment, as the Supplier considers necessary to
ensure satisfactory installation. The Customer shall ensure the Supplier is
granted all reasonable access, including necessary security clearances, for the
purposes of complying with this clause.

12.2.5 Reverse Engineering

The Customer shall not reverse assemble or reverse compile or directly or
indirectly allow or cause a third party to reverse assemble or reverse compile
the whole or any part of the Supplier's Software.

12.2.6 New Releases

i. The Customer shall be entitled to receive New Releases of the Supplier's
Software and shall comply with a direction from the Supplier to:

     o    install New Releases of the Supplier's Software from time to time
          provided that such installation shall not cause unreasonable
          disruption to the functioning the Supplier's Network; and

ii. Where such replacement is made:

     o    this Agreement will continue to apply in all respects to the New
          Releases and that the New Releases shall forthwith be deemed to be the
          Supplier's Software for the purpose of this Agreement.


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Vision Plant Inc.                                       Telematics Wireless Ltd.

12.2.7 Security

i. The Customer will be solely responsible for the use, supervision, management
and control of the Supplier's Software and Associated Documentation delivered to
the Customer.

ii. The Customer will use its best endeavors to ensure through appropriate
contractual terms with the Subscribers that the Supplier's Software is protected
at all times from misuse, damage or destruction.

12.2.8 Warranties

i. The Supplier warrants that the Supplier's Software will be properly installed
and will substantially operate in accordance with the specifications in Annex I.

ii. The provisions of Article 12 of the Agreement shall apply mutatis mutandis.

12.3 SUPPORT SERVICES

12.3.1 Supply of Support Services

i. The Supplier shall provide Support Services in response to submission of a
fault report on the prescribed form by the Customer relating to a suspected
defect or error in the Supplier's Software causing the Supplier's Software to
depart significantly from Annex 1.

ii. The Supplier shall perform such Support Services as it considers necessary
to ensure the Supplier's Software remains in substantial conformity with the
Specification but only to the extent necessary to ensure the Customer's
commercial use of the system is unaffected by any non-conformity.

12.3.2 Support Services Availability

i. The Supplier shall provide Support Services during its normal working hours.
The Supplier shall use its best efforts to provide emergency support outside of
these hours.

ii. The Customer shall, if so requested by the Supplier, give the Supplier a
listing of output and any other data which the Supplier requires in order to
reproduce operating conditions similar to those present when any defect or error
in the Supplier's Software was discovered.

12.3.3  Exclusions

i. Support Services to be provided by the Supplier under this Agreement do not
include:

     o    correction of errors or defects caused by operation of the Supplier's
          Software or the Designated Hardware in a manner other than that
          specified by the Supplier;

     o    correction of errors or defects caused by modification, revision,
          variation, translation or alteration of the Supplier's Software not
          authorized by the Supplier;

     o    correction of errors caused by the use of computer programs not
          licensed by the Supplier to the Customer;

     o    correction of errors caused by the failure of the Customer to provide
          suitably qualified and adequately trained operating and programming
          staff for the operation of the Supplier's Software;

     o    rectification of errors caused by use of the Supplier's Software other
          than in accordance with the Manuals;


Annex I                                                                  Page 20



Vision Plant Inc.                                       Telematics Wireless Ltd.

     o    rectification of errors caused by a fault in the Designated Hardware;

     o    rectification of errors caused by inadequate on site equipment
          maintenance;

     o    furnishing or maintenance of accessories; attachments, supplies,

     o    consumables or associated items not provided by the Supplier.

     o    correction of errors arising directly or indirectly out of the
          Customer's failure to comply with this Agreement or any other
          agreement between the parties relating to the Supplier's Software; or

     o    Support Services made more difficult by the Customer's failure to
          comply with this Agreement or any other agreement between the parties
          relating to the Supplier's Software.

ii. In the event the Customer requests any of the Services referred to in
12.3.3.a, the Supplier shall present the cost for the implementation and
incorporation of the Services asked by the Customer taking into consideration
the timeframe. If the Customer chooses to implement the Services, the cost shall
be borne by the Customer and the timeframe shall be adjusted accordingly.

12.3.4 Access for the Supplier's Personnel

i. The Customer shall, where relevant, ensure the Supplier's personnel have full
and safe access to the Supplier's Software and the Designated Hardware at all
reasonable times for the purpose of:

     o    providing the Support Services; and

     o    installing New Releases.

The Customer shall also ensure that the Supplier's personnel are provided with
all information, facilities, services and accessories reasonably required by the
Supplier to enable the Supplier to comply with its obligations under this
Agreement.

ii. The Customer shall, where relevant, provide on request a suitably qualified
or informed representative, agent or employee to accompany the Supplier's
support personnel and to advise the Supplier on access or on any other matter
within the Customer's knowledge or control which will assist the Supplier in
complying with its obligations under this Agreement.

12.3.5 Additional Services

From the Handover Date, the Supplier will at no additional cost to the Customer
undertake the following activities:

i. deliver to the Customer all new software developments and functional
improvements to the Supplier's Network Software undertaken by the Supplier in
the generic development of the product;

ii. deliver new releases of the Supplier's Software in order to preserve
compatibility with the generic the Supplier's Network Software.

12.4 SUB-LICENSING OF SOFTWARE

12.4.1 The Customer shall grant Software, sub-license(s) to its subscribers on
the following conditions:


Annex I                                                                  Page 21



Vision Plant Inc.                                       Telematics Wireless Ltd.

i. the sub-license shall only be for the fleet management station software as
described in paragraph 13 of this Annex;

ii. the Customer shall enter into an agreement with each subscriber which
contains provisions protecting the Intellectual Property to the Supplier's
satisfaction.

12.5 COPYRIGHT

12.5.1 The Customer shall ensure that any of the Supplier's Software which it
sub-licences pursuant to this Agreement bears notice of copyright and a notice
stipulating that the Supplier's Software or any improvements thereto contain
confidential information. The Customer shall comply with any reasonable
directions of the Supplier as to the form or content of such notice.

12.5.2 The provisions of Article 32 shall apply with respect to the copyright
and other intellectual property in the Supplier's Software.

12.6 LOCAL ADAPTATION OF THE SOFTWARE

12.6.1 The Supplier shall supply to the Customer all relevant data and API for
the fleet management system and Console to enable the Customer to produce Korean
language versions of such software.

12.6.2 The Supplier shall be responsible for technically assisting the
functioning, performance or support of any software produced by the Customer
using such data and APC.

12.6.3 The Customer must ensure that all reasonable steps are taken to protect
the Suppliers Intellectual Property rights in the use of such data and APC.

13. THE SUPPLIER'S SOFTWARE

The Supplier's Software comprises:

13.1 NETWORK SOFTWARE

The proprietary software or firmware contained in the NCC computers and/or the
Base Station computers and circuit card assemblies that is required to perform
the functions of location, messaging and alarm reception as well as control and
monitoring of the System.

13.2 FLEET MANAGEMENT SOFTWARE (OPTIONAL)

The proprietary executable code, data files and support files installed on a
personal computer for the purposes of allowing that computer to function as a
Fleet Management Station connected to the System.

13.3 CONSOLE SOFTWARE

The proprietary executable code, data files and support files installed on a
personal computer for the purposes of allowing that computer to function as a
System Console connected to the System.


Annex I                                                                  Page 22



Vision Plant Inc.                                       Telematics Wireless Ltd.

13.4 MOBILE TERMINAL (VLU AND PAL) SOFTWARE

The proprietary firmware that resides in the Mobile Terminal to implement the
functions required of a Transponder operating on the Network.



13.5 OTHER SOFTWARE

The proprietary applications software and/or utilities that may be made
available from time to time for installation on a NCC computer, a Fleet
Management or System Console or other computer to provide ancillary functions


Annex I                                                                  Page 23



Vision Plant Inc.                                       Telematics Wireless Ltd.

                               LIST OF APPENDIXES


APPENDIX A: Equipment List

APPENDIX B: Infrastructure Acceptance Test - Base Stations

APPENDIX C: Infrastructure Acceptance Test - NCC

APPENDIX D: System Acceptance Test Principles

APPENDIX E: Operational NCC general Description

APPENDIX F: Requirements from Digital Mapping Content


Annex I                                                                  Page 24



Vision Plant Inc.                                       Telematics Wireless Ltd.



                                   APPENDIX A

                           EQUIPMENT LIST (PHASE ONE)

<TABLE>

---------------------------------------------------------------------------------------------------------------
                                                                                              SUPPLYING PARTY
                                                                                            -------------------
  LOCATION                                SUBSYSTEM                              QUANTITY   CUSTOMER   SUPPLIER
---------------------------------------------------------------------------------------------------------------

 Base station                                ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***         O
                                             ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***
                                             ***                                    ***         O
                                             ***                                    ***
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
---------------------------------------------------------------------------------------------------------------
  NCC (Full                                  ***                                    ***         O
   Backup)                                   ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
---------------------------------------------------------------------------------------------------------------
 Spare Parts                                 ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***         O
                                             ***                                    ***         O
---------------------------------------------------------------------------------------------------------------
   Software                                  ***                                    ***         O
---------------------------------------------------------------------------------------------------------------
</TABLE>



Annex I                                                                  Page 25


***   Confidential material redacted and filed separately with the Commission.


Vision Plant Inc.                                       Telematics Wireless Ltd.



EQUIPMENT LIST (PHASE TWO)

<TABLE>

---------------------------------------------------------------------------------------------------------------
                                                                                              SUPPLYING PARTY
                                                                                            -------------------
  LOCATION                                SUBSYSTEM                              QUANTITY   CUSTOMER   SUPPLIER
---------------------------------------------------------------------------------------------------------------

 Base station                                ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***         O
                                             ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***
                                             ***                                    ***         O
                                             ***                                    ***
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
---------------------------------------------------------------------------------------------------------------
  NCC (Full                                  ***                                    ***         O
   backup)                                   ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
---------------------------------------------------------------------------------------------------------------
 Spare Parts                                 ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***         O
                                             ***                                    ***         O
---------------------------------------------------------------------------------------------------------------
  Software                                   ***                                    ***                    O
---------------------------------------------------------------------------------------------------------------
</TABLE>



Annex I                                                                  Page 26


***   Confidential material redacted and filed separately with the Commission.


Vision Plant Inc.                                       Telematics Wireless Ltd.



EQUIPMENT LIST (PHASE THREE)

<TABLE>

---------------------------------------------------------------------------------------------------------------
                                                                                              SUPPLYING PARTY
                                                                                            -------------------
  LOCATION                                SUBSYSTEM                              QUANTITY   CUSTOMER   SUPPLIER
---------------------------------------------------------------------------------------------------------------

 Base station                                ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***         O
                                             ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***
                                             ***                                    ***         O
                                             ***                                    ***
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
---------------------------------------------------------------------------------------------------------------
  NCC (Full                                  ***                                    ***         O
   backup)                                   ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
                                             ***                                    ***         O
---------------------------------------------------------------------------------------------------------------
 Spare Parts                                 ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***                    O
                                             ***                                    ***         O
                                             ***                                    ***         O
---------------------------------------------------------------------------------------------------------------
   Software                                  ***                                    ***                    O
---------------------------------------------------------------------------------------------------------------
</TABLE>



Annex I                                                                  Page 27


***   Confidential material redacted and filed separately with the Commission.


Vision Plant Inc.                                       Telematics Wireless Ltd.

                                   APPENDIX B

INFRASTRUCTURE ACCEPTANCE TEST: BASE STATIONS

Base Station's infrastructure acceptance tests will consist of the following:

1. MAST

i. Testing the existence and integrity of all permits required for the
establishment and operation of the base station.

ii. Approval of the mast by a safety engineer if applicable.

iii. Results of geodetic measurements.

iv. Ensuring that the grounding of the mast meets the standards.

v. Painting, illumination, climbing ladder if applicable.

vi. Sealing connectors, marking and path of RF cables.

vii. Antennas: reinforcing arms, jumpers.

2. STRUCTURE

i. Dragging and sealing the structure.

ii. Ensuring that the grounding of the structure meets the standards.

iii. Acid-resistant floor coating.

iv. The type and installation of the air-conditioner.

v. Antenna concentrator: sealing, marking and grounding, VSWR for adjusting the
antennas.

vi. Electricity board in the structure: value and types of switches, marking.

vii. Cabling in the structure: cable ladders, arrangement, marking, connectors.

viii. Regularity of communication cables (data and dialing) between the station
and NCC.

ix. Batteries: type of batteries, rack, connectors to power supply and
electricity board.

x. Fire extinguisher: type, working order, method of installation, expiry dates.

xi. Illumination, fire/smoke detector, door-opening sensor.

3. EQUIPMENT

i. Setting up bases in the structure.

ii. Installing units in bases, connections between units, marking.

iii. Electrical connections, grounding, communication and RF cables to the
system's units.

iv. Installation of lightning arresters, AC, RF and communication -
installation, marking.

v. Running order of all items of the system in accordance with the results of
the self-test of each unit.

vi. Running order of the station against the NCC.

4. DOCUMENTATION

i. A map of the area indicating the site.

ii. A map of the site indicating the location of the mast, antennas, the
structure and cables paths.


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Vision Plant Inc.                                       Telematics Wireless Ltd.

iii. A drawing of the interior of the structure indicating equipment bases,
batteries, antenna concentrators, electricity board, and entry points of
communication lines.

iv. A drawing of the interior of the equipment base, indicating all units and
cables.

v. Photographs of the site, integrity of the documentation, and its concordance
with the site.


Annex I                                                                  Page 29



Vision Plant Inc.                                       Telematics Wireless Ltd.

                                   APPENDIX C

INFRASTRUCTURE ACCEPTANCE TEST: NCC

NCC's infrastructure acceptance tests will consist of the following:

i. Tests of all equipment (computers, communication): connection to power,
markings of sockets and communication points.

ii. Lighting: running order of the lighting, a sufficient quantity, no glare on
monitors.

iii. Racks: cables ducting, precise and legible markings, and general quality of
work.

iv. Floating floor: stability, ducting of cables underneath the floor, markings,
and general quality of work.

v. Examining the running order of modems for dialing, including connections to
the communication cables.

vi. Inspection of the air-conditioning system concordance with the plans.

vii. Inspection of the communication to the sites from the SMC workstations.

viii. Inspection of the entire layout of the A/B switches.

ix. Inspection of the UPS system support.

     o    Voltage drop in the network.

     o    Continuous good running order of the system.

     o    Good running order of the emergency lighting.

     o    Generator activation.

     o    After generator activation - activation of the air-conditioning
          system.

     o    Generator drop in order to measure operation time of UPS batteries.


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Vision Plant Inc.                                       Telematics Wireless Ltd.

                                   APPENDIX D

SYSTEM ACCEPTANCE TEST PRINCIPLES

The system tests at the end of the System deployment for each Phase will consist
of the following:

1. OPERATIONAL TESTING OF THE BASE STATIONS

Operational testing of all the components of each Base Station will be performed
during the period of one week, every three hours, by means of diagnostic
programs from the NCC.

Availability of the following equipment should be reported during the tests:

i. GPS Receivers

ii. Paging Transmitters

iii. Receivers in the Stations (IBSU)

iv. Transmitters Controllers (SPCU)

2. AVAILABILITY TEST OF NCC

The test will be based on the current operation of the system and verification
of compliance with Operating Procedures.

3. TESTS OF COVERAGE AND LOCATION ACCURACY

The Test will include movement of defined number of PAL and VLU units in the
coverage area and the comparison between the actual location and the location
displayed in the NCC to demonstrate required CEP (Circular Equal Probability)
accuracy. The test will include at least 100 locations and 20 end user terminals
(to be provided by the Supplier) for each representative environment as
specified in paragraph 2.3.5 of Annex I.

In all the locations, the following data will be registered:

i. Number of receiving stations participating in the location process.

ii. The coordinates calculated by the system.

iii. The coordinates displayed at the operators' workstations.

iv. Actual location as reported from the field.

v. Quality of the signal reception (FOM).

vi. Stability of location.

In addition, the performance of message reception will be verified, including
synchronous and asynchronous messaging as specified above.


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Vision Plant Inc.                                       Telematics Wireless Ltd.

4. TEST OF CAPACITY PARAMETERS (NUMBER OF LOCATIONS PER SECOND)

The system will be operated in the continuous interrogation manner to
demonstrate required maximum interrogation rate capability.

The above data, after its processing, will enable to evaluate the quality of the
System service and maximum capacity.

The specifications in paragraph 2.4.5 of Annex I will be verified at each
representative environment as described in section 3 of this Appendix.

A detailed System Acceptance Test Procedure will be prepared by the Supplier and
agreed upon with the Customer at PDR.




Annex I                                                                  Page 32



Vision Plant Inc.                                       Telematics Wireless Ltd.

                                   APPENDIX E


Operational NCC General Description

1. GENERAL

The purpose of this document is to describe Ituran's Operational NCC.

[GRAPHIC OMITTED]

2. EVENT SERVER

2.1 GENERAL

The Event server functionality manages the operational NCC's activities. It
receives all incoming alarms received by the Ituran location system from the end
units and routes them to operator workstations. All the operator workstations
are connected to this server. In addition, the workstations are connected to the
location system gateway, and through this gateway they are able to send commands
to the end units and receive messages from the end units (such as location and
various status messages).

The Event Server also takes part in the unit activation process, the concluding
part of every new end unit installation.

2.2 MAIN USER INTERFACE

i. List of connected Operator Workstations with list of events in every station
and their status

ii. Communication monitor to the Operator Workstations over TCP/IP

iii. Control of all the NCC's operational parameters (method of workstation
routing and load balancing, operational policy control, workstation role
definitions etc.)

2.3 COMMUNICATION TO OPERATOR WORKSTATIONS

The Event Server is connected over TCP/IP to the Operator Workstations. Each
incoming Event message is routed to a workstation selected according to a few
alternate algorithms (the least busy workstation, the "next available" or
according to event type). Only this station can then handle this incoming event.

Main features are:

i. New incoming event will be routed to the relevant Operator Workstation that
has currently the lowest number of pending events, or by other parameters
detailed above.


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Vision Plant Inc.                                       Telematics Wireless Ltd.

     o    New event will be added to the list of events.

     o    An option to temporarily stop routing new events to a specific
          Controller Station

ii. Temporarily or permanently close down a specific Operator Workstation and
transfer existing events to another Operator Workstation.

     o    Transferring events from one Operator Workstation to another Operator
          Workstation

iii. Automatic synchronization between Operator Workstation and Event Server
upon re-connection.

3. OPERATOR WORKSTATION

3.1  OPERATOR WORKSTATION MAIN FEATURES:

One, two or four opened mapping windows with option to display a different type
of map in each window (subject to maps availability).

i. A list of open events and their status

ii. Automatic sorting of incoming alarms risk level based on operational
scenarios entered into the system

iii. Full and unit communication abilities, allowing it to both monitor the unit
status and send commands to the unit.

iv. Support vector, raster and aerial photo maps

v. Specific vehicle real-time tracking

3.2 VEHICLE DETAILS SCREEN

This screen displays all vehicle telematics information such as: sensors,
location, velocity and direction (subject to availability of relevant sensors in
the vehicle).

3.3  VEHICLE COMMAND DIALOG OPTION

This dialog option is used for sending various commands to the vehicle,
including: location, enabling/disabling vehicle devices.

3.4 VEHICLE DISPLAY ON THE MAP

The vehicle will be displayed on the map with an icon. The icon is derived from
the relevant vehicle group.

3.5 RECORD AND REPLAY

All incoming and outgoing messages are recorded. The Controller can invoke a
report on any desired event. The report is generated as a table of events, which
can be replayed graphically on the map.


Annex I                                                                  Page 34



Vision Plant Inc.                                       Telematics Wireless Ltd.

ANNEX I - SOW

APPENDIX F

REQUIREMENTS FROM DIGITAL MAPPING CONTENT

LOCATIONET GIS V2.1

1. GENERAL

LocatioNet real-time GIS engines use an underlying layer of propriety GIS binary
data, which is built from spatial databases (digital mapping content). Spatial
databases are supplied by data providers that collect and distribute digital map
information. There are many data providers around the world with different
distribution formats. LocatioNet recommends using data from one of the two major
and leading vendors, TeleAtlas or NavTech if possible, yet will work with the
Customer's chosen vendor. The two most popular data formats used for
distribution are Mif/Mid text files (developed by MapInfo) and binary Shape
files (developed by ESRI). Data can be easily transformed from one format to the
other. Digital data includes two types of information: geographical layers and
the road network. The geographical layers are used for vector maps drawing. The
road network is used for drawing, routing, creating geocode databases and
reverse geocoding.

1.1 GEOGRAPHICAL LAYERS

Each geographical layer binds geographical items with a common denominator (e.g.
gas stations, parks etc.). Each geographical item has a set of coordinates that
define its location and shape, and a set of attributes that define its look on
the map. The shapes can be of any type, such as: points, lines, polylines,
polygons and regions (xor combinations of multiple polygons). Examples for
geographical layers:

i. Administrative areas (e.g. states, provinces, cities etc.)

ii. Water areas (e.g. rivers, lakes, ponds etc.)

iii. Woodland

iv. Parks

v. Railroads

vi. POI (points of interest) (e.g. restaurants, hospitals, gas stations etc.)

1.2 ROAD NETWORK LAYER

The road layer represents the road network. This layer is very complex;
therefore a lot of information is needed. The road network consists of
intersecting roads. An intersection between two roads is called a node
(junction). A section of a road that lies between two nodes is called a road
segment; therefore every segment has a starting node and an ending node. Each
road can be constructed from one or more road segments. Each road segment has a
set of coordinates that define its location and shape, and a set of attributes
that define the complexity of use of this layer. The shape of a road segment is
always a line or a polyline.


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Vision Plant Inc.                                       Telematics Wireless Ltd.

[GRAPHIC OMITTED]

2. MAPS ENGINE

The vector maps engine displays both geographical layers and the road network.

2.1 MINIMUM REQUIREMENTS FOR AN OBJECT IN A GEOGRAPHICAL LAYER

i. Unique object id

ii. Name (if any, or blank)

2.2 ADDITIONAL REQUIREMENTS FOR AN OBJECT IN A GEOGRAPHICAL LAYER

     o    Type (i.e. in the water layer, types can be: river, lake, pond etc.)

Once the type is supplied, there is an option to control each type's draw
attributes separately, instead of applying the same attributes for the entire
layer.

2.3 MINIMUM REQUIREMENTS FOR DRAWING A ROAD SEGMENT

i. Segment id, unique in its country

ii. Road level (i.e. national, between cities, main in city, neighborhood etc.)
Road levels function the same way as geographical layers types.

2.4 ADDITIONAL REQUIREMENTS FOR DRAWING A ROAD SEGMENT

i. Road type (i.e. highway, ramp, bridge, tunnel, circuit, pedestrian walkway
etc. - allow drawing special features inside road levels)

ii. Road Z level (i.e. a bridge going over a road will have a higher z level)

iii. Route number, if available

iv. Road name constructed of prefix, base name and suffix (i.e. if there isn't
any sufficient space to draw Calle de Zurita Maria, perhaps there is for Zurita)

v. Road dividers

vi. Traffic lights



3. GEOCODE ENGINE

The road network is also used for building geocode databases (i.e. all the
cities in state, all the streets in city etc.), and for reverse geocoding (i.e.
getting the address of a given coordinates). It is important to get a
description of the administrative hierarchy that the data supports, in order to
fully understand each country's attributes (e.g. Israel has county, cities and
streets while Austria has country, states, cities and streets, etc.).


Annex I                                                                  Page 36



Vision Plant Inc.                                       Telematics Wireless Ltd.

3.1 MINIMUM GEOCODE REQUIREMENTS

i. City name of road segment


ii. Road name of road segment

SUPPORTING MINIMUM REQUIREMENTS WILL ALLOW THE GEOCODE ENGINE TO PERFORM THESE
TASKS:

i. Return roads' center coordinates

ii. Transform coordinates into partial addresses

iii. Get supported countries list

iv. Get the cities list in state

v. Get the roads list in city

vi. Get the cities list in a circle or in a rectangle

vii. Get the roads list in a circle or in a rectangle

3.2 ADDITIONAL GEOCODE REQUIREMENTS
(In each road segment, extra but important)

i. Zone name in city (neighborhood)

ii. Region name in state (province, canton etc.)

iii. State name in country

iv. Left side house number format (i.e. O - odd, E - even, M - mix, U -
undefined)

v. Left from house number (as integer)

vi. Left to house number (as integer)

vii. Left zip code

viii. Right side house number format (as mentioned above)

ix. Right from house number (as integer)

x. Right to house number (as integer)

xi. Right zip code

xii. Road official name and other alternative names

xiii. Each roadside may have a different name

xiv. Each roadside may belongs to a different city

SUPPORTING EXTRA REQUIREMENTS WILL ALLOW THE GEOCODE ENGINE TO PERFORM THESE
TASKS:

i. Convert full addresses into coordinates

ii. Transform coordinates into full addresses

iii. Get the cities list in zip code

iv. Get the roads list in zip code

SUPPORTING EACH SEGMENT'S FROM NODE ID AND TO NODE ID WILL ALLOW THE GEOCODE
ENGINE TO PERFORM THESES TASKS:

i. Return a coordinate of an intersection between two roads

ii. Get the intersections list in a circle or in a rectangle

iii. Get all intersecting road names to a given road


Annex I                                                                  Page 37



Vision Plant Inc.                                       Telematics Wireless Ltd.

                                    ANNEX II

                                   APPENDIX A

                           LETTER OF CREDIT BY SWIFT

TO: BANK HAPOALIM B.M. - TEL AVIV

FROM: A LEADING INTERNATIONAL BANK

40A: FORM OF DOCUMENTARY CREDIT: IRREVOCABLE

20: DOC. CRED. NO.

31C: DATE OF ISSUE: ________________

31D: DATE AND PLACE OF EXPIRY: ________________ IN ISRAEL (__ MONTHS AFTER THE
L/C ISSUANCE DATE)

50: APPLICANT: VISION PLANT INC: 13 FLOOR, SEWOO BUILDING, 837-12, YOUKSAM-DONG,
KANGNAM-KU, SEOUL, KOREA

59: BENEFICIARY: TELEMATICS WIRELESS LTD. 26 HAMELACHA ST., POB 1911, HOLON
58117

32B: CURRENCY CODE AMOUNT: $US

41A: AVAILABLE WITH....BY: BANK HAPOALIM B.M. BY NEGOTIATION

42C: DRAFTS AT ________________ SIGHT

42D: DRAWEE: ISSUING BANK

43P: PARTIAL SHIPMENTS: ALLOWED

43T: TRANSHIPMENT: ALLOWED

44A: LOADING OF BOAD/DISPATCH/TAKING IN CHARGE AT/FROM: ANY PORT OR AIRPORT IN
ISRAEL

44B: FOR TRANSPORTATION TO: ANY PORT OR AIRPORT IN KOREA

44C: LATEST DATE OF SHIPMENT: ________________

45A: DESCRIPTION OF GOODS AND/OR SERVICES:

SUPPLY OF RADIO LOCATION SYSTEM IN KOREA AS PER CONTRACT NO: LSA 20040831 DATED
31 AUGUST 2004 (the "AGREEMENT")


Annex II                           Appendix A                             Page 1



Vision Plant Inc.                                       Telematics Wireless Ltd.

46A: DOCUMENTS REQUIRED:

A. DOCUMENTS REQUIRED FOR THE DELIVERY OF PRODUCTS AMOUNTING TO US$

1) 3/3 ORIGINALS PLUS 3 NON NEGOTIABLE COPIES OF CLEAN ON BOARD MARINE BILLS OF
LADING MADE OUT TO ORDER OF ISSUING BANK MARKED "PAYABLE AT DESTINATION" NOTIFY:
APPLICANT.

AND/OR

AIRWAYBILL (3RD ORIGINAL - FOR SHIPPER) CONSIGNED TO ISSUING BANK MARKED
"PAYABLE AT DESTINATION" NOTIFY: APPLICANT.

2) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

3) PACKING LIST IN ONE ORIGINAL AND 2 COPIES.

4) ONE (1) ORIGINAL CERTIFICATE OF CONFORMANCE RELATED TO THE GOODS SIGNED BY
THE DULY AUTHORIZED REPRESENTATIVE OF THE BENEFICIARY AS PER ARTICLE 11.2 OF THE
AGREEMENT.

5) ONE (1) QUALITY ASSURANCE CERTIFICATE RELATED TO THE GOODS SIGNED BY THE
REPRESENTATIVE OF THE BENEFICIARY AS PER ARTICLE 11.3 OF THE AGREEMENT.

6) ONE (1) ORIGINAL CERTIFICATE SIGNED BY THE REPRESENTATIVE OF THE BENEFICIARY
CERTIFYING THAT THE BENEFICIARY DECLARES THAT THE GOODS WERE INSPECTED AND
TESTED BY THE REPRESENTATIVE OF THE BENEFICIARY AS PER ARTICLE 11.4 OF THE
AGREEMENT.

B. DOCUMENTS REQUIRED FOR PRELIMINARY DESIGN REVIEW AMOUNTING TO US$

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL APPLICANT'S CERTIFICATE CERTIFYING THAT PRELIMINARY DESIGN REVIEW
HAS BEEN COMPLETED AND THE REPORT HAS BEEN RECEIVED BY THE APPLICANT.

C. DOCUMENTS REQUIRED FOR CRITICAL DESIGN REVIEWAMOUNTING TO US$

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.


Annex II                           Appendix A                             Page 2



Vision Plant Inc.                                       Telematics Wireless Ltd.

2) ORIGINAL APPLICANT'S CERTIFICATE CERTIFYING THAT CRITICAL DESIGN REVIEW HAS
BEEN COMPLETED AND THE REPORT HAS BEEN RECEIVED BY THE APPLICANT.

D. DOCUMENTS REQUIRED FOR HANDOVER EVENT AMOUNTING TO US$

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL APPLICANT'S DECLARATION STATING THAT HANDOVER OF THE SYSTEM OF PHASE
__ HAS BEEN COMPLETED.

3) ONE (1) COPY OF A WARRANTY BOND IN THE AMOUNT OF US$____________ (AS PER
ARTICLE 12.8 OF THE AGREEMENT) DULY CERTIFIED BY THE ISSUING BANK THEREOF.

47A: ADDITIONAL CONDITIONS

o PRESENTATION OF THE DOCUMENTS NO LATER THAN 21 DAYS AFTER THE TRANSPORT
DOCUMENT DATE.

o COMMERCIAL INVOICE TO SHOW FULL CONTRACT VALUE OF THE RELEVANT ITEM SUPPLIED,
DELIVERED OR PERFORMED AND THE NET AMOUNT PAYABLE UNDER THIS L/C.

o THIS LETTER OF CREDIT SHALL BE TERMINATED AND BECOME INVALID AS OF THE DATE
THE ISSUING BANK WILL RECEIVE A WRITTEN NOTICE FROM THE APPLICANT FOR THE
TERMINATION OF THE AGREEMENT PURSUANT TO ARTICLE 36.1 OF THE AGREEMENT.

71B: CHARGES: ALL THE BANKING COMMISSIONS AND CHARGES OUTSIDE ISRAEL ARE FOR
APPLICANT'S ACCOUNT.

49: CONFIRMATION INSTRUCTIONS: CONFIRM (ALL COSTS AND CHARGES FOR CONFIRMING
BANK SHALL BE FOR BENEFICIARY'S ACCOUNT.)

53A: REIMBURSING BANK: ________________

78: INSTRUCTIONS TO THE PAYING/ACCEPTING/NEGOTIATING BANK: UPON PRESENTATION OF
DOCUMENTS REQUIRED AT YOUR COUNTERS, PLEASE ADVISE US BY TESTED TELEX /
AUTHENTICATED SWIFT STATING AMOUNT OF DOCUMENTS PRESENTED, VALUE DATE OF YOUR
CLAIM AND TRANSPORT DOCUMENT NUMBER AND DATE.

WE HEREBY ENGAGE THAT ALL DOCUMENTS PRESENTED UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS L/C SHALL BE DULY HONORED.


Annex II                           Appendix A                             Page 3



Vision Plant Inc.                                       Telematics Wireless Ltd.

IN REIMBURSEMENT OF YOUR PAYMENT(S), YOU MAY DRAW BY TESTED TELEX /
AUTHENTICATED SWIFT ON OUR ACCOUNT WITH....(INSERT NAME OF REIMBURSING BANK)....
VALUE 3 BUSINESS DAYS AFTER DATE OF YOUR TELEX / SWIFT AS ABOVE.

DOCUMENTS TO BE FORWARDED TO US BY REGISTERED MAIL / COURIER.

THIS L/C IS SUBJECT TO UCPDC (REV. 1993) ICC BROCHURE 500. REIMBURSEMENT IS
SUBJECT TO UNIFORM RULES FOR BANK TO BANK REIMB. UNDER DOC. CREDITS ICC PUBL.
NO. 525. THIS MT700 CONSTITUTES OPERATIVE INSTRUMENT AND NO MAIL CONFIRMATION
FOLLOWS.


Annex II                           Appendix A                             Page 4



Vision Plant Inc.                                       Telematics Wireless Ltd.

                                    ANNEX II

                                   APPENDIX A

                           LETTER OF CREDIT BY SWIFT

TO: BANK HAPOALIM B.M. - TEL AVIV

FROM: A LEADING INTERNATIONAL BANK

40A: FORM OF DOCUMENTARY CREDIT: IRREVOCABLE

20: DOC. CRED. NO. : ________________

31C: DATE OF ISSUE: ________________

31D: DATE AND PLACE OF EXPIRY: ________________ IN ISRAEL (__ MONTHS AFTER THE
L/C ISSUANCE DATE)

50: APPLICANT: VISION PLANT INC., 13 FLOOR, SEWOO BUILDING, 837-12,
YOUKSAM-DONG, KANGNAM-KU, SEOUL, KOREA

59: BENEFICIARY: TELEMATICS WIRELESS LTD., 26 HAMELACHA ST., POB 1911, HOLON
58117

32B: CURRENCY CODE AMOUNT: $US

41A: AVAILABLE WITH....BY: BANK HAPOALIM B.M. BY NEGOTIATION

42C: DRAFTS AT...SIGHT

42D: DRAWEE: ISSUING BANK

43P: PARTIAL SHIPMENTS: ALLOWED

43T: TRANSHIPMENT: ALLOWED

44A: LOADING OF BOAD/DISPATCH/TAKING IN CHARGE AT/FROM: ANY PORT OR AIRPORT IN
ISRAEL

44B: FOR TRANSPORTATION TO: ANY PORT OR AIRPORT IN KOREA

44C: LATEST DATE OF SHIPMENT: ________________

45A: DESCRIPTION OF GOODS AND/OR SERVICES: SUPPLY OF RADIO LOCATION SYSTEM IN
KOREA AS PER CONTRACT NO: LSA 20040831 DATED 31 AUGUST 2004 (the "AGREEMENT")

46A: DOCUMENTS REQUIRED: ________________


Annex II                           Appendix A                             Page 1



Vision Plant Inc.                                       Telematics Wireless Ltd.

A. DOCUMENTS REQUIRED FOR THE DELIVERY OF PRODUCTS AMOUNTING TO US$

1) 3/3 ORIGINALS PLUS 3 NON NEGOTIABLE COPIES OF CLEAN ON BOARD MARINE BILLS OF
LADING MADE OUT TO ORDER OF ISSUING BANK MARKED "PAYABLE AT DESTINATION" NOTIFY:
APPLICANT.

AND/OR

AIRWAYBILL (3RD ORIGINAL - FOR SHIPPER) CONSIGNED TO ISSUING BANK MARKED
"PAYABLE AT DESTINATION" NOTIFY: APPLICANT.

2) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

3) PACKING LIST IN ONE ORIGINAL AND 2 COPIES.

4) ONE (1) ORIGINAL CERTIFICATE OF CONFORMANCE RELATED TO THE GOODS SIGNED BY
THE DULY AUTHORIZED REPRESENTATIVE OF THE BENEFICIARY AS PER ARTICLE 11.2 OF THE
AGREEMENT.

5) ONE (1) QUALITY ASSURANCE CERTIFICATE RELATED TO THE GOODS SIGNED BY THE
REPRESENTATIVE OF THE BENEFICIARY AS PER ARTICLE 11.3 OF THE AGREEMENT.

6) ONE (1) ORIGINAL CERTIFICATE SIGNED BY THE REPRESENTATIVE OF THE BENEFICIARY
CERTIFYING THAT THE BENEFICIARY DECLARES THAT THE GOODS WERE INSPECTED AND
TESTED BY THE REPRESENTATIVE OF THE BENEFICIARY AS PER ARTICLE 11.4 OF THE
AGREEMENT.

B. DOCUMENTS REQUIRED FOR PRELIMINARY DESIGN REVIEW AMOUNTING TO US$

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL APPLICANT'S CERTIFICATE CERTIFYING THAT PRELIMINARY DESIGN REVIEW
HAS BEEN COMPLETED AND THE REPORT HAS BEEN RECEIVED BY THE APPLICANT.

C. DOCUMENTS REQUIRED FOR CRITICAL DESIGN REVIEW AMOUNTING TO US$

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.


Annex II                           Appendix A                             Page 2



Vision Plant Inc.                                       Telematics Wireless Ltd.

2) ORIGINAL APPLICANT'S CERTIFICATE CERTIFYING THAT CRITICAL DESIGN REVIEW HAS
BEEN COMPLETED AND THE REPORT HAS BEEN RECEIVED BY THE APPLICANT.

D. DOCUMENTS REQUIRED FOR HANDOVER EVENT AMOUNTING TO US$

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL APPLICANT'S DECLARATION STATING THAT HANDOVER OF THE SYSTEM OF PHASE
__ HAS BEEN COMPLETED.

3) ONE (1) COPY OF A WARRANTY BOND IN THE AMOUNT OF US$____________ (AS PER
ARTICLE 12.8 OF THE AGREEMENT) DULY CERTIFIED BY THE ISSUING BANK THEREOF.

47A: ADDITIONAL CONDITIONS

o PRESENTATION OF THE DOCUMENTS NO LATER THAN 21 DAYSAFTER THE TRANSPORT
DOCUMENT DATE.

o COMMERCIAL INVOICE TO SHOW FULL CONTRACT VALUE OF THE RELEVANT ITEM SUPPLIED,
DELIVERED OR PERFORMED AND THE NET AMOUNT PAYABLE UNDER THIS L/C.

o THIS LETTER OF CREDIT SHALL BE TERMINATED AND BECOME INVALID AS OF THE DATE
THE ISSUING BANK WILL RECEIVE A WRITTEN NOTICE FROM THE APPLICANT FOR THE
TERMINATION OF THE AGREEMENT PURSUANT TO ARTICLE 36.1 OF THE AGREEMENT.


Annex II                           Appendix A                             Page 3



Vision Plant Inc.                                       Telematics Wireless Ltd.



                                   ANNEX III

                       ESTIMATED PRICE AND PAYMENT TERMS

1. ESTIMATED PRICE

PHASE ONE

-------------------------------------------------------------------------
                                     UNIT PRICE              TOTAL AMOUNT
   ITEM            SUBSYSTEM            (US$)     QUANTITY       (US$)
-------------------------------------------------------------------------
   Base      CCSP (Receiving B/S)        ***         ***          ***
 Station             MPRF                ***         ***          ***
                (Receiving B/S)
                      CTU                ***         ***          ***
                     SPCU                ***         ***          ***
                   Sub total                                      ***
-------------------------------------------------------------------------
Licensing      System Licensing          ***         ***          ***
            NCC Software Licensing       ***         ***          ***
                   Sub total             ***                      ***
-------------------------------------------------------------------------
  Spare      CCSP (Receiving B/S)        ***         ***          ***
   Part       MPRF (Paging site)         ***         ***          ***
                      CTU                ***         ***          ***
                     SPCU                ***         ***          ***
                   Sub total                                      ***
-------------------------------------------------------------------------
 Software    Fleet Management S/W        ***         ***
-------------------------------------------------------------------------
                          System supporting services

Engineering, frequency adaptation, system modifications,          ***
management, supervision, training and consulting services
(including salaries, accommodation, travel) during the
deployment of the System
------------------------------------------------------------------------
                                  Total Price                     ***
------------------------------------------------------------------------


Annex III                                                                 Page 1



***   Confidential material redacted and filed separately with the Commission.




Vision Plant Inc.                                       Telematics Wireless Ltd.

PHASE TWO

------------------------------------------------------------------------
                                    UNIT PRICE              TOTAL AMOUNT
   ITEM            SUBSYSTEM           (US$)     QUANTITY       (US$)
------------------------------------------------------------------------
   Base      CCSP (Receiving B/S)       ***         ***          ***
 Station
             MPRF (Receiving B/S)       ***         ***          ***
                      CTU               ***         ***          ***
                     SPCU               ***         ***          ***
                   Sub total                                     ***
------------------------------------------------------------------------
          NCC Software Licensing        ***         ***          ***
------------------------------------------------------------------------
Spare Part   CCSP (Receiving B/S)       ***         ***          ***
             MPRF (Receiving B/S)       ***         ***          ***
                      CTU               ***         ***          ***
                     SPCU               ***         ***          ***
                   Sub total                                     ***
------------------------------------------------------------------------
 Software    Fleet Management S/W       ***         ***          ***
------------------------------------------------------------------------
                          System supporting services             ***
------------------------------------------------------------------------
                                  Total Price                    ***
------------------------------------------------------------------------

PHASE THREE

------------------------------------------------------------------------
                                    UNIT PRICE              TOTAL AMOUNT
   ITEM            SUBSYSTEM           (US$)     QUANTITY       (US$)
------------------------------------------------------------------------
   Base      CCSP (Receiving B/S)       ***         ***          ***
 Station
             MPRF (Receiving B/S)       ***         ***          ***
                      CTU               ***         ***          ***
                     SPCU               ***         ***          ***
                   Sub total                        ***          ***
------------------------------------------------------------------------
          NCC Software Licensing        ***         ***          ***
------------------------------------------------------------------------
Spare Part   CCSP (Receiving B/S)       ***         ***          ***
             MPRF (Receiving B/S)       ***         ***          ***
                      CTU               ***         ***          ***
                     SPCU               ***         ***          ***
                   Sub total
------------------------------------------------------------------------
 Software    Fleet Management S/W       ***         ***          ***
------------------------------------------------------------------------
                          System supporting services             ***
------------------------------------------------------------------------
                                  Total Price                    ***
------------------------------------------------------------------------


Annex III                                                                 Page 2



***   Confidential material redacted and filed separately with the Commission.




Vision Plant Inc.                                       Telematics Wireless Ltd.

2. PAYMENT SCHEDULE FOR EACH PHASE

-----------------------------------------------------
         MILESTONES                    PAYMENT %
-----------------------------------------------------
   Upon Commencement Date                ***
             PDR                         ***
             CDR                         ***
Upon the Delivery to the site            ***
        Handover Date                    ***
-----------------------------------------------------
            TOTAL                        100%
=====================================================




3. INVOICE FORMAT

The Supplier shall provide the invoice which, as a minimum, will include all the
information as specified in the following indicative invoice format:

                     Telematics-Wireless Ltd.
         26 Hamelachi St., P.O.B. 1911 Holon 58117 Israel

--------------------------------------------------------------------------------
SHIP TO:                                        Contract No.
                                                TW Order No.         Invoice No.
--------------------------------------------------------------------------------
Customer:                                       End User
--------------------------------------------------------------------------------

ITEM                             DESCRIPTION                      PRICE   AMOUNT
--------------------------------------------------------------------------------


            I hereby certify that all these details of items
            are in accordance with the Agreement.
--------------------------------------------------------------------------------


Annex III                                                                 Page 3


***   Confidential material redacted and filed separately with the Commission.


                            REPRESENTATION AGREEMENT

This REPRESENTATION AGREEMENT (hereinafter referred to as the "Agreement" or
this "Agreement"), effective as of June ___, 2004, is made by and between
TELEMATICS WIRELESS LTD., having its principal place of business at 26 Hamelacha
Street, Holon 58117, Israel (hereinafter "Telematics") and KOREA INTEGRATED
SERVICES CO., LTD., having its principal place of business at #703 Seoul Center
Building 91-1, Sogong-dong, Chung-gu, Seoul 100-070 Republic of Korea
(hereinafter "Representative").

WHEREAS, Telematics seeks to promote its products and those of ITURAN CAR
COMMUNICATION AND LOCATION LTD. ("Ituran") in the Republic of Korea and possibly
other countries in Asia, and has represented that it is duly authorized to
represent and act for and on behalf of Ituran.

WHEREAS, Representative has the expertise to provide assistance and advice to
Telematics in support of Telematics' marketing activities; and

WHEREAS, Telematics desires to retain Representative to provide such assistance
and advice, and Representative desires to offer Telematics such assistance and
advice.

NOW, THEREFORE, in consideration of the promises and mutual obligations
hereinafter set forth, the parties hereto agree as follows:

1. APPOINTMENT

Telematics hereby appoints Representative, and Representative agrees to act, as
Telematics' exclusive Representative in the Territory and for the Products
pursuant to Article 2 and 3, respectively.

Likewise, Telematics agrees not to permit any of its officers, directors,
employees, advisors or other representative to, without prior written consent of
Representative (i) initiate or solicit, directly or indirectly, any inquiries or
the making of any proposal in the Territory, (ii) engage in any negotiations or
discussions with any person in the Territory or otherwise facilitate any effort
or attempt to make or implement an agreement.

2. TERRITORY

Telematics hereby agrees to appoint Representative as its sole representative in
the Republic of Korea and other Asian countries (the "Territory"), which will be
specified in the definitive agreement to be executed between Telematics and
Service Provider in Korea.

3. PRODUCTS

(a) Any and all components and associated services of Ituran's terrestrial
location system, sold by Telematics, including but not limited to the
followings: Equipments associated with establishing the infrastructure for
services to be provided by Service Provider as set forth in section 4(a) based
on Telematics' technology including but not limited to receiving stations,
peripheral equipment for receiving base stations, paging transmitters,
calibration transmissions


                                       1



units, peripheral equipment for transmitters, computers and telecommunication
equipment for control centers, and standard test equipment ("Infrastructure
Equipment").

(b) Technology licenses including but not limited to system licensing and
network control center software licensing ("Licensing").

(c) Consulting services including but not limited to engineering, frequency
adaptation, system modifications, management, supervision, training and general
consulting services provided by the Telematics team during the deployment of the
system ("Consulting").

(d) End user equipments including but not limited to Telematics' standard
vehicle kit, optional high-end vehicle location unit and alarm kit, and Personal
Alarm Locator (PAL) ("End user equipment").

(e) Maintenance and support services provided after the completion of Service
Provider's system deployment ("Maintenance and Support")

4. REPRESENTATIVE'S ACTIVITIES

Representative shall use its best efforts to actively and aggressively promote
and increase marketing, sale and use of the Products in and throughout the
Territory by all legal and ethical means, including:

(a) Identify and negotiate an agreement with local companies who will act as
investors and service providers ("Service Provider") in the Territory for the
Products, and

(b) Identify and negotiate an agreement with major clients for Service Provider
in the Territory.

5. CONTRACT TERMS

Telematics will have exclusive responsibility to determine the contractual terms
and conditions to be included in all sales contracts with the Service Provider.
No order or contract will be binding on Telematics until accepted in writing by
Telematics.

6. COMPETITIVE PRODUCTS

During the "Term" pursuant to Section 18(a) hereof and any renewal term and for
one year thereafter, Representative shall not advertise, sell, offer for sale,
promote or otherwise deal in any goods or merchandise similar to, or used as a
substitute for, or in competition or conflict of interest with, the Products,
unless Representative shall first have obtained the written consent of
Telematics to do so.

7. REPRESENTATIVE'S CONDUCT

Representative represents that it is free to contract with Telematics to perform
the services contemplated by this Agreement and that contract or performance
hereunder will not violate any agreement, fiduciary obligation, or restriction
to which Representative may be subject. Representative agrees to conduct its
activities under this Agreement in accordance with all


                                       2



applicable laws and regulations including, without limitation, registration of
this Agreement, if required. Breach of this provision shall be grounds for
immediate termination of this Agreement for cause and shall result in forfeiture
of compensation otherwise payable hereunder.

For the avoidance of doubt, Representative has been providing Vision Plant, a
Service Provider, with advice, consultation, guidance, assistance and service on
a personal and informal basis on grounds of Representative's relationship with
certain shareholder of Vision Plant (such advice, consultation, guidance,
assistance and service provided to Vision Plant are hereinafter collectively
referred to as "Vision Plant Services"). Telematics hereby acknowledges and
agrees that (1) Telematics is fully informed of the nature of the Vision Plant
Services, (ii) provision of Vision Plant Services does not constitute a breach
of this Section 7 or any other provision of this Agreement and (iii) Telematics
shall not assert any claims or proceedings against Representative on any grounds
for or in connection with Vision Plant Services. Representative will, upon prior
consent from Telematics, continuously provide such advice, consultation,
guidance and assistance to Vision Plant.

8. REPORTS

Representative shall furnish Telematics with reports as requested by Telematics
from time to time, which shall contain information with respect to its marketing
activity.

9. REPRESENTATION

Representative shall refrain from making any representation or warranty with
respect to the Products other than those contained in the standard warranty
provided by Telematics.

10. SUB-AGENTS

Representative shall not appoint any distributors, agents or delegates or assign
any part of its obligations or functions hereunder without first obtaining
Telematics' consent thereto.

11. SALES MATERIALS

From time to time, Telematics will furnish to Representative such demonstration
equipment and such printed materials pertaining to the Products as Telematics,
in its absolute discretion, deems appropriate, including, but not limited to,
catalogs, advertising literature, technical information, and brochures
describing the products and other sales information (the "Materials").
Representative will not distribute or deliver to customers any printed Materials
pertaining to any Product which is not furnished or approved by Telematics.

12. COMPENSATION

(a) Service Fee: Representative shall be entitled to a non-refundable cash fee
equal to ten (10) percent of any installments, paid to Telematics on
Infrastructure Equipment, Licensing, Consulting, and Maintenance and Support
sold by Telematics as a result of Representative's efforts and delivered to a
customer in the Territory within the Term of this Agreement. Representative
shall also be entitled to five (5) percent of any and all installments paid to


                                       3



Telematics on End User Equipment sold by Telematics to the above mentioned
customer in the Territory within the Term of this Agreement.

(b) Payment: The compensation regarding Infrastructure Equipment, Licensing,
Consulting, and Maintenance and Support will be paid within 30 days following
the receipt of respective payment by Telematics from the Service Provider to the
Representative's nominated account. The compensation regarding End User
Equipment will be based on the total number of units sold per quarter and will
be paid within 30 days from the end of each quarter (March 31, June 30,
September 30, and December 31) to the Representative's nominated account.

If Telematics receives an advance, down payment, payment for partial shipment,
partial payment for the sale of Infrastructure Equipment, Licensing, Consulting,
and Maintenance and Support or progress payment, Representative shall be
entitled to a compensation for its corresponding (pro-rata) share.

If termination of this agreement does not occur as a consequence of any of the
events described in the Section 18(b), Representative shall receive its
compensation for those orders placed prior to the date of termination. The
applicable compensation will not be earned until the customer has paid
Telematics for the Product. The compensation will be based on the F.O.B. "Net
Invoice Price" of the Product, i.e., on the price received by Telematics from
the customer.

(c) Taxes: Each Party shall be responsible for all taxes, duties and charges
assessed upon it in connection with any payment from Service Provider or the
other Party.

13. REPRESENTATIVE'S EXPENSES

Each party shall bear its own expenses incurred in connection with this
Agreement and the implementation of the activities and duties contemplated
hereby.

14. USE OF TRADE NAMES AND SIGNS

(a) Use: Representative agrees to market all Products covered by this Agreement
under the regular trade names and brands used on such goods by Telematics,
unless otherwise agreed upon in writing by Telematics.

(b) Ownership: Telematics is the owner of all trademarks, service marks and
other word and design marks used in connection with the Products. Representative
acknowledges Telematics' ownership and right to control the use and display
thereof by Representative.

(c) Limitation: Representative is granted the privilege of displaying such
trademarks and service marks in connection with the selling of the Products;
provided, however, Representative shall immediately discontinue the display or
rise of any such mark or change the manner in which any such mark is displayed
or used when requested to do so by Telematics or upon termination of this
Agreement.

(d) Protection: Representative further agrees to protect the trade names,
trademarks and service marks used by Telematics.


                                       4



(e) Remedies: If Representative shall refuse or neglect to keep and perform any
of the provisions of this Article 14, Representative shall reimburse Telematics
for all costs, attorneys' fees and other expenses incurred by Telematics in
connection with legal action to require Representative to comply therewith.

15. RELATIONSHIP OF PARTIES

There shall be no employer-employee relationship between Telematics and
Representative. Representative is an independent contractor acting for its own
account, his employees are in no way the employees of Telematics for any purpose
whatsoever and have no right or authority to assume or create, in writing or
otherwise, any obligation of any kind, express or implied, in the name or on
behalf of Telematics.

16. CONFIDENTIAL INFORMATION

All price information and quotations regarding Products, customer lists and
customer names which now or hereafter are in Representative's possession, and
engineering data and application notes and other technical information which are
furnished by Telematics to Representative shall be deemed to have been furnished
in confidence and for use by Representative only in connection with this
Agreement. Representative will take all steps necessary to hold all the
foregoing information in confidence and to prevent the disclosure thereof to any
third party without the prior written direction of Telematics. All such data and
information will remain the property of Telematics and, upon the expiration or
termination of this Agreement, will be returned to Telematics or, at Telematics'
election, destroyed.

17. FORCE MAJEURE

Each party shall use its best efforts to perform its obligations under this
Agreement, but shall be excused for failure to perform or for delay in
performance hereunder due to causes beyond its reasonable control.

18. TERM/TERMINATION

(a) Term: This Agreement shall, except as otherwise provided herein, be for a
period beginning on the date first stated above and ending 12 months of the
signature thereof unless a definitive agreement is executed between Telematics
and Service Provider within this period. Upon the execution of such a definitive
agreement, this agreement shall be automatically extended for the duration of
Telematics' agreement with the Service Provider, including any and all
extensions of the agreement thereafter.

(b) Termination: Notwithstanding Section 18(a), and during the Term and any
renewal thereof, this Agreement may be terminated: (i) on 30 days' written
notice if the other party shall breach any material provision hereof and fails
to cure such breach during the 30-day notice period; (ii) immediately in the
event the other party ceases to function as a going concern, ceases to conduct
its business in the normal course, a receiver is appointed or applied for with
respect to the other party or its property, a petition in bankruptcy is filed by
or against the other party, or it makes an assignment for the benefit of
creditors; or (iii) immediately by Telematics in the event


                                       5



Representative attempts to assign this Agreement or any rights hereunder without
Telematics' prior written consent.

(c) No Compensation: Telematics shall not be liable to Representative, by reason
of termination, expiration, or non-renewal of this Agreement, for compensation,
reimbursement or damages arising out of or connected with the loss of
prospective profits or anticipated sales or compensation or on account of
expenditures, leases or commitments in connection with the business or goodwill
of Representative, or for any other reason, any provision of any law to the
contrary notwithstanding.

However, in case, following the termination of this Agreement, Telematics
successfully completes a transaction, for which the completion is evidenced by
the execution of a definitive agreement, with any local company that
Representative has contacted, introduced, mediated and/or intermediated, within
24 months of the date of termination, Telematics shall pay the compensations
pursuant to Article 12.

(d) Subsequent Orders: The acceptance of any order through Representative after
the expiration or termination hereof shall not be deemed a renewal or extension
hereof nor a waiver of expiration or termination; however, such order shall be
governed by and handled in accordance with all the terms, conditions and
limitations contained in this Agreement as if this Agreement had not been
terminated.

19. MISCELLANEOUS

(a) No Waiver: The failure of either party hereto to enforce at any time or for
any period any right or provision hereof in accordance with its terms shall not
be construed as a waiver of such right or provision.

(b) Agreement: This Agreement contains the entire agreement between the parties
respecting the subject matter hereof, and supersedes and replaces all previous
agreements, understandings, commitments or arrangements, oral or written, with
respect thereto. This Agreement may not be modified except by an instrument in
writing executed by both parties.

(c) Severability: Any provision of this Agreement which is prohibited by, or
unlawful or unenforceable under any applicable law of, any jurisdiction will be
ineffective as to such jurisdiction without affecting any other provision of
this Agreement. To the full extent, however, that the provision of such
applicable law may be waived, they are hereby waived, to the end that this
Agreement shall be deemed to be a valid and binding Agreement enforceable in
accordance with its terms. In addition, the parties hereto hereby agree to
cooperate with each other and to replace the unlawful provision with a lawful
provision which will achieve the same economic result as the provision
determined to be unlawful.

(d) Assignment: Neither party may assign this Agreement to a third party without
the prior written consent of the non-assigning party.

(e) Notices: All notices hereunder shall be in writing and sent to the address
set forth above (or to such changed address as shall be notified to the other
party in writing pursuant hereto) by registered mail, and shall be deemed to be
given on receipt.


                                       6



(f) Governing Law: This Agreement and any and all disputes among the parties
arising from this Agreement shall be governed in all respects by the laws of the
United Kingdom of Great Britain and Northern Irelands.

(g) Headings: The heading contained herein are for the ease of reference only
and shall not affect the interpretation hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.

For and on behalf of:

TELEMATICS WIRELESS LTD.


/s/ Kafry Eddy
--------------------------------
Eddy Kafry
President & CEO

Accepted and agreed for and on behalf of

KOREA INTEGRATED SERVICES CO., LTD.


/s/ Tiger Kim
--------------------------------
Tiger Kim
President & CEO


                                       7



[KLIC Letterhead]

Chi-Young Kwack
6th Fl., Seoul Center Building, 91-1 Sogong-dong,
Chung-gu, Seoul, Korea 100-070

April 1, 2005

Mr. Eddy Kafry & Mr. Roman Sternberg
Telematics Wireless Ltd.
26 Hamelacha Street,
P.O.B. 1911 Holon, 58117 Israel

NOTICE OF AGREEMENT TRANSFER

Dear Sirs:

Korea Location Information & Communications Co. Ltd (hereinafter referred to as
"KLIC") was established on the 23rd day of February 2005, as the Operation
Company referred to in ARTICLE 23 of the LICENSE AND SUPPLY AGREEMENT for RADIO
LOCATION SYSTEM between VISION PLANT INC. (hereinafter referred to as "VPI") and
TELEMATICS WIRELESS LTD. (hereinafter referred to as "TW") dated August 31, 2004
(hereinafter referred to as "Agreement"), and that the Ministry of Information
and Communications of the Korean Government granted the business license to
"KLIC" on the 30th day of March 2005.

KLIC duly accepts all the rights and obligations of "VPI" under the "Agreement".

Please be noticed that all the rights and obligations of "VPI" under the
"Agreement" shall be transferred to and assumed by "KLIC" by this notice,
pursuant to ARTICLE 23 of the "Agreement".

For and on behalf of "KLIC"

--------------------------/     /     /    /

Chi-Young Kwack

Chairman & CEO



[KLIC Letterhead]

"VPI", as the original party of the "Agreement", confirms that "KLIC" is the
"Operations Company" intended in ARTICLE 23 of the "Agreement", and that its
statements regarding its establishment and business license are true.

"VPI" hereby acknowledges that all the rights and obligations of "VPI" under the
"Agreement" has been transferred to "KLIC" by its formal acceptance.

For and on behalf of "VPI"

--------------------------/     /     /    /

Chi-Young Kwack

Chairman & CEO







                                                                   EXHIBIT 10.15

                                        CONFIDENTIAL TREATMENT REQUESTED.
                                        CONFIDENTIAL PORTIONS OF THIS DOCUMENT
                                        HAVE BEEN REDACTED AND HAVE BEEN
                                        SEPARATELY FILED WITH THE COMMISSION.


                                    AGREEMENT


                                 BY AND BETWEEN;



                    GOLDEN NET COMMUNICATION TECHNOLOGY LTD.

                                    ("BUYER")

                                       AND

                        DIGITRACK (CHINA) GROUP CO. LTD.

                                    ("AGENT")

                                     - AND -

                            TELEMATICS WIRELESS LTD.

                                  ("SUPPLIER")

                         FOR THE SUPPLY OF ITURAN RADIO
                                 LOCATION SYSTEM

                                IN GREATER CHINA





                                   AGREEMENT

This Agreement is made this ___ day of _______, 2004 between the Chinese company
Golden Net Communication Technology Ltd. (hereinafter referred to as "Buyer"),
having its registered office at C-209, 25 Fuxing Road, Zhongguancun Science
Park, Beijing, P.R. China, the Hong Kong company Digitrack (China) Group Co.
Ltd. (hereinafter referred to as "Agent"), having its registered office at Shop
55 2/F Lever Building 33, Larch Street Tai Kok Tsvi Kowloon, and the Israeli
company under the name Telematics Wireless Ltd. (hereinafter referred to as
"Supplier"), having its registered office at 26 Hamelacha st., Holon, Israel.

WHEREAS, Buyer is in the business of terrestrial location and monitoring,
intelligent transportation management, development of computer hardware and
software system, and remote meter reading in Greater China, including China
Mainland, Hong Kong, Macau and Taiwan and has obtained a Spectrum License
ranging 835-837 MHz, as well as 280.1625 MHz in China Mainland for operation of
a land-based radio location system, i.e. Ituran System, and

WHEREAS, Buyer wishes to set up in the Region a system of wireless exchange of
messages, between mobile units and stationary units with an identification of
the mobile unit's locations. This system is named Ituran system, using Direct
Sequence Spread Spectrum and other technology for communication and Differential
Time of Arrival (DTOA) technology for location (technical description of Ituran
system is specified in ANNEX IV), and

WHEREAS, with the Effective Date of September 1st, 2004, NCC (Network Control
Center) and 10 Base Stations of first such system should be deployed in Shanghai
area with initial demonstration capability not later than May 31st, 2005, and

WHEREAS, Supplier is in the business of supplying turn-key projects of Ituran
system including, but not limited to, the training of personnel (Tasks of the
turn-key projects are specified in ANNEX V) and is the sole supplier of base
stations and end units for the system; Supplier choose Buyer or related
companies that have major participation from Buyer as the sole user of the
technology of such System in the Region; The special equipment supplied by
Supplier in the People's Republic of China shall only be operated in the
frequencies between 835-837MHz as well as 280.1625MHz; and

WHEREAS, Supplier developed base stations, vehicular units and personal or cargo
location units for receiving and transmitting messages and identification of the
units' location and is in the business of manufacturing, supplying and
supporting of such Components; and

WHEREAS, the System special equipment have been developed by Supplier. The
special equipment for the System shall be manufactured by Supplier or its sub -
contractors. Supplier shall retain the title and ownership of the intellectual
property rights or know-how relating to the special equipment of the System, and
possesses licenses for other components of the System. Supplier acknowledges
that the System shall be operated within the frequencies ranging 835-837 MHz as
well as 280.1625 MHz in the People's Republic of China; and

WHEREAS, Buyer acknowledges the specific spectrum characteristics of the System
(as specified in ANNEX III), and will be responsible for its acceptance by the
authorities, and

                                       2


WHEREAS, Buyer has the ability to finance the deployment of the System in the
Region and to establish a service provider company to commercially operate the
System, and to provide qualified and skilled personnel; and has the ability and
personnel to manage and supervise the operation of the System in the Region; and

WHEREAS, Supplier wishes to associate with Buyer and to provide to the Buyer the
CONTRACTUAL ITEMS as described herein, relying exclusively on the terms and
conditions of this AGREEMENT and its ANNEXES which shall constitute an integral
part thereof; and

WHEREAS, Agent acts as an exclusive agent for Supplier's technologies in the
Region.

NOW THEREFORE, in consideration of the mutual promises, covenants, and
conditions herein contained, Buyer, Agent and Supplier agree as follows:



                         AGREEMENT TERMS AND CONDITIONS

ARTICLE 1 DEFINITIONS

The following terms shall have the meaning that is provided hereunder (it is
understood that other terms and acronyms / abbreviations may be additionally
defined in other locations of this Agreement):

--------------------------------------------------------------------------------
TERM                               DEFINITION OF TERM
--------------------------------------------------------------------------------
THE TERRITORY                      China Mainland
--------------------------------------------------------------------------------
THE REGION                         The state of P.R. China including China
                                   Mainland, Hong Kong, Macau and Taiwan
                                   (Greater China).
--------------------------------------------------------------------------------
PROJECT INITIATION AGREEMENT       The contract executed between the Parties for
                                   the implementation of the Ituran Ratio
                                   Location System in the Territory.
--------------------------------------------------------------------------------
SPECTRUM LICENSE                   Spectrum License ranging 835-837 MHz, as well
                                   as 280.1625 MHz for operation of a land-based
                                   radio location system in the People's
                                   Republic of China.
--------------------------------------------------------------------------------
LICENSES                           SPECTRUM LICENSE and all other permits,
                                   licenses and authorisations needed to execute
                                   this AGREEMENT in the REGION.
--------------------------------------------------------------------------------
BUYER                              Golden Net Communication Technology Ltd.
--------------------------------------------------------------------------------
AGENT                              Digitrack (China) Group Co. Ltd.
--------------------------------------------------------------------------------
SUPPLIER                           Telematics Wireless Ltd.
--------------------------------------------------------------------------------







                                   3






--------------------------------------------------------------------------------
TERM                               DEFINITION OF TERM
--------------------------------------------------------------------------------
AGREEMENT                          This Agreement signed this _day of _______,
                                   2004 between the Buyer, the Agent and the
                                   Supplier inclusive of its Articles and
                                   Annexes which shall constitute an integral
                                   part thereof.
--------------------------------------------------------------------------------
                                   This is the entire, complete and operational
                                   system of wireless exchange of messages,
                                   between mobile units and stationary units
                                   with an identification of the mobile unit's
                                   locations.

                                   The system shall consist of components,
                                   including but not limited to, mobile units,
                                   receiving base stations, a control center,
                                   paging units, terrestrial communication lines
                                   management organization and logistic control.

                                   This system includes the following separate
                                   SYSTEMS:

ITURAN RADIO LOCATION SYSTEM
(SYSTEM)                           a. Base Stations- for receiving and
                                   processing of the Vehicle Location Units and
                                   Personal Alarm and Locator transmissions.

                                   b. Vehicle Location Units- vehicular units
                                   for receiving and transmitting messages and
                                   identification of the units' location

                                   c. Personal Alarm and Locator Units - persona
                                   units for receiving and transmitting messages
                                   and identification of the units' location.

                                   d. Control Center.

                                   (Technical description of the Ituran System
                                   is specified in ANNEX IV):
--------------------------------------------------------------------------------
ADVANCE PAYMENT                    The sum of 732,200USD to be paid by BUYER to
                                   SUPPLIER.
--------------------------------------------------------------------------------
LETTER OF CREDIT                   Letter of Credit issued by First Class
                                   International Bank for the total sum of the
                                   deployment cost less the Advance Payment.
--------------------------------------------------------------------------------
INTEGRATION                        The integration by the Supplier of the SYSTEM
                                   and the relevant parts and furthermore the
                                   participation and support by the Buyer, as
                                   described in ANNEX I of the Agreement, to the
                                   integration of the SYSTEM.
--------------------------------------------------------------------------------

                                   4


--------------------------------------------------------------------------------
TERM                               DEFINITION OF TERM
--------------------------------------------------------------------------------
PRODUCTS                           Any individual item specified to be
                                   delivered by the Supplier in accordance with
                                   the terms of this Agreement as part of the
                                   SYSTEMS including software and any spare
                                   parts that may be ordered by the BUYER and
                                   delivered to by the SUPPLIER, as further
                                   defined in ANNEX I.
--------------------------------------------------------------------------------
SERVICES                           All services that shall be provided by the
                                   Supplier under the terms of this Agreement,
                                   including the design, integration, the
                                   updating of software & hardware of the
                                   SYSTEM, and the training to the Buyer's
                                   personnel.
--------------------------------------------------------------------------------
CONTRACTUAL ITEMS                  All of the items provided by the Supplier to
                                   the Buyer in accordance with this Agreement
                                   (PRODUCTS, SERVICES, SYSTEM) as specified in
                                   this Agreement, as the object of the
                                   Supplier's contractual obligation.
--------------------------------------------------------------------------------
                                   Full System Delivery (FSD) means that upon
                                   acceptance of the full System as described
                                   in the SOW:

                                   o The SYSTEMS shall be fully functional,
                                   they shall satisfy the Specifications and
                                   requirements of the Agreement and they shall
                                   be ready for full operational use.

                                   o All the following have been completed:

                                        o program management,

Full system Delivery (FSD)              o the requirements of the SYSTEM
                                          including definition, engineering,
                                          adaptation, installation, integration,
                                          commissioning, certification of
                                          conformity, training and the
                                          fulfillment of Articles 7 and 8 of the
                                          Agreement and

                                        o all contractual documentation in
                                          English and the User training,
                                          operational and maintenance manuals in
                                          the English language.

                                        o All specified infrastructure and
                                          quantities of equipment, software and
                                          services according to Bill of
                                          Quantities have been delivered and
                                          installed.
--------------------------------------------------------------------------------
TECHNICAL DOCUMENTATION            The technical documentation/bibliography to
                                   be provided by the Supplier to the Buyer in
                                   accordance with Article 37.
--------------------------------------------------------------------------------
TRAINING                           The Supplier is obliged to train selected
                                   personnel of the Buyer.  This personnel shall
                                   have, following completion of the training
                                   program, the knowledge required to train the
                                   personnel of the BUYER in order to operate
                                   and maintain the SYSTEM.
--------------------------------------------------------------------------------


                                   5





--------------------------------------------------------------------------------
TERM                               DEFINITION OF TERM
--------------------------------------------------------------------------------
BUYER FURNISHED EQUIPMENT (FE)     The equipment to be furnished by the BUYER
                                   for the implementation of this Agreement as
                                   specified  in ANNEX I.
--------------------------------------------------------------------------------
BUYER FURNISHED INSTALLATIONS(FI)  The installations to be furnished by the
                                   BUYER for the implementation of this
                                   Agreement as specified in ANNEX I.
--------------------------------------------------------------------------------
BUYER FURNISHED SERVICES (FS)      The services to be furnished by the BUYER for
                                   the implementation of this Agreement as
                                   specified in ANNEX I.
--------------------------------------------------------------------------------
                                   The information to be furnished by the BUYER
                                   for the implementation of this Agreement as
                                   specified in ANNEX I.

BUYER FURNISHED INFORMATION (Fl)   FOR THE PURPOSES OF THE ABOVE DEFINITIONS;
                                   I.E. FE, FI AND FS THE TERM BUYER SHALL
                                   INCLUDE BUYER'S SUBCONTRACTORS AND
                                   SUPPLIERS.
--------------------------------------------------------------------------------
DEFECTS                            Any defect that concerns the material and/or
                                   the workmanship of the PRODUCTS or/and the
                                   SYSTEM which causes operational
                                   noncompliance with the specifications of the
                                   system.
--------------------------------------------------------------------------------
MINOR DEFECTS                      A DEFECT that has been identified, prior to
                                   the date of FINAL ACCEPTANCE, and is minor
                                   and not so serious as to prevent the BUYER
                                   from accepting the SYSTEM.
--------------------------------------------------------------------------------
WARRANTY OF GOOD OPERATION         Means the warranty of the PRODUCTS to be
                                   provided by the Supplier in accordance with
OR WARRANTY                        the terms of ARTICLE 11 herein for a period
                                   of one (1) year following the Final
OR WARRANTY OBLIGATION             Acceptance.
--------------------------------------------------------------------------------
SPARE PARTS AVAILABILITY           Means that the Supplier shall for a period
                                   of seven (7) years from the date of FINAL
                                   ACCEPTANCE, have available all spare parts
                                   required in accordance with the provisions
                                   of ARTICLES 11 and 41.3.
--------------------------------------------------------------------------------
                                   Shall be completed with the issuance by the
                                   BUYER of the certification of completion of
                                   FAT - as notified to the Buyer by the
                                   Customer - following the successful
FINAL ACCEPTANCE                   completion of the Processes and Final
                                   Acceptance Tests performed on the fully
                                   completed system in accordance with ARTICLE 8
                                   and based on the principles as outlined in
                                   ANNEX II or upon the fulfillment of the
                                   conditions provided in ARTICLE 8.1.2.ii
                                   hereto.
--------------------------------------------------------------------------------



                                   6




--------------------------------------------------------------------------------
TERM                               DEFINITION OF TERM
--------------------------------------------------------------------------------
PARTY/PARTIES                      The parties of the present Agreement, i.e.,
                                   BUYER, AGENT and SUPPLIER.
--------------------------------------------------------------------------------



1.1 Any term not specified in this present Agreement shall have the meaning
provided for this term by the existing stipulations of United Kingdom Law.

1.2 The Parties to this present AGREEMENT shall be bound only by the terms and
conditions of this AGREEMENT and its Annexes, which shall constitute an integral
part thereof.

ARTICLE 2 SUBJECT AND SCOPE OF THIS AGREEMENT

2.1 Pursuant to the stipulations, the terms and the conditions of this
Agreement, the Supplier undertakes the obligation to participate in a site
survey, design in detail, manufacture, install, test, complete, develop,
integrate, sell and deliver to the Buyer the SYSTEM, as specified in ANNEX I - X
(X defines the city or area, collectively referred to as ANNEX I) and provide
the SERVICES in accordance with ANNEX I as well as fulfill all of its
obligations as defined in this AGREEMENT. Supplier shall provide the Buyer with
a turn-key Project management, specific hardware and software manufactured by
Supplier and shall provide the engineering and technical planning and design of
the System and designate the qualified personnel to train and participate in the
establishment of the System as specified in this Agreement.

2.2 For clarification purposes, it is stated that the first stage of
implementation shall be the establishment of ten Base Stations in the TERRITORY,
as stated in ANNEX I.

2.3 The CONTRACTUAL ITEMS shall be delivered and installed by the Supplier to
the installations specified in the terms and conditions of this Agreement (ANNEX
I). The Buyer shall purchase the CONTRACTUAL ITEMS, exclusively from Supplier
during the entire period in which the Buyer will run the business and operation
of Vehicle and/or Personal Location in the Region. The CONTRACTUAL ITEMS,
supplied by Supplier in the Region shall be applied in the frequencies between
835-837 MHz as well as 280.1625 MHz.

2.4 The configuration and general technical description of the SYSTEMS are
specified in ARTICLE 5 - "SPECIFICATIONS" and in the respective ANNEX I and
ANNEX IV.

2.5 All PRODUCTS to be delivered to the Buyer shall, with the exception of their
operation for the performance of tests and training, be new, complete, have the
technology and construction

                                   7



defined in ANNEX I and shall be constructed from high quality, new, unused
material in accordance with the requirements of this agreement.

2.6 Buyer shall undertake to establish and finance the deployment and Operation
of the System in the Region. Upon the completion of the deployment System by
Supplier in accordance to this Agreement, the Buyer shall commercially operate
the System.

2.7 Supplier shall open all interface to the System to Buyer and provide the
technical specifications of the interfaces. Buyer will choose the software
developing company to develop the System application software adaptation to
Chinese market.

2.8 The Supplier states that it has the proper technological know how,
personnel, methodology, organizational skills, management and control of all of
the necessary detailed designs, and capabilities required for the execution of
the Agreement in accordance with the rules of "science and art" (state of the
art).

2.9 The BUYER states that it has the proper technological know how, personnel,
methodology, organizational skills, management, expertise and control of all of
the necessary capabilities required for the execution of the Agreement in
accordance with the rules of "science and art" (state of the art), including
without limitation the proper LICENSES.

ARTICLE 3 TERM OF THE AGREEMENT/EFFECTIVITY

3.1 This Agreement shall become effective at the date of September 1, 2004, or
at the date that the BUYER has submitted to the Supplier the ADVANCE PAYMENT,
whichever is later.

3.2 The LETTER OF CREDIT shall be submitted to the Supplier no later than
October 1, 2004. Any delay in the submission of LETTER OF CREDIT after this date
will cause corresponding delay in the Project Schedule.

3.3 After the Final Acceptance, this Agreement shall continue to be in force for
the fulfillment of the contractual obligations of the PARTIES which are related
to the Final Acceptance, i.e. WARRANTY, SPARE PARTS AVAILABILITY, MAINTENANCE,
OPTIONS, CONFIDENTIALITY, INTELLECTUAL PROPERTY RIGHTS, payments and until the
PARTIES has fully performed all of these obligations in accordance with this
Agreement, unless earlier terminated.

ARTICLE 4 PRICE, PAYMENT AND INVOICING REQUIREMENTS

4.1  Price.

4.1.1 The total amount of the price to be paid by the Buyer to the Supplier for
the fulfillment of the SUPPLIER's obligations under this AGREEMENT is described
in Appendix C of ANNEX I.

                                       8



4.1.2 The Price is calculated, among other, on the basis of the Bill of
Quantities defined in ANNEX I i.e. unit prices multiplied on the basis of
quantity supplied; plus the lump sum for the provision of the items specified as
"lump sum items", as stated in the Bill of Quantities in ANNEX I. Payment shall
be made in US Dollars.

4.1.3 It is further clarified that the lump sum for the items specified as "lump
sum items" IN Appendix C of ANNEX I, shall remain constant and unchanged
throughout the duration of the AGREEMENT, irrespective of the increase or
decrease of the CONTRACTUAL ITEMS.

4.1.4  The Price, as defined above, is FOB Tel -Aviv Israel.

4.2  Payment Terms

4.2.1 The Buyer shall pay the Price to the Supplier through the Agent in
accordance with the terms and conditions set forth in Appendix C of ANNEX I.

4.2.2 The dates referred herein above (paragraph 4.2.1) relate to the issuance
of an invoice by the supplier. The payment shall take place 7 days after the
issuance of the invoices.

4.2.3 A fourteen (14) days delay by the Buyer in the scheduled payment dates is
considered as an excusable delay to accommodate fixed scheduled payment dates of
the Buyer.

4.3 Income Tax. The Supplier and its subcontractors shall pay their
corresponding income tax in accordance with the provisions of the Israeli Law or
the applicable bilateral agreements for the avoidance of Double Taxation, as the
case may be. All payments to Supplier shall be free of any deduction for
withholding taxes that apply to payments from Buyer to Supplier.

4.4 Except the Advance Payment, payment to the Supplier shall be made through
Letter of Credit (LOC) issued by First Class International Bank for the total
sum of the deployment Cost less the Advance Payment. The LOC will be provided no
later than thirty (30) days after the Effective Date. The content of this LOC
will include the payment terms as specified in Appendix I of ANNEX I.

4.5 Reconciliation of Accounts. Within ONE (1) month from the fulfillment of the
Final Acceptance, the final account reconciliation for the delivered CONTRACTUAL
ITEMS shall be performed. If a difference exists between the amount of the final
account reconciliation and the Price of this Agreement corresponding to the
obligations of the Supplier related to the Final Acceptance, this difference
shall be resolved within one (1) month from the final account reconciliation, as
follows:

(i) if the difference is in favor of the Buyer, by payment of this difference in
cash by the Supplier in accordance with the Buyer's written instructions.

(ii) if the difference is in favor of the Supplier, by payment of this
difference in cash by the Buyer in accordance with the Supplier's written
instructions.

                                       9


On completion of the final account reconciliation, the Buyer and the Supplier
shall sign a certificate stating that neither party has any claims with regard
to the payment of the Price under this Agreement.

ARTICLE 5 SPECIFICATIONS

The CONTRACTUAL ITEMS to be delivered by the Supplier to the Buyer in accordance
with this Agreement shall be new, fully compatible and inter operational between
them and in accordance with ANNEX I. Detailed System specifications will be
submitted at PDR in accordance with ANNEX I.

ARTICLE 6 SPECIFICATION AMENDMENTS

6.1 No modification to the specifications is allowed unless otherwise agreed
between the Parties.

6.2 If the Supplier, during the implementation of the Agreement, discovers that
its technical solution does not conform to the operational specifications
described in ANNEX I, the Supplier shall notify the Buyer in writing, specifying
the details of the non conformance.

6.3 In this event, the Supplier shall be obliged to propose for acceptance to
the Buyer, a respective modification of the specifications of the SYSTEM or part
of them, so as for the requirements of the operational, specifications that are
described in ANNEX I are fulfilled. No modification shall influence the agreed
project schedule (as specified in Appendix B of ANNEX I). Buyer shall provide to
the Supplier approval or comments forthwith upon the approval or comments. The
modifications proposed by the Supplier should be free of charge. The Supplier
shall bear all the expenses incurred by the modifications. If the System fails
to come into proper operation at the time specified in ANNEX I, the Supplier
shall compensate the Buyer a sum equal to zero point one percent (0.1%) of the
price of the subject of this Agreement for every delay of one day after the
grace period of 60 days up to the maximum level of 10%, if Buyer at its own
discretion demands to do so.

6.4 In the event Buyer requires modification of the operational specifications
of the SYSTEM or part of them during the deployment of the SYSTEM, Supplier
shall present the cost for the implementation and incorporation of modifications
asked by Buyer, taking into consideration the timeframe. The cost in this case
shall be borne by the Buyer, if he chooses to do so and timeframe shall be
adjusted accordingly.

6.5 Following the agreement for the acceptance of the specifications'
modification, the procedures for the amendment of the Agreement shall be in
accordance with ARTICLE 40 - "AMENDMENTS OF THE AGREEMENT".

                                       10


ARTICLE 7 ACCEPTANCE PROCEDURES

7.1 The Final Acceptance of the SYSTEM shall be deemed to be effected in
accordance with the terms and provisions of this article and of article 8 and in
accordance with the principal guidelines defined in ANNEX II. The detailed Final
Acceptance Procedures will be provided on CDR. The Supplier shall enable the use
of the SYSTEM by the Buyer for testing procedures in accordance with the
timetable provided in ANNEX I of this AGREEMENT. The Supplier shall perform the
testing procedures in accordance with the Supplier's internal procedures and the
Completed Acceptance Plan of the SYSTEM, as provided in ANNEX II of the
AGREEMENT. A copy of the Completed Acceptance Plan of the SYSTEM regarding the
testing procedures shall be drafted and submitted by the Supplier to the Buyer
at least thirty (30) calendar days prior to the dates the testing procedures are
scheduled to take place. The acceptance test principles are described in ANNEX
II of this Agreement.

7.2 The Buyer shall be responsible for a proper number of authorised personnel
to participate in the acceptance procedure.

7.3 If the tests performed during the application of the Complete Acceptance
Plan for the acceptance of the SYSTEM are not successful according to the
Complete Acceptance Plan, these tests shall be repeated immediately and within
the timetable defined in the Complete Acceptance Plan, until they are completed
successfully. The Supplier shall repair malfunctions and/or failures/DEFECTS,
which may occur in the SYSTEM observing however the delivery timetable of this
Agreement.

7.4 The acceptance procedure shall be completed as soon as the following are
achieved:

(i) The tests for the SYSTEM have been completed by the PARTIES, through the
signature of the System Acceptance Report ("SSAR").

(ii) Every and all of the materials, equipment and other items provided in the
Bill of Quantities have been delivered, installed and tested for each one of the
SYSTEM,

(iii) The training has been completed and the BUYER's trainees have been
certified with the Certificate of Training for the operation and maintenance of
the SYSTEM.

(T) All of the written documentation has been delivered to the Buyer.

ARTICLE 8  DELIVERY-ACCEPTANCE-TRANSFER OF OWNERSHIP - RISK OF LOSS OR DAMAGE

DELIVERY-ACCEPTANCE

8.1.1 The Supplier shall deliver the SYSTEM, ready for operational use, and in
accordance with the timetable of this Agreement.

                                       11



8.1.2 (i) The SYSTEM shall be accepted by the BUYER after the final acceptance
tests have been successfully completed.

(ii) In the event that the BUYER has not sent to the Supplier, any written
notice regarding a DEFECT or non successful Final Acceptance Test, as defined in
Article 7 above and in ANNEX II, then the SYSTEM shall be deemed to have
achieved Final Acceptance for the purposes of this Agreement and shall be
considered to have been accepted by the Buyer within thirty (30) days after the
successful final acceptance tests of the SYSTEM. The Supplier is considered to
have fulfilled all contractual obligations related to the delivery of the SYSTEM
and shall have the right to receive the respective final payment.

(iii) In the event that the BUYER has sent to the Supplier, a written notice
regarding a DEFECT or non successful Final Acceptance Test, as defined in
Article 7 above and in ANNEX II, then the Supplier shall take measures to insure
that the SYSTEM will commence operating at the time specified in ANNEX I. If the
System fails to come into proper operation at the time specified in ANNEX I
because of such DEFECT, the Supplier shall compensate the Buyer a sum equal to
zero point one percent (0.1%) of the price of the subject of this Agreement for
every delay of one day after the Grace Period of 60 days up to the maximum level
of 10%, if the Buy at its own discretion demands to do so.

8.1.3 All CONTRACTUAL ITEMS shall be delivered in accordance with the terms and
conditions specified in this Agreement.

8.1.4 The Supplier shall be responsible for the whole process of the training.
Supplier and Buyer will jointly decide on whether the training having been
provided properly via examinations on both knowledge and operation, which will
be supervised by the representatives respectively designated by the Supplier and
the Buyer. The training shall be considered to have been provided properly, upon
the issuance and execution by the Supplier of a CERTIFICATE certifying that the
training has been completed and provided in accordance with the terms and
conditions of this present Agreement. The trainees shall get the CERTIFICATE
only after passing the strict examinations.

TRANSFER OF OWNERSHIP -- SERVICES PROVIDED

8.2 The transfer of ownership from the Supplier to the Buyer of the SYSTEM shall
be completed upon fulfillment of the conditions of Article 8.1.2 (ii) or as
otherwise may be agreed to by the Parties in writing.

8.3 The Parties agree that the Buyer shall not have the right to use the SYSTEM,
unless the Buyer has paid the Supplier the amount of the Price defined in
article 4.2.1, subject to the terms of article 4.

8.4 The Supplier, upon the date of fulfillment of the conditions of Article
8.1.2(ii) or as otherwise may be agreed to by the Parties in writing, shall
transfer to the Buyer the ownership of all CONTRACTUAL ITEMS, free from DEFECTS,
any claims of third parties, liens, encumbrances and other legal defects.

                                       12


RISK OF LOSS OR DAMAGE

8.5 All risks of loss or damage to the PRODUCTS shall be transferred from the
Supplier to the Buyer on FOB basis, unless otherwise agreed to by the Parties in
writing.

8.6 In the event of loss or defect of a PRODUCT, prior to the transfer of its
risk of loss and damage in accordance with this article, the Supplier shall be
required to replace it with a new one, at its own expenses.

ARTICLE 9 ADVANCE PAYMENT AND LETTER OF CREDIT

The Buyer shall submit to the Supplier an Advance Payment and Letter of Credit
issued by First Class International Bank in accordance with ANNEX I.

ARTICLE 10 QUALITY ASSURANCE

10.1 The Supplier is ISO 9001 certified? and shall implement a quality assurance
system during the implementation of the Agreement.

10.2 The CONTRACTUAL ITEMS shall be accompanied at the time of their delivery by
a Certificate of Conformance to the requirements of the Agreement, which will be
issued and signed by the Supplier.

10.3 All quality assurance certificates related to the CONTRACTUAL ITEMS shall
be in accordance with the Quality Plan. The aforementioned certificates shall
certify that the Supplier is in conformance with the requirements of contractual
terms and the specifications in accordance with ISO 9001.

ARTICLE 11 WARRANTY

11.1 The Supplier shall provide, for the PRODUCTS a warranty for a period of one
(1) year from the Final Acceptance.

11.2 In the event that, during the warranty period, any DEFECT of material,
hardware or software of all PRODUCTS may appear, which is capable of affecting
the operation of the SYSTEM by the Buyer, and for which DEFECT the Supplier is
responsible in accordance with the terms and conditions of this present ARTICLE,
the following shall apply:

i. The BUYER shall send the defective PRODUCT/Part to the SUPPLIER. SUPPLIER
shall repair or replace the defective material or PRODUCT hardware and send it
back to the BUYER. All transportation and packaging costs shall be borne by the
SUPPLIER.

ii. SUPPLIER shall repair or replace the defective software, at its own
expenses.

iii. The warranty period of any defective material, hardware or software
replaced by the SUPPLIER shall be one (1) year after the new material, hardware
or software is received by the BUYER; SUPPLIER shall extend the warranty period
of the repaired defective material,

                                       13



hardware or software for a time period equaling to the time required to restore
the operation of the PRODUCT/Part.

11.3  Throughout the warranty period, the following must be observed:

A. The notification of the Supplier by the Buyer, for any appearance of material
defect of material, hardware or software, which is covered by this warranty, by
sending a written Event Report to the Supplier immediately after the defect's
detection.

B. The obligation of the Buyer to avoid further use of the defective item
immediately after the defect's detection, in order to avoid further damage to
the related SYSTEM.

C. The compliance with the Supplier's written and/or oral directions for the
measures the Buyer must take until operations are restored, in accordance with
the specifications.

11.4 Ownership of every of material, hardware or software, replaced in
accordance with the terms of the Warranty shall be transferred to the SUPPLIER.
Every item repaired within the frame of the warranty shall be covered under the
warranty until the end of the initial warranty period or of its extension in
accordance with Article 11.2 (c).

11.5 The PRODUCTS shall be stored, used, tested/ inspected and placed in
operation in accordance with the Technical Manuals and all other written
instructions issued by the Supplier.

11.6 The Warranty provided by the Supplier shall not cover defects resulting
from:

A. Damages or malfunctions caused by the use of unauthorized individuals, bad
use or non compliance or non-conformity with the Supplier's written directions.

B. Damages or malfunctions caused by:

(1) Electric power overload, fire, (excluding fire caused by defect of material)
and / or force majeure;

(2) Improper storage;

(3) PRODUCTS that have been opened or dissembled by the Buyer, without the
Supplier's authorization for such action;

(4) Vandalism or other criminal activity of third parties.

11.7 This warranty also covers the cost of parts, materials, and mechanical
parts which have suffered damages of any nature exclusively due to the defective
CONTRACTUAL ITEM, and which damage was notified to the Supplier in a timely
manner, so that the SYSTEM may be returned to a state of full and proper
operation.

11.8 Within the warranty period the SUPPLIER shall provide the BUYER the
necessary spare parts free of charge. After the warranty period, the BUYER will
have the option to buy the above-mentioned spare parts or to return the spare
parts to the SUPPLIER.

                                     14



ARTICLE 12 MAINTENANCE

The Supplier shall provide to the Buyer the Maintenance Services up to the end
of Warranty Period, according to the terms and conditions stated in ANNEX I.
After the Warranty Period, the Supplier shall provide to the Buyer the
Maintenance Services according to the terms and conditions based on Maintenance
and Support Agreement to be signed between the Parties based upon ANNEX VI -
MAINTENANCE AND SUPPORT AGREEMENT PRINCIPLES.

ARTICLE 13 TRAINING

13.1 The Supplier is obliged to provide training in accordance with this
article, and ANNEX I to the trainees of the BUYER in the deployment,
integration, use and operation of the SYSTEM.

13.2 The Buyer, in order to facilitate the Supplier to fulfill its training
obligation as defined in paragraph 13.1 above and in ANNEX I, agrees to provide
to the Supplier the following services under the terms and conditions defined
herein below:

13.2.1. The Buyer shall designate the personnel to be trained by the Supplier.
The training shall be in the English language to the Buyer's designated trainees
as set forth in ANNEX 1. The training material which will be used during the
training shall be in the English language.

13.2.2. The Supplier will supply a training facility in Israel as required, in
accordance with ANNEX I.

13.3 Following the training to be provided by the Supplier to the personnel
designated by the Buyer, the latter will train the all of his additional
employees.

13.4 The personnel designated by the Buyer to act as instructors (after their
training) will have the responsibility to translate the training material to the
Chinese language.

English versions of the training material will be provided to the trainees with
the English one being the official.

13.5 The Supplier shall, at the end of each training course, provide a
Certificate of Successful Completion of Training to each trainee who
successfully completes the training course and passes the examinations
supervised by the Supplier and the Buyer together.

ARTICLE 14 INSURANCE

14.1 Notwithstanding any provision contained herein, any Party and its
employees, agents, representatives, consultants, subcontractors, and suppliers,
are not insured by the other Party, and are not covered under any policy of
insurance that the other Party has obtained or has in place.

14.2 The CONTRACTUAL ITEMS shall be insured against loss and damage during
transportation, at the Buyer's cost, for their full contract value. This
insurance shall cover all risks relative to the nature of the goods, including,
without limiting the generality of the foregoing, strikes.

                                       15



14.3 For the implementation of this Agreement, every Party and its
subcontractors shall have insurance coverage against general risks and civil
liability, which they usually conclude for their own protection. In addition,
they shall maintain the aforementioned insurance coverage in force until Final
Acceptance.

ARTICLE 15 INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS

15.1. Indemnity. Subject to Sections 15.3 below, Supplier will defend, indemnify
and hold harmless Buyer, and its directors, officers, employees and agents, from
and against any and all INTELLECTUAL PROPERTY RIGHTS claims, demands,
liabilities, actions, suits, proceedings (including reasonable attorneys' fees)
asserted by a third party arising out of or relating to Supplier's performance
under this Agreement, and Supplier agrees to undertake the cost of defending the
same, and will pay resulting costs and damages finally awarded, provided that:

15.1.1. Buyer promptly notifies Supplier of the claim;

15.1.2. Buyer cooperates with Supplier in the defense, provided that Supplier
reimburses Buyer for its reasonable out-of-pocket expenses (including reasonable
outside counsel legal fees) associated with such cooperation; and

15.1.3. Supplier has sole control of the defense and all related settlement
negotiations, using counsel reasonably satisfactory to Buyer.

15.2. Supplier's Obligations Regarding Infringement Claims. No warranty; Buyer
Due Diligence. Supplier represents and warrants to Buyer that as of the
Effective Date it has not been notified of any claim that Supplier's use of the
System violates the legally protected trade secret, proprietary right or other
interest of a third party, or infringes a patent, copyright or other
intellectual property right of a third party (a "Third Party Infringement
Claim"). Buyer acknowledges and agrees, however, that Supplier makes absolutely
no representation or warranty regarding Third Party Infringement Claims arising
from Buyer's use of the System in the Territory. Supplier strongly encourages
Buyer to conduct copyright searches and other appropriate due diligence, in the
Territory to ensure that Buyer's use of the System in the Territory will not
result in a Third Party Infringement Claim. Buyer acknowledges and agrees that
it is assuming all risk and liability that a Third Party Infringement Claim may
result from Buyer's use of the System in the Territory.

15.3. Third Party Infringement Claims. If a Third Party Infringement Claim
occurs as described in Clause 15.1 above with respect to one or more elements of
the System, or in Supplier's opinion is likely to occur, Supplier will use
reasonable efforts, at its option and expense, either to challenge such Third
Party Infringement Claim or otherwise procure for Buyer the right to continue to
use, maintain and provide support for the System, or to replace or modify the
alleged infringing element so that such element becomes non-infringing, provided
that such replacement or modification does not materially affect performance of
the System.

                                       16


ARTICLE 16 TIMETABLE FOR THE IMPLEMENTATION OF THE AGREEMENT - PROGRESS REVIEWS
- MONITORING / REVIEW COMMITTEES TIMETABLE FOR THE IMPLEMENTATION

16.1 The timetable for the implementation of this Agreement, based on which the
CONTRACTUAL ITEMS, are provided to the Buyer is included in ANNEX I.

16.2. The Agreement shall become effective in accordance with ARTICLE 3 "TERM OF
THE AGREEMENT/EFFECTIVITY" and the timetable mentioned in Article 16.1 is
calculated from the effective date of the Agreement.

PROGRESS REVIEWS

16.3 The Supplier shall meet with the Buyer to review the progress of the
Agreement implementation. The scheduled meetings shall be a means of
communication with the Buyer to examine the agenda issues which have been agreed
upon or those for which the Buyer shall be required to be briefed on from time
to time.

16.4 The Supplier shall submit specific issues of the agenda prior to the
scheduled review meeting. The Agenda issues shall cover, inductively, but not
limited to, issues of the development for specific CONTRACTUAL ITEMS, design and
production reviews, modifications, contractual and logistics issues, possibly
requested tests, financial issues and deliveries. The Buyer must respond within
seven (7) calendar days from receipt of the aforementioned issues. The Buyer may
request modifications and / or additional items to be discussed, so that the
scheduled agenda shall include other issues under the condition that these
changes are included in the object of this Agreement.

16.5. The specific meeting dates and the location of the meetings shall be
agreed upon between the parties.

MONITORING OF THE IMPLEMENTATION OF THE AGREEMENT

16.6. The representatives of each Party shall adhere to the regulations and
limitations imposed by the other Party at the facilities where they shall be
housed or in the locations they shall visit.

16.7 Under the terms and conditions of the above paragraph, the Supplier shall
ensure the Buyer's representative will have access to all locations related to
the production, use and testing, performance use and testing, and the
completion, verification and quality control of the SYSTEM. The Buyer shall
notify the Supplier fourteen (14) days in advance, regarding the visits of the
Buyer's representatives and shall inform the Supplier of the number and
identities of the representatives, the purpose of the visit. The visit shall
take place during business hours or otherwise agreed by the Parties in emergency
or special situation. The Buyer's representatives shall avoid all acts which may
hinder the smooth operation of the facilities.

ARTICLE 17 WAIVER OF RIGHTS

17.1. The waiver or the non exercise of any term of this Agreement by either of
the Parties shall not constitute a waiver of any of the rights of the said
Party. Such resignation shall be valid only

                                       17


if it is agreed upon in writing between both Parties, in accordance with ARTICLE
40 "AMENDMENT OF THE AGREEMENT".

17.2. Failure or omission of either of the two Parties to impose upon the other
Party, at any time, the application of the provisions of this Agreement or to
exercise any right provided by this Agreement shall not be interpreted as being
a present or future resignation from these provisions or rights and shall not
affect the existence /validity, enforcement of the Agreement.

17.3. The explicit resignation of any of the Parties from any of the rights
resulting from any ARTICLE or any provision contained in this document, does not
constitute a waiver/ resignation from any future right or obligation in
accordance with this ARTICLE or provision, or waiver/ resignation from any other
right which derives from any term of this Agreement, unless it has been agreed
to otherwise between both Parties.

17.4. Any omission by the either Party to immediately claim any indemnification
from the other Party for any damage, costs or other expenses that will be paid
by it for the other Party's account, shall not constitute resignation of the
Party from its right to claim indemnification for the damages, costs or other
expenses and the Party has the right to claim the aforementioned indemnification
at any time, in accordance with this Agreement.

ARTICLE 18 LICENSES, PERMITS AND APPROVALS

18.1 The Buyer will be responsible to provide any Local Licenses and permits
necessary to establish and operate the System in the Region and in order for the
Supplier to have access to the sites provided to in this Agreement in order for
the latter to fulfill its contractual obligations in accordance with this
Agreement. The Buyer shall be responsible to obtain any other licenses, permits
and approvals necessary for the Supplier to perform its contractual obligations,
including any and all permits and approvals related to the Supplier's and its
subcontractors' personnel, such as security provision requirements, visas, work
and residence permits if required, etc. Without derogating from the above, the
Buyer shall assist and support the Supplier and shall use its best efforts to
arrange for the residence permits as well as for the necessary work permits for
the Supplier's personnel.

18.2 According to the requirements of the Chinese government, Supplier shall be
responsible for applying for the Telecommunication Equipment Network Access Type
Approval to the relevant Chinese government departments; Buyer shall co-operate
diligently with Supplier for the application.

18.2.1 To perform the foregoing tasks, the Supplier and its parent company
Ituran Location and Control Ltd. will authorize Buyer as their representative
office in the Region within thirty (30) calendar days from the Effective Date of
this Agreement. The term of this authorization shall be no shorter than five (5)
years. The representative office will represent the Supplier to apply for the
Telecommunication Equipment Network Access and Type Approval to the relevant
Chinese authorities.

18.2.2 Supplier and its parent company Ituran Location and Control Ltd. shall
provide all the documents required for setting up the representative office in
China.

                                       18


18.2.3 Buyer will play its role, at its own expenses, as the representative
office of Supplier and its parent company Ituran Location and Control Ltd. in
the Region. The fees charged by the relevant Chinese authorities during the
application for setting up the representative office in China shall be borne by
Supplier and its parent company Ituran Location and Control Ltd.

18.2.4 The costs of applying for the Telecommunication Equipment Network Access
and Type Approval to the relevant authorities of China shall be borne by
Supplier and its parent company Ituran Location and Control Ltd.

18.2.5 Any delays caused during the process of the fulfillment of forgoing tasks
not caused due to the faulty behavior of the Supplier, and causing the
corresponding delay in the project schedule, will be considered "excusable
delays" and defined in article 21.3

ARTICLE 19  COMPLIANCE WITH LAWS

19.1 The Parties specifically acknowledges that themselves and their supplier's
employees, agents, subcontractors, and consultants shall conduct business within
the letter and spirit of all applicable laws and regulations.

19.2 The Buyer must receive all necessary approvals, including import licenses
from the competent local government agencies.

19.3 Should the Buyer be found to be non-compliant with any of the provisions of
the aforementioned laws; as well as of article 18, the Buyer shall indemnify the
Supplier for any penalty, loss or expenses incurred by Supplier as a result of
Buyer's breach of any of its obligations under this Article.

19.4 Each Party is responsible for the supervision and safety of its personnel
and the personnel of its subcontractors/suppliers. All delivered products, work
or services provided or performed under this Agreement by each Party shall be
safe for all uses contemplated by the present Agreement. The Buyer is
responsible for the supervision and safety of its personnel and the personnel of
its subcontractors/suppliers.

ARTICLE 20  GOVERNING LAW/ARBITRATION

20.1 This Agreement shall be governed by and construed in accordance with the
laws of United Kingdom (LAW) without regard to its conflict or choice of law
provisions. This Agreement and all related correspondence shall be written in
the English language, which shall take precedence over any translation.

20.2 Any dispute arising out of or in connection with this Agreement, including
its existence, validity or termination, shall be handled in accordance with the
following process:

20.3 The Buyer and Supplier's in-country program managers shall agree to enter
into negotiations to resolve such dispute. Both parties agree to negotiate in
good faith to reach a mutually agreeable settlement within a reasonable amount
of time. If after a period of twenty (20) calendar days the dispute remains
unresolved, it shall then be solely and finally settled by binding arbitration
under the Rules of Conciliation and Arbitration of the International Chamber

                                       19




of Commerce (ICC), which rules are deemed to be incorporated by reference into
this article. The tribunal shall consist of three (3) arbitrators appointed
pursuant to the rules of the ICC and as follows: one arbitrator shall be
appointed by the Buyer, one by the Supplier. The third arbitrator shall be
appointed by the other two arbitrators and shall be the president of the
tribunal. The place of the arbitration shall be Vancouver, Canada. The English
language shall be used throughout the arbitral proceedings. The judgment
rendered by the arbitrators upon the award shall be final and binding upon the
Parties and may be submitted in any court having jurisdiction for the purposes
of obtaining an order of enforcement or judicial acceptance of the award, as the
case may be.

20.4 The Parties shall not be entitled for any reason whatsoever, to stop the
implementation of this Agreement or/ and any of the obligations hereto. As an
exception to the aforementioned, in the event that the Buyer delays the payment
to the Supplier of any overdue amount of the Price, for a period which is longer
than fourteen (14) days from the date that this amount became due and payable in
accordance with the terms and conditions of this Agreement, then the Supplier
shall have the right to stop the implementation of its obligations until the
date that the Buyer will fulfill its respective obligation for payment.

ARTICLE 21  LIMITATION OF LIABILITY

21.1 AGGREGATE LIABILITY. Irrespective of the number of claims and the basis of
such claims, the maximum aggregate liability of either party in connection with
this agreement for any direct damages or losses, whether such claim arises in
contract, tort or otherwise, shall not exceed a sum equal to the amounts
actually paid by Buyer to Supplier in terms of this Agreement, in addition to a
Performance Bond equal to the 10% of the amounts paid by the Buyer to the
Supplier.

21.2 SOLE LIABILITY. Either Party (and its suppliers) obligations and liability
under this Article and this Agreement shall be Either Party's sole obligations
and liability to the other Party and any third party and the Party's exclusive
remedy and the other Party shall have no other liability whatsoever.

21.3 EXCUSABLE DELAY. The liability do not apply when the Supplier is unable to
complete or is late in fulfilling its contractual obligations towards the Buyer
exclusively and solely as a result of the culpable ("ipetia siberifora")
behavior of the Buyer or of any of Buyer's subcontractors and/or the culpable
failure of fulfillment of Buyer's responsibilities in accordance with this
Agreement, or due to reasons of force majeure in accordance with article 23
hereto ("EXCUSABLE DELAY"), nevertheless the Parties will make their best
efforts to retain the time schedule and meet the program milestones. In cases of
excusable delays, the Buyer will hold the Supplier harmless from damages and
shall not impose penalties to the Supplier.

ARTICLE 22  ASSIGNMENT OF RIGHTS AND OBLIGATIONS

Neither party shall be entitled to assign its rights or obligations hereunder
without the prior consent of the other party except for assignments to parent
companies or related companies that have major participation from each party.

                                       20


ARTICLE 23  FORCE MAJEURE

23.1 If either Party, due to reasons of force majeure, is not able to fulfill
its contractual obligations, and particularly to deliver the CONTRACTUAL ITEMS
within the time limits specified in ARTICLE 8 - "DELIVERY - ACCEPTANCE --
TRANSFER OF OWNERSHIP -- RISK OF LOSS OR DAMAGE" then the time limits for the
fulfillment of its obligations and for the delivery of the CONTRACTUAL ITEMS
shall be extended for a time period equal to the duration of the event which
constitutes Force Majeure and of its results, without imposing any applicable
sanctions, under the condition that the Party suffering the Force Majeure Events
shall act as specified in the following paragraphs of this ARTICLE.

23.2 The proof of the event which constitutes, Force Majeure and the duration of
its results, as well as the size of the negative implications of the occurring
of such an event to the smooth implementation of this Agreement, shall be the
responsibility of the Party suffering the Force Majeure Events, who shall be
obliged to submit to the other Party a notification together with the proper
documents issued by the competent authorities, as the case may be, within, at
the latest, thirty (30) days from the time the Force Majeure event occurred,
while, in the event that they are continuous, the Party suffering the Force
Majeure Events shall within the same time period, specify their estimated end if
possible.

23.3. Taking into consideration the special conditions of the implementation of
this Agreement and the importance of its timely implementation in accordance
with ARTICLE 2.6 above, as Force Majeure Events shall be deemed only those
which: a) are beyond the control of the Party suffering the events, b) they take
place without being caused by such Party's culpability, c) hinder this Party
from fulfilling its obligations despite the reasonable attempts to implement
alternative means and ways for this fulfillment. The following events shall be
considered to constitute Force Majeure, under the aforementioned conditions:

23.3.1  Destructive fires, floods, earthquakes or other natural disasters.

23.3.2 Generalized war that hinders specifically the implementation of the
Agreement.

23.3.3 Embargo or accidents that influence the transportation and delivery of
the CONTRACTUAL ITEMS.

23.3.4  Political upheaval, terrorist acts,

23.3.5. Interruption of power supply and other utilities or verified machinery
damage.

23.3.6 General or partial strike, declared by the legally recognized unions, at
the Supplier's facilities.

23.3.7 The announcement by the foreign affairs ministry, which forever reason
warn, or limits or forbids one side to travel to the other Party state.

23.4 If the Parties do not agree as to the characterization of events, other
than those described in Paragraph 23.3 above, as constituting force majeure
and/or as to their consequences to the inability of the Party who pleads them
for the non fulfillment of its contractual obligations, the

                                       21



provisions of ARTICLE 20 - "APPLICABLE LAW - ARBITRATION" shall apply. No Party
shall unjustifiably refuse the acceptance of a proven event of Force Majeure.
The Party that will have been notified regarding the occurring of an event
constituting Force Majeure, is obliged, within eight (8) calendar days after
receiving the information documenting the event which constitutes Force Majeure,
to notify the other Party in writing of its acceptance or refusal to accept that
the event constitutes force majeure; otherwise, the event and its consequences
shall be considered accepted.

23.6 The Party appealing a force majeure event, shall continue to perform the
part of its contractual obligations which is not affected by the force majeure
event and shall make all reasonable efforts in order to minimize the negative
impact of this event in the fulfillment of its obligations. After the occurring
of the force majeure event, the implementation of this Agreement shall continue
in the most beneficial manner for both parties. In case that modifications are
required in the delivery timetable, the payment timetable, etc. these shall be
defined and shall be mutually agreed to within eight (8) calendar days in
accordance with ARTICLE 40 "AMENDMENTS OF THE AGREEMENT", from the time that the
affected Party provided written notification that the force majeure event is
terminated.

ARTICLE 24 LOCAL MANUFACTURING, RESEARCH AND, DEVELOPMENT

24.1 The parties acknowledge the importance of production of end-user equipment
in THE REGION. The Supplier will choose the adequate Chinese manufacturer for
the end-user equipment approved by Buyer. The Buyer has the exclusive right to
finally confirm a manufacturer. This Chinese manufacturer will produce the end
user equipment as Supplier's subcontractor. Ways of manufacturing and settlement
shall be stipulated in separate agreement negotiated by the Parties. The
manufacturing of end user equipment by the Chinese Manufacturer chosen by the
Parties will commence after the production and supplying of specified quantities
of the equipment by Supplier's current manufacturers as will be agreed between
the Parties.

24.2 The parties agree to produce BASE STATIONS in the China Mainland. The
production may start from simply assembly of Base Station equipment, then
gradually transits to extensive manufacture. All details (time, terms etc.) of
the production of Base Stations will be negotiated in the future. The
manufacturing of BASE STATIONS by the Chinese Manufacturer chosen by the Parties
will commence after the production and supplying of specified quantities of the
BASE STATIONS by Supplier's current manufacturers as will be agreed between the
Parties. This Chinese manufacturer will produce Base Station equipment as
Supplier's subcontractor. Ways of manufacturing and settlement shall be
stipulated in separate agreement negotiated by the Parties.

24.3 Setting Up Research and Development Center (R&D, Center). The Parties
herein acknowledge the great potential of Chinese market and the importance of
this market to the future development of the Supplier. After the deployment of
the First Phase System, the Parties shall discuss the details of setting up R&D
Centers of Ituran system in China. The Supplier may take multiple ways to set up
the R&D Center in cooperation with the Buyer; the Buyer will have a sole right
to designate the Chinese companies for this task. The aforesaid designated
companies shall be approved by the Supplier.

                                       22


ARTICLE 25  SUCCESSORS

This Agreement shall inure to the benefit of, and shall be binding upon the
Parties hereto and their successors, and legal representatives.

ARTICLE 26 TECHNICAL AND CONTRACTUAL REPRESENTATIVES

26.1 The Parties shall designate and notify in writing to the other Party their
technical and contractual authorized representatives.

26.2 All communications shall be in English. Communications that could affect
the Agreement's Price, schedules, statement of work, or these terms and
conditions shall be made only with the authorized contractual representatives
noted above. No changes to this Agreement shall be binding upon either party
unless incorporated in a written modification to the Agreement and signed by the
contractual representatives of both Parties.

ARTICLE 27  COOPERATION

Each Party and their respective employees, agents, subcontractors, vendors and
consultants shall fully cooperate and not interfere with the performance of
employees, agents, other subcontractors, vendors or consultants of other persons
or entities working for the implementation of the SYSTEM. Each Party shall be
obliged to coordinate the activities of its subcontractors so as to ensure that
the other Party and its subcontractors are able to proceed without any delay
with the execution of the tasks to be performed.

ARTICLE 28  RELATIONSHIP OF PARTIES

The parties and their respective subcontractors are independent contractors and
nothing contained in this Agreement shall be deemed or construed to create a
partnership, joint venture, or other relationship other than that of Supplier
and Buyer or those mentioned in any other agreement between the Parties. Every
Party will be solely responsible for payment of all compensation owed to its
employees, its subcontractors as well as employment related taxes.

ARTICLE 29  ITURAN RADIO LOCATION SYSTEM LICENSE

29.1 The Supplier on its own behalf and on behalf of other companies that
license Technologies incorporated in the System grants the Buyer a sole and
exclusive license to use Ituran Technologies in the Territory, including without
limitation the System, and certain solutions and all software of the Supplier,
as long as they are incorporated in the System, for the purpose of operating,
maintaining and promoting the terrestrial location-based services to the
potential customers and end-users including but not limited to, the general
public, military, marine, police, and security forces, within the Territory
pursuant to the terms of this Agreement.

29.2 The Ituran Radio Location System License by the Supplier is comprised of
the license for the total system and the license for NCC (Network Control
Center) software per regional NCC. Any monthly service feel or royalty fee per
customer or transponder shall not be charged by the Supplier to customer in any
case.

                                       23


29.3. The Supplier shall not directly, or shall not grant any license,
concerning Ituran Technologies, to any company that intends to, provide any
license for the Ituran Radio Location System in the Region or sublicense the
Ituran Technologies to any other company which may engage in such services in
the Region. The Supplier hereby declares that it possesses all necessary
licenses from other Parties to fulfill its obligations under this Agreement.

29.4 Without the prior approval of the Supplier, the Buyer or its related
companies shall not engage with other companies that provide location technology
competitive with Ituran Technologies.

ARTICLE 30  CONFIDENTIALITY

30.1 All information obtained by the Buyer and the Supplier relative to the
Supplier or the Buyer, for or in connection with this Agreement, including but
not limited to information obtained during proposal and pre-proposal efforts,
PROJECT INITIATION AGREEMENT and Agreement negotiations, site visits and
meetings shall be considered confidential. Accordingly, each Party agrees that
it will not disclose to any person such confidential information unless that
person has a need to know for the implementation of this Agreement, and is bound
by confidentiality obligations consistent with those in this Article. Further,
each party shall use confidential information solely for the performance of this
Agreement and for no other purpose. Confidential information shall include, but
not be limited to, the features of any equipment, tools, gauges, patterns,
designs, drawings, specifications, engineering data or other technical,
financial, business, pricing, or proprietary information furnished by or
relating to the Supplier or the Buyer. Each Party also agrees to abide by any
restrictive legends placed on such information. Upon completion or termination
of this Agreement, each Party shall return all such information to its owner or
make such other disposition thereof as may be directed or approved by such
party.

30.2 The Parties may be required to disclose certain information in order to
acquire certain approvals required by each Party's Government or under any law.
Such information may include specifications, technical and financial
information, plans, technical reports and other similar information required for
export/import license acquisition. Each Party shall inform the other before
making such disclosures. Prior to disclosing such information, the disclosing
Party shall notify the receiving party in writing, or by appropriate markings on
the documents, that the information is confidential, proprietary, or for "strict
official use", as applicable.

30.3. Any Party may disclose any information required by any law.

30.4 Similarly, it may be necessary to disclose certain information to the
subcontractors and suppliers of each Party for the performance of the Agreement.
In that case also, each Party shall observe the same restrictions as described
above. In addition, each party shall execute with such subcontractors and
suppliers a non-disclosure agreement with terms consistent with this article.

ARTICLE 31  INTELLECTUAL PROPERTY RIGHTS, OWNERSHIP, PATENTS AND ROYALTIES

31.1 The Supplier represents, undertakes and warrants that it owns the
intellectual property rights or know-how relating to the special equipment of
the System, and possesses licenses for other components of the System.

                                       24


31.2 The Supplier agrees to pay all royalties and license fees owed by the
Supplier to any third party by reason of performance of the Supplier on this
Agreement. The Buyer agrees to pay all royalties and license fees owed by the
Buyer to any third party by reason of performance of the Buyer on this
Agreement.

31.3 The Supplier and the Buyer shall each retain ownership of, and all right,
title and interest in and to, their respective, pre-existing technology. For
matter of clarity, all trademarks, trade names, copyrights, patents and other
intellectual property rights used or embodied in or in connection with the
CONTRACTUAL ITEMS developed by the Supplier, and all documentation and manuals
relating thereto shall be and remain the sole property of Supplier, and Buyer
shall not during or at any time after the expiry or termination of this
Agreement in any way question or dispute the ownership by Supplier of any such
rights.

31.4  Licenses and Technical Documentation.

(a) Supplier grants the licenses to the Buyer for the technology as set forth in
the Article 29, and in accordance with article 8.3. Such licenses shall be non
transferable. The intellectual property rights associated with such licenses
shall be owned by the Supplier or the Supplier's subcontractors and suppliers.
The licenses are granted in this Agreement for use by the Buyer or any permitted
assignee. The licenses shall not grant the right to reverse engineering, copy,
manufacture or reproduce any of the CONTRACTUAL ITEMS delivered hereunder by the
Supplier.

(b) All of the documentation provided to the Buyer and in accordance with this
Agreement shall be complete and shall correspond to the most current version of
the accompanying products as they have been delivered to the Buyer.

ARTICLE 32  TRANSFER OF INTELLECTUAL PROPERTY RIGHTS

The PARTIES agree as follows regarding the transfer of the intellectual property
rights hereunder. The Supplier agrees to transfer exclusively for the use within
the Region the title, ownership to the intellectual property rights, including
Know-how, patents and the source codes of all the application software of the
SYSTEM, which he owns, to the Buyer once the following conditions are fulfilled.
The intellectual property rights, including Know-how, patents and the source
codes of all the application software of the SYSTEM which Supplier owns then
transferred from the Supplier to the Buyer shall be up-to-date and being used in
the SYSTEM:

32.1 The Buyer has paid the Supplier an aggregated sum of US$150 million (one
hundred and fifty million) (including payments that have been made for the
special equipment of Ituran system, System licensing fee, software licensing
fee, etc.)

32.2 Upon the completion of the transfer, the BUYER will own the title,
ownership to the intellectual property rights, including Know-how, patents and
the source codes as mentioned above. The transferred intellectual property
rights shall only be used in the Region, and shall not be used for any
commercial purpose or any other purpose, outside the Region. The supplier shall
retain full title and ownership to the intellectual property rights outside the
Region.

                                       25


ARTICLE 33  PUBLICITY AND DISCLOSURE

Neither Party shall use the name or logo of the other Party in any news release,
public announcement, advertisement or other form of publicity, or disclose any
of the terms or subject matter of this Agreement to any third party except as
may be required by the law and for the performance of this Agreement, without
securing the prior written consent of the other Party's Contractual
Representative.

ARTICLE 34 NOTICE

Any notice to be given hereunder by either Party to the other shall be in
writing and signed by an authorized representative in the English Language and
shall be deemed received when delivered by confirmed facsimile or recognized
courier. The Parties agree that notices delivered orally, or by electronic mail
on the Internet or by intranet, do not constitute official, enforceable notices
under this Article.

Notices to Buyer shall be addressed to:

Golden Net Communication Technology Ltd.
C-209, 25 Fuxing Road
Zhongguancun Science Park
Beijing, 100036, P.R.  China
Tel:  +86-10-68181557
Fax:  +86-10-68185315
Attn:  Mr Guangyi Cao

Notices to Agent shall be addressed to:

Digitrack (China) Group Co. Ltd
Shop 55 2/F Lever Building 33, Larch Street
Tai Kok Tsvi Kowloon
Tel:  + (852)31881257
Fax:  + (852)34285609
Attn:  Mr Hongming Xu

Notices to Supplier shall be addressed to:

Telematics Wireless Ltd.
26 Hamelacha st.,
Holon, Israel
Tel:  +972-3-5575757
Fax:  +972-3-5575703
Attn:  Mr Kafri Eddy,
Mr Sternberg Roman

If either Party changes its address or facsimile number (or any part thereof)
during the Term, it shall so advise the other Party in writing. Any notice
thereafter required to be given shall be sent by a recognized courier or fax to
such new address or to the new or revised facsimile number.

                                       26



ARTICLE 35  LIABILITY

UNLESS OTHERWISE STIPULATED IN THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER FOR ANY DAMAGES OR FOR ANY LOST REVENUES, LOST PROFITS, OR
OTHER INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES CAUSED,
IN WHOLE OR IN PART, BY THE LICENSING, USE OR SALE OF THE SYSTEM OR ANY PART
THEREOF, INCLUDING, BUT NOT LIMITED TO, ANY LICENSE, OR OTHERWISE ARISING OUT OF
OR RELATING TO THIS AGREEMENT. NOTHING IN THIS SECTION SHALL RELIEVE BUYER OF
ANY OBLIGATION TO PAY TO SUPPLIER AMOUNTS DUE AND OWING UNDER THIS AGREEMENT AND
DEVELOPMENT, TRAINING AND SUPPORT CHARGES UNDER THIS AGREEMENT.

ARTICLE 36  TERMINATION

36.1 Buyer may, by written notice of default of Supplier, terminate the whole or
any part of this Agreement, in any one of the following circumstances:

(i) Supplier fails for reasons due to his liable behavior to make delivery of
the CONTRACTUAL ITEMS within one hundred and twenty (120) days after the dates,
set forth in ANNEX I or any extension thereof due to Force Majeure reasons or
any extension due to excusable delay, as defined in Article 21.3 of the present
Agreement; or

(ii) Supplier fails for reasons due to his liable behavior to perform any of its
contractual obligations, all being defined hereto as "major contractual
obligations" as the term "major contractual responsibilities" is specified
according to the principles of good faith, despite the fact that it has been
notified by the Buyer in accordance with paragraph 36.2; or

(iii) Supplier becomes insolvent or the subject of proceedings under any law
relating to the relief of debtors or admits in writing its inability to pay its
debts as they become due.

36.1 Buyer may, by written notice of default to Supplier, terminate the whole or
any part of this Agreement, in any one of the following circumstances:

36.2  Procedure for Termination

If one or more reasons stated in paragraph 36.1 hereinabove occurs, the
following procedure shall apply:

Termination by the Buyer

(a) The Buyer shall send written notification to the Supplier regarding the
Buyer's intent to declare this Agreement terminated, indicating the specific
breach of the Supplier's contractual obligation and requesting the Supplier to
take any action or actions necessary to remedy the situation.

(b) The Supplier shall have the obligation to remedy the breach within one
hundred and twenty (120) calendar days from the date the written notification
was received, or, if the breach for

                                       27



which the Supplier is responsible cannot be remedied within one hundred and
twenty (120) calendar days, the Supplier shall have the obligation to propose a
remedy and timetable for fulfilling the proposed remedy.

(c) If the Supplier fails to remedy the violation for which the Supplier is
responsible within one hundred and twenty (120) calendar days from the time the
written notice is received, or the Supplier fails to propose a remedy and a
timetable of implementation of the proposed remedy within one hundred and twenty
(120) calendar days, the Buyer shall have the right to terminate the Agreement,
in whole or in part, by sending written notification to the Supplier specifying
further the reasons for calling the Agreement terminated and the effective date
of the termination.

36.3 If this Agreement is so terminated, Buyer may procure or otherwise obtain,
upon such terms and in such manner as Buyer may reasonably deem appropriate,
remedy solely as stated in this Agreement.

36.4 Supplier shall transfer title and deliver to Buyer, to the extent requested
in writing, such complete or partially completed articles, property, materials,
parts, tools, fixtures, plans, drawings, information, which shall be defined as
termination inventory upon payment by Buyer the respective Agreement price.

36.5 The Supplier shall continue performance of this Agreement to the extent not
terminated and so requested by the Buyer.

36.6 In the event that Buyer terminates the Agreement for Force Majeure or for
any reason whatsoever as stated above, this Agreement shall be terminated
without liability or claims by either party as a result thereof. In such event
the Buyer shall pay the Supplier for all the CONTRACTUAL ITEMS delivered by the
Supplier up to the effective date of the said termination. The parties shall
settle all open accounts, and Supplier shall not be entitled for any reason
whatsoever, to claim lost profits or consequential damages or costs resulting
from such termination.

36.7  Termination by the Supplier

The Supplier shall be entitled to terminate this Agreement as stated in Articles
36.1 - 36.6 above, MOTATIS MOTANDIS.

36.8  Time Schedules

In a case either Party is in a breach of an obligation, all time schedules shall
be postponed respectively, for the period of the breach.

36.9 If the Buyer has exercised his option of receiving the delay penalties from
the Supplier as specified in Articles 6.3 and 8.1.2 and then exercised the
option of Termination of this Agreement, the delay penalties paid by the
Supplieer will be deducted from the Performance Bond sum to be paid to the
Buyer.

                                       28


ARTICLE 37  TECHNICAL DOCUMENTATION (BIBLIOGRAPHY)

37.1 The Supplier shall provide at no separate cost to the Buyer, technical
bibliography and - maintenance - training bibliography in writing and electronic
form. The manuals shall accompany all technical equipment provided, including
the manuals of use as well as those of the management of maintenance of the
SYSTEMS. The documentation shall include:

o Base Station Specifications
o Vehicle Location Unit Specifications
o Personal Location Unit Specifications
o Control Center Diagrams
o Control Center Infrastructure requirements Specifications
o Base Station Infrastructure requirements specifications
o Control Center operating Procedures
o Fleet Management Post Operating Manual
o VLU and PAL Registration and Activation Procedure
o System Acceptance Test Procedures
o Vehicle Location Unit general Installation instructions
o Monthly progress reports
o Design Reviews documentation

37.2 All the manuals of operation and other documentation shall be provided in
English language.

37.3 The manuals for standard commercial type (COTS) shall be delivered in the
same form they were created by the manufacturer in English, provided however
this equipment is supplied by Supplier.

37.4  The exact quantities of the bibliography shall be defined in PDR.

37.5 The TECHNICAL DOCUMENTATION to be delivered to the end users shall cover
the operation and the maintenance of the first stage (first line maintenance) of
the SYSTEMS to the extent that is provided in this Agreement.

37.6 The Supplier guaranties the completeness and correctness of the TECHNICAL
DOCUMENTATION to be provided to the Buyer.

ARTICLE 38  CONFLICT OF INTEREST/SEVERABILITY.

38.1 Supplier shall exercise reasonable care and diligence to prevent any
actions or conditions which could result in a conflict with the Buyer's best
interests in connection with this Agreement. This obligation shall apply to the
activities of the Supplier's employees and agents in their relations with the
Buyer's employees, their families, vendors and third parties arising from this
Agreement and accomplishing work hereunder.

38.2. Buyer shall exercise reasonable care and diligence to prevent any actions
or conditions which could result in a conflict with the Supplier's best
interests in connection with this Agreement. This obligation shall apply to the
activities of the Buyer's employees and agents in

                                       29


their relations with the Supplier's employees, their families, vendors and third
parties arising from this Agreement and accomplishing work hereunder.

38.3 If any term of this Agreement is held or finally determined to be invalid,
illegal or unenforceable in any respect, in whole or in part, such term shall be
severed from this Agreement, and the Parties shall exercise their best efforts
in order that the remaining terms contained herein shall continue in force and
effect.

ARTICLE 39  INTERPRETATION

The captions and headings used in this Agreement are solely for the convenience
of the parties, and shall not be used in the interpretation of the text of this
Agreement. Each party has read and agreed to the specific language of this
Agreement; therefore no conflict, ambiguity or doubtful interpretation shall be
construed against the drafter.

ARTICLE 40  AMENDMENTS OF THE AGREEMENT

This Agreement may not be modified unless in writing duly executed by the
authorized representatives of the Parties and with specific reference to this
Agreement.

ARTICLE 41  GENERAL TERMS

41.1 The Parties under the Agreements agree that Supplier and its affiliated
companies shall not engage in any business connections in the Region regarding
the System except through Buyer or related companies that have major
participation from Buyer.

41.2 Any future business changes of Supplier, such as changes in share holders,
and change of names, etc, shall, not affect the full rights enjoyed by Buyer
under the Agreements and accordingly any future business changes of Buyer, such
as changes in share holders, and change of names, etc, shall not affect the full
rights enjoyed by Supplier under the Agreements.

41.3 In the event that SPARE PARTS are ordered by the Buyer, their prices shall
be as described in ANNEX I. The specification provided for the PRODUCTS apply
also to SPARE PARTS.

ARTICLE 42  BUYER FURNISHED EQUIPMENT- INSTALLATIONS - INFORMATION - SERVICES

42.1 The Supplier shall notify the Buyer of the details of the Buyer Furnished
Equipment within twenty (20) working days from the effective date of this
Agreement. The Buyer shall furnish to the Supplier all of the BUYER FURNISHED
EQUIPMENT (FE), BUYER FURNISHED INSTALLATIONS (FF), BUYER FURNISHED INFORMATION
(Fl) and BUYER FURNISHED SERVICES (FS) free of charge, in a timely manner, in
accordance with the provisions set forth in ANNEX I and in general, in such a
manner so as not to delay the time schedule. In the event of any delay, and/or
if the FE, the FF, the FI and the FS prove not to be in compliance with the
requirements of ANNEX I or it is proven that they are defective or incorrect,
the provisions of article 21.3 will apply.

                                       30


42.2 The Supplier shall be responsible for the BUYER FURNISHED EQUIPMENT (FE),
BUYER FURNISHED INSTALLATIONS (FF), BUYER FURNISHED INFORMATION (FI) and BUYER
FURNISHED SERVICES (FS), for the time that they shall be in its possession. In
the event of expiration or termination of this Agreement, the Supplier shall be
obliged to return them to the Buyer, forthwith, in the good condition that they
were provided to it, subject to normal tear and wear.

ARTICLE 43  ORDER OF PRECEDENCE

This Agreement and all of the ANNEXES attached hereto are intended to be read
and construed in harmony with each other, but in the event of an inconsistency
or conflict between provisions of this Agreement, the inconsistency or conflict
shall be resolved by giving precedence in the following order:

i. In case of inconsistencies between the ARTICLES and the ANNEXES, the ARTICLES
will prevail.

ii. The provisions of ANNEX I shall prevail to the provisions of the remaining
ANNEXES.

ARTICLE 44  ENTIRE AGREEMENT

This Agreement, including all documents enclosed and signed, shall constitute
the entire agreement and understanding between the parties hereto and shall
supersede and replace any and all prior or contemporaneous representations,
agreements or understandings of any kind, whether written or oral, relating to
the subject matter hereof with exception of the latest versions of Cooperation
Agreement between Agent and Supplier from January 16, 2003 and Cooperation
Agreement between Buyer, Agent and Supplier from January 16, 2003.

ARTICLE 45  LIST OF ANNEXES

THE FOLLOWING IS THE LIST OF ANNEXES CONTAINED IN THIS AGREEMENT

ANNEX I - Statement of Work, Price and Terms of Payment (incl. its appendixes)

ANNEX II - Acceptance Plan Principles

ANNEX III - Specific Spectrum Characteristics of the System

ANNEX IV - Ituran System Technical Description

ANNEX V - Tasks of Ituran and Telematics Team in the Turn-Key Project

ANNEX VI- Maintenance and Support Agreement Principles

                                     * * * *

                                       31




In consideration of the mutual obligations assumed under this Agreement, Buyer,
Agent and Supplier agree to this Agreement, which is executed by duly authorized
representatives as of the dates below.

AGREED BY:

TELEMATICS WIRELESS LTD.

By:  /s/ Avry Franco                       /s/ Roman Sternberg
     ----------------------------          ------------------------------------
By:  Avry Franco                           By: Roman Sternberg

Title:  V.P. & C.F.O.                      VP Marketing

Date:  29.08.04                            29.8.04



GOLDEN NET COMMUNICATION TECHNOLOGY LTD.

By:  /s/ [in Chinese characters]

Title: [in Chinese characters]

Date: [in Chinese characters]



DIGITRACK (CHINA) GROUP CO.  LTD.

For and on behalf of

DIGITRACK (CHINA) GROUP CO. LIMITED

Authorised Signature(s)

By:    /s/ [in Chinese characters]

Title: [in Chinese characters]

Date: [in Chinese characters]

                                       32



                               ANNEX I-1-SHANGHAI

                      ITURAN SYSTEM DEPLOYMENT IN SHANGHAI

                 STATEMENT OF WORK, PRICES AND TERMS OF PAYMENT

1.  GENERAL

This document provides a description of the activities to be carried out by
Supplier, its parent company Ituran Location and Control Ltd. (hereinafter
referred to as "Ituran") and local teams of the Buyer as a part of deployment of
Ituran Location System in Shanghai, including the responsibilities of each
party.

To insure successful deployment and based on the experience of previous
deployments of this system in other countries, a "phased" approach is proposed.
It is based on the initial deployment of a First Phase system in chosen
location. This First Phase will serve as a basis for all future deployments,
will enable proper adaptation to specific local conditions, to train local
technical and operational personnel and to serve as a Demonstration System for
various marketing activities. After completion of First phase deployment, its
initial trial run and performing all necessary further modifications and
adaptations, further deployment can be commenced. The First Phase System will
also serve as a basis for the System Acceptance Testing, after successful
completion of which the System will be officially transferred to the
responsibility of the Operating Company in Shanghai.

2.  GENERAL DESCRIPTION OF THE SYSTEM

Ituran System for locating vehicles, cargo and people is composed of the three
following sub-systems:

o Control Center.

o Base Stations.

o PAL (Personal Alarm and Locator (also serves as the cargo location unit))/VLU
(Vehicle Location Unit) - transmitter/receiver installed in the vehicle, cargo
or carried by a person.

The CONTROL CENTER is usually installed in the same building with other offices
of the Operating Company. The Control Center is composed of a number of computer
systems with dedicated software, workstations for operators, and communication
systems that connect the Center with the Base Stations. The control center is
the heart of the system, and its availability is of the utmost importance. The
center's systems have a hot backup and all its infrastructures (electricity,
communication lines, air-conditioning, etc.) are also backed-up. A general
description of the Control Center is provided in Appendix G of this SOW.

The characters displayed on Operator Stations shall be the official language of
the People's Republic of China - Simplified Chinese Characters.

                                       1


The Back Office capabilities, including billing are not part of the proposed
system and should be chosen by the Buyer based on the local systems and
regulations from local vendors.

The BASE STATIONS are installed in the chosen locations scattered in required
coverage area and constitute receive-only or receive and transmit sites (The
average proportion between receive-only sites and receive and transmit sites is
3:1). The Base Stations include computer-controlled receivers that receive
signals from the VLU or PAL and transfer the information to the Control Center
via the communication lines (basic technical requirements of such lines are
specified in ANNEX IV of the Comprehensive Agreement) for further processing and
display.

Some of the Base Stations are equipped with standard Paging transmitters
controlled by special controllers. The transmitters receive the information from
the control center and transmit it to the VLU or PAL in a synchronized form.
These transmissions serve for synchronization of all active VLUs/PALs and
interrogation of the chosen unit. The transmitters are tuned by Atomic Clocks or
GPS receivers installed at the stations or by other means.

Some of the Base Stations contain special synchronization transmitters,
responsible for precise calibration of the stations.

All of the stations are equipped with appropriate antennas installed on masts,
lightning protection systems, air-conditioning and UPS systems.

3.  CONTENT OF THE WORK

3.1  GENERAL

Installation of the System in the defined area will include installation of 45
receiving Base Stations and associated equipment. The deployment of this system
will be divided into 3 consecutive phases -

First phase: *** Base Stations and CC
Second phase: expansion of the system to *** Base Stations
Third phase:  expansion of the system to *** Base Stations

The first phase in the framework of the project includes all the activities
required for the deployment and running operation of the control center and ***
Base Stations of the Ituran location system. The system deployed in a first
phase will serve as a basis for the system Acceptance Testing by The Buyer. Upon
completion and Acceptance Testing, the Pilot system will be expanded in two
phases to include *** Base Stations and finally *** Base Stations.

The stations to be installed are:

o  ***
o  ***
o  ***

                                       2


***   Confidential material redacted and filed separately with the Commission.


The control center shall be run by defined number of operators and will permit
communication to *** base stations and upgradeable for communications with about
*** Base Stations (Receive and Transmit) with additional hardware.

3.2  PLANNING

Appendix B of this SOW presents a schedule of the process of system deployment
in a Microsoft ProjectTM format. The plan relates to the starting point of
September 1, 2004, however, it should be referenced to the actual Effective Date
of the project as defined in the Agreement. A more detailed plan will be
prepared after project launch and following the preliminary phase of site/field
survey and presented at PDR.

As can be seen from the Plan, the completion of first *** Base Stations and its
integration in Israel will be completed in 6.5 months AED. Please note that the
equipment must be modified to operate on the allocated frequencies. Originally
planned shipment (by sea) and custom procedures in China were estimated to take
one month. This time can be shortened if other more expensive transportation
means are exercised (e.g. air), thus shortening the entire project schedule. Due
to the tight schedule for the Demonstration System deployment it is assumed that
all shipments will be by air. The additional cost of this shipment shall be born
by Buyer.

3.3. LOCAL ENGINEERING TEAM AND ITS TRAINING

Following is the list of customer's technical personnel recommended to
participate at all the stages of system deployment. This team will work in
parallel with Telematics Wireless/Ituran team and will be trained to perform
further deployment, technical operation and maintenance of the System.

1. Engineering Manger. This person will be the technical leader of the local
team and will have overall responsibility for all the technical aspects of
system's operation and support. This should be an Electrician Engineer,
preferably with wide experience in integration and technical support for large
scale infrastructure-based communications systems (e.g. cellular or paging) and
excellent management skills.

2. Senior System Engineer. This person will be the manager of the Control Center
Engineering team. He should be software engineer with experience in operating
systems (e.g. QNX/UNIX) and real time software.

3. Control Center Engineer. This should be software engineer working under the
supervision of Senior System Engineer.

4. Base Stations Engineer. This person will be responsible for the technical
operation and support of system's Base Stations. He and his team will actively
participate in all the aspects of the deployment and integration of Base
Stations. This should be an Electronics Engineer with experience in
installation, operation and maintenance of RF, communications equipment,
antennas, modems, interfacing with telecom lines and power supply
infrastructure. Preferably, this person should have an experience in integration
and maintenance of Cellular Base Stations sites or Paging Transmission sites.

                                       3

***   Confidential material redacted and filed separately with the Commission.


5. Base Station Technicians. Two or three technicians or junior engineers with
the experience in installation and maintenance of Cellular or Paging sites and
working under the supervision of Base Stations Engineer.

The above team will actively participate in all stages of the deployment process
under the supervision of Telematics personnel. They all (especially the
engineers) must have good knowledge of English language. They will receive an
initial training at Ituran and Telematics facilities in Israel for about two
weeks. Afterwards the team will work together with Telematics team in China,
continuing its training in OJT form. After the deployment, integration and
initial operation of the first *** Base Station, the local team will perform
further deployment of additional *** Base Stations (phase two) under the strict
supervision and "as needed" involvement of Telematics team. In parallel, the
local team will prepare the required Installation and Operating instructions in
Chinese, based on their training and experience gathered during the deployment
process and the documentation provided by Telematics Wireless. Final *** Base
Stations deployment (phase 3) will be performed by the local team under the
supervision of Telematics team, but with minimum level of their direct
involvement.

3.4  EQUIPMENT PURCHASE

The list of the main items required for the deployment of *** Base Stations and
Control Center is provided in the Appendix A of this SOW. This list is subject
to changes according to the specific local requirements. Some of the standard
items mentioned in the list may be obsolete and should be replaced by the
compatible items. The updated purchase list for standard equipment will be
prepared by Supplier within fifteen (15) calendar days from the Effective Date.
The list includes recommended quantities for purchase. Exact quantities for
maintenance purposes will be separately agreed upon between Supplier and Buyer.
Supplier shall notify the Buyer to prepare such equipment at least fifteen (15)
calendar days before it shall be used. Supplier has the responsibility for
special equipment supply. Buyer will be responsible for the standard equipment
supply and may propose alternative vendors for specific items, equal in
performance to the defined items. The standard equipment items purchased by the
Buyer must be approved by the Supplier in advance. Any changes in equipment must
be approved by the Supplier. The purchased equipment will be shipped to the
specific locations as directed by the Supplier for further integration and
installation. The equipment for the first Control Center and Base Stations will
be integrated and tested in Israel prior to the shipment to China. The Buyer
will be responsible for releasing the equipment from customs and transporting it
to the Control Center or other sites as required.

Equipment type approval for the special equipment will be performed in full
coordination between Supplier and Buyer. The application preparation and
submission will be fully supported by the Buyer.

The purchase of End User equipment will be done in accordance with End User
Equipment Purchase Agreement attached as Appendix J of this SOW.

                                       4


***   Confidential material redacted and filed separately with the Commission.


4.  SETTING UP THE CONTROL CENTER

4.1  INFRASTRUCTURE

Supplier will prepare the specifications for the setting up the Control Center.
The Buyer will choose local contractor that shall plan and set up infrastructure
in the Control Center building based on Supplier' specifications. The
infrastructure will permit the operation of the Control Center, including its
operation during power failures and partial malfunction of the air-conditioning.
The infrastructure set up will include the purchase and installation of a
generator, UPS, electricity boards and their integration in the building's
electricity system.

Based on Supplier' specifications, the local contractor will design and
construct the partitions required for the operation of the Control Center and
the communication room, taking into consideration all the needs of the Operating
Company to be established. A floating floor will be installed in the Control
Center and the communication room for the passage of cables. A platform for the
operators will be constructed in the Control Center, and contain furnishings for
several operating posts. The contractor will install electricity and
communication sockets underneath the floating floor and along the walls of the
Control Center, fluorescent lighting in the ceiling with anti-glare covers.
Electricity boards and carrying equipment of communication to the sites will be
installed in the communication room.

The contractor will design, purchase and install a backed-up air-conditioning
system for the control center and the communication room.

The contractor will present all plans to Supplier and, after their approval,
will continue with the implementation stage.

The Buyer will insure that the design and implementation is performed according
to all applicable regulations. The Local contractor's work will be considered
completed upon full acceptance by Supplier.

4.2  COMPUTERS AND COMMUNICATION

The Local contractor will install the Control Center and operators' posts
equipment in accordance with specifications and guidelines of Supplier.

Integration and testing of the Control Center's equipment will be performed by
Telematics Wireless team together with the Local Engineering team. Initial
integration of the equipment will be performed in Israel with participation of
the Local Engineering team.

Appendix G provides general description of the operational Control Center.
Digital Mapping Content will be supplied by the Buyer according to the
requirements presented in Appendix H. In addition, the Buyer will supply a DTM
file (in known format) that includes the altitude data for all the required
coverage in a definition of at least 1 minute.

                                       5


5.  SETTING UP BASE STATIONS

5.1  LOCATING AND PURCHASE OF SITES

Upon completion of the Field Review by Telematics team, The Buyer will be
responsible for the location of appropriate sites for Base Stations, on the
basis of a primary deployment map and a list of sites according to priorities,
that will be prepared and provided by Telematics. This list will be based on a
special analysis using DTM information ("altitude" maps). For each potential
site The Buyer will present more than one alternative, stating the technical and
economic advantages and disadvantages of each. Among other issues, The Buyer
will check the possibility of long-term rental, access to the site during all
hours, the existence of an appropriate electricity feeding line, place for a
mast (or existence of a usable mast) appropriate grounding, and the feasibility
of obtaining a data line. Telematics and Local engineering team will verify if
there is a risk of possible existence of electro-magnetic interference from
nearby radio equipment of third parties as well as general level of
electro-magnetic noise that may have influence on system sensitivity. After one
of the alternatives has been approved by Supplier. Buyer will handle the rental
contract and obtain from the municipal authorities all required permits for
setting up a base station.

5.2  COMMUNICATION LINES

The Buyer will order for each site allocated for the receiving station the
following communication infrastructures:

o PTP data line between the site and the control center at a rate of minimum 9.6
Kbps asynchronous.

o An ordinary telephone line.

The Buyer will order for each site intended for the receiving and transmission
station the following communication infrastructures:

o Two PTP data lines between the site and the control center at a rate of
minimum 9.6 Kbps asynchronous.

o Two ordinary telephone lines.

o The possibility of working with a line at a rate of 19.2 Kbps and a
multiplexer unit for two ports will be examined at these sites.

5.3  SITE INFRASTRUCTURE

Supplier will provide the specifications and requirements for the infrastructure
installations at Base Stations sites. The Buyer via local contractor will design
the infrastructure for each site intended for Base Station. The contractor will
plan the type and height of the mast (if necessary), the location for the
building/construction (if necessary), the routing of the RF, communication,
power and grounding cables, and submit the design to the Supplier for approval.
The mast will be equipped with a lightning arrester with grounding cable, mast
illumination (if

                                       6



necessary), a cable ladder, and arms appropriate for the system's antennas. The
contractor will submit to Supplier for approval the type of the construction,
the air conditioning system, the method of deployment of the communication
infrastructure. The construction will contain the antennas concentrator board
for the entry of RF cables, lighting, a smoke/fire sensor, a standard fire
extinguisher and a door-opening sensor.

After approval of the plans by Supplier, the local contractor will set up the
infrastructure at the site. This will include the mast and the construction,
installation of RF cables and antennas on the arms, connecting the construction
to the electricity source, the grounding, the communication lines, and the RF.
The contractor will purchase all the needed equipment for the above activities
except antennas.

If necessary, the contractor will design and erect a fence around the station,
and make arrangements with a security company to guard the site.

5.4  GEODESIC MEASUREMENTS

At each of the sites The Buyer via local contractor, specifically chosen for
this task, will perform geodesic measurements for the placement of the antennas.
The accepted measuring system is Differential GPS. The required precision is +/-
few centimeters.

5.5  INSTALLING A BASE STATION

Upon completion of the infrastructures deployment at the site, the local
contractor will transport the Base Stations racks to each site and will put it
at the construction location. The Telematics and Local engineering teams will
perform all connections between system's units and the various infrastructures.
The operation of the system at the site shall be performed in accordance with
the guidelines issued by Supplier.

5.6  INTEGRATION WITH THE CONTROL CENTER

Integration of Base Stations with the Control Center will be performed by
Telematics team together with the local engineering team. Each Base Station data
will be defined in the CC, including measured location, name, technical profile,
communication lines definitions etc. After verification of proper functioning of
communication lines using test equipment, each Base Station will be connected to
the CC over the designated line.

Location System will provide real time information regarding the communication
performance and data validity received from the site.

5.7  GENERAL REQUIREMENTS

In all installation works the local contractor will mark all cables with
markings to be agreed upon with Supplier. The cables will be marked at 3 m
intervals and adjacent to end connectors. Routing of cables serving different
purposes (communication, electricity, grounding, etc.) shall be separated.

                                       7


The local contractor will meet the accepted standards for civil construction,
mechanical work, cabling work, and electrical safety. The Buyer will insure that
the design and implementation is performed according to all applicable
regulations.

6.  MAINTENANCE

During the establishment and trial run stages of the system, the local
contractor will provide maintenance to the general infrastructure of the Control
Center and the Base Stations, including masts installed by the contractor. The
contractor will keep a precise record of all spare equipment stored in the
Control Center warehouse for the purposes of maintaining the system. When an
item of equipment is replaced, the contractor will send the defective item to be
repaired.

During the deployment and trial run stages, the maintenance of all the equipment
supplied by Supplier will be performed by Supplier. The maintenance will be
performed at no additional charge during the warranty period of one year.
Further maintenance of this equipment will be performed according to the
Maintenance Agreement that will be executed between the parties.

Following response times should be insured:

o Every malfunction at the control center will be repaired within 6 hours of
notification.

o Every malfunction at a base station will be repaired within 24 hours of
notification.

Within the warranty period the Supplier shall provide a sufficient level of
Spare Units free of charge, and upon the expiry of the warranty period, the
Buyer will keep a sufficient level of Spare Units to insure the above response
times. Failed equipment will be shipped to Israel for repair and replacement.
The repair time in Israel will be not more than thirty (30) days after receiving
the equipment.

The Buyer will keep a detailed record with regard to the date and type of
malfunctions, the method in which each was handled, and the time it took to
repair the malfunction. Copies of the reports will be submitted to Supplier.



7.  PROJECT MILESTONES

Appendix B of this SOW provides the schedule of the system deployment. Following
are the main milestones of this project and their corresponding completion dates
presented in AED (After Effective Date) terms.

o  Field Survey by Project Team and Preliminary
Design Review                                                     1.5 months AED

o  Local Engineering Team training in Israel                        3 months AED

o  Critical Design Review                                           5 months AED


o  Integration of CC and *** sites in Israel                      6.5 months AED


                                       8

***   Confidential material redacted and filed separately with the Commission.


o  Arrival and custom release of CC and *** sites equipment       7.3 months AED

o  Phase One system integration and Acceptance Testing and


delivery of *** vehicle units                                     9 months AED

o  Integration of *** Phase Two sites in Israel                   7.3 months AED

Testing of Phase Two *** sites system in China                     11 months AED

o  Integration of *** Phase Three sites in Israel                10.5 months AED


Testing of Phase Three *** sites system in China                 13.5 months AED


8.  INFRASTRUCTURE ACCEPTANCE TESTS

These acceptance tests refer to the acceptance by Supplier of the infrastructure
preparations and associated works performed by local contractor with regard to
Control Center and Base Stations. Tests of Base Stations, infrastructure are
specified in Appendix D of this SOW. Tests of the Control Center infrastructure
are specified in Appendix E of this SOW. The tests will be performed by Supplier
in the presence and the assistance of the local contractor.

9.  SYSTEMS ACCEPTANCE TESTS

System Acceptance Testing will be performed according to the Acceptance Test
Procedures that will be agreed upon between the parties. The Acceptance Testing
will be divided into following phases:

- Base Station Acceptance Testing. These tests will demonstrate Base Stations'
equipment compliance with its specifications.

- End user equipment Acceptance Testing. These tests will demonstrate Vehicle
Location Units and Personal Location Unit compliance with their specifications.

- System Acceptance Testing. This testing will be performed upon completion of
the deployment and trial run of Control Center and *** Base Stations. This
testing will demonstrate the overall performance of the system in terms of
operating procedures, location capability, messaging capability, coverage,
interrogation rate (capacity parameter) etc. The testing will be performed using
specified number of Vehicle and Personal Location Units. Upon successful
completion of System Acceptance Testing the System will be officially
transferred to the responsibility of The Buyer. The overview of System
Acceptance concept is presented in Annex II of this Agreement.

                                       9

***   Confidential material redacted and filed separately with the Commission.


10.  REPORTS AND DESIGN REVIEWS

During the performance of the project Supplier will submit a monthly progress
report to The Buyer. The report will include a description of the content of the
work planned for the preceding month in the original plan against actual
performance. The report will include a brief description of irregular incidents
and malfunctions in the implementation of the project. The parties will hold two
Design Reviews, PDR and CDR where the detailed status of the project with a
breakdown of activities performed in relation to planning, and a detailed
working plan for the future will be presented. The Design Reviews will be
performed at the locations designated by The Buyer.

11.  SYSTEM DOCUMENTATION

The Supplier will provide following documentation:

-  Base Station Specifications
-  Vehicle Location Unit Specifications
-  Personal Location Unit Specifications
-  Control Center Diagrams
-  Control Center Infrastructure requirements specifications
-  Base Station Infrastructure requirements specifications
-  Control Center Operating Procedures
-  Fleet Management post Operating Manual
-  VLU and PAL Registration and Activation Procedure
-  System Acceptance Test Procedures
-  Vehicle Location Unit general installation instructions
-  Monthly progress reports
-  Design Reviews documentation

The above documentation will be in English.

                                       10



Local contractors, responsible for Control Center and Base Station
infrastructure preparation, will maintain documentation for each of the sites to
be established. The documentation of the control center will include a detailed
description of the electricity system, including all interim boards and the main
electricity board, specifying the types of cables and automatic switches. The
markings of the switches in the documentation will be identical to their
markings on electricity boards. The documentation of the system will include
diagrams of the connections of all components of the system, specifying numbers
of cables, types of cables, and names of connectors. The markings in the
diagrams will be identical to the markings on cables and connectors.

For each of the base stations the local contractor will prepare a booklet,
indicating the site on a map with a scale of 1:100000. The booklet will also
contain a descriptive diagram of the site and the mast, specifying the
disposition of the dedicated equipment, and digital photographs of the interior
and exterior of the site. The documentation will include a complete address of
the site, precise coordinates of the antennas, the name and telephone numbers of
the site owner, the name and telephone numbers of the contractor's liaison,
details of electricity feeding up to the structure's main board, and the paths
of communication and grounding lines. The local contractor will provide a
detailed description of the connections between components of the system,
including types of cables, their length, and types of connectors. The contractor
will specify the manufacturer's number of each of the items of equipment
installed at the site, including air-conditioner, electricity board, and
components of the locating system. The station's infrastructure acceptance test
report will be attached to the booklet. All of the material will be submitted on
magnetic media and in a hard copy.

In consideration of the mutual obligations assumed under this Annex, Buyer,
Agent and Supplier agree to this Annex, which is executed by duly authorized
representatives as of the dates below:

AGREED BY:

GOLDEN NET COMMUNICATION TECHNOLOGY LTD          DIGITRACK (CHINA) GROUP CO. LTD

By: /s/ [chinese characters]                     By: /s/ [chinese characters]

Title:  Chairman                                 Title:  [chinese characters]

Date:  [chinese characters]                      Date:  [chinese characters]

                                       11


TELEMATICS WIRELESS LTD.

/s/ Avry Franco                                  /s/ Roman Sternberg

By:  Avry Franco                                 Roman Sternberg

Title:  V.P. & C.F.O.                            VP Marketing

Date:  29.08.04                                  29.08.04

                                       12





                               LIST OF APPENDIXES

APPENDIX A:  Equipment List

APPENDIX B:  Project Schedule

APPENDIX C:  Price and Terms of Payment

APPENDIX D:  Infrastructure Acceptance Test - Base Stations

APPENDIX E:  Infrastructure Acceptance Test - Command Center

APPENDIX F:  System Acceptance Test Principles

APPENDIX G:  Operational Control Center general Description

APPENDIX H:  Requirements from Digital Mapping Content

APPENDIX I :  Letter Of Credit Principle Terms

APPENDIX J : End User Equipment Purchase Agreement (to be further discussed and
agreed upon)


                                       13








<TABLE>


                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
No.         part description                           vendor               part number                         Qty.for installation
----------- ------------------------------------------ -------------------------------- --------------------------------------------

1   ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
2   ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
3   ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
5   ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
6   ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
7   ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
8   ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
9   ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
10  ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
11  ***            ***                                    ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
37  ***            ***                                    ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
38  ***            ***                                    ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
39  ***            ***                                    ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
40  ***            ***                                    ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
41  ***            ***                                    ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
42  ***            ***                                    ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
43  ***            ***                                    ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
44  ***            ***                                    ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
45  ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
46  ***            ***                                                                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
47  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
61                                                                                                              ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
62  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
    ***                                                                                                         ***
    ***                                                                                                         ***
    ***                                                   ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
    ***                                                                                                         ***
    ***                                                                                                         ***
    ***                                                   ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
    ***                                                                                                         ***
    ***                                                                                                         ***
    ***                                                   ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
    ***                                                                                                         ***
    ***                                                                                                         ***
    ***                                                   ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
    ***                                                                                                         ***
    ***                                                                                                         ***
    ***                                                   ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
    ***                                                                                                         ***
    ***                                                                                                         ***
    ***                                                   ***      ***                                          ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
</TABLE>



***   Confidential material redacted and filed separately with the Commission.




<TABLE>


----------- ------------------------------------------ -------------------------------- --------------------------------------------
No.         part description                           vendor               part number                        Qty. for installation
----------- ------------------------------------------ -------------------------------- --------------------------------------------

    ***                                                                                                         ***
    ***                                                                                                         ***
    ***                                                   ***                                                   ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
    ***                                                                                                         ***
    ***                                                                                                         ***
    ***                                                   ***                                                   ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
    ***                                                                                                         ***
    ***                                                                                                         ***
    ***                                                   ***                                                   ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
63  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
64  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
    ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
65  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
66  ***                                                                                                         ***
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67  ***                                                                                                         ***
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68  ***                                                                                                         ***
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69  ***                                                                                                         ***
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70  ***                                                                                                         ***
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71  ***                                                                                                         ***
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72  ***                                                                                                         ***
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73  ***                                                                                                         ***
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74  ***                                                                                                         ***
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75  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
76  ***                                                                                                         ***
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77  ***                                                                                                         ***
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78  ***                                                                                                         ***
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79  ***                                                                                                         ***
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80  ***                                                                                                         ***
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81  ***                                                                                                         ***
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82  ***                                                                                                         ***
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83  ***                                                                                                         ***
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84  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
85  ***                                                                                                         ***
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86  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
87  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
88  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
89  ***                                                                                                         ***
----------- ------------------------------------------ -------------------------------- --------------------------------------------
</TABLE>



***   Confidential material redacted and filed separately with the Commission.


Annex I - Appendix B

[GRAPHIC OMITTED]








                                   APPENDIX C

       ITURAN SYSTEM DEPLOYMENT IN SHANGHAI - PRICES AND TERMS OF PAYMENT

This document addresses the following:

o  Deployment cost
o  End-user equipment cost
o  Licensing fees

All the prices presented below are FOB Israel (for relevant items).

1. ITURAN SYSTEM DEPLOYMENT COST

a. System deployment cost is divided as follows:

1. Equipment purchase:

i. Special equipment purchase (manufactured by Telematics)
ii. Standard equipment purchase - Base Stations
iii. Standard equipment purchase - Network Control Center
iv. System and NCC software licensing
v. Standard test equipment for engineering team

2. Engineering and consulting services provided by Telematics

Costs described in this document do not include the cost of local services
provided by local companies and contractors as described in the Statement Of
Work document.

The number of base stations needed for the deployment depends on the size of the
required coverage area. Based on our experience, the average density of the
installation of receiving base stations in urban area is around *** square
kilometers per base station.

We estimate that the deployment in the area of *** square kilometers will
require *** Base Stations. In addition, *** transmitting stations will be
deployed. The prices below are presented for single unit (single Base Station)
and the Total is calculated for convenience for *** Receiving and ***
Transmitting Stations, *** of which include the Calibration Transmitter Unit.
Different quantities will cause corresponding change in total pricing of the
project.



<TABLE>


b. Prices (US$)                                              unit       total

1. Equipment

a. (a.1.a)       Receiving station ***
                 -item 1 & 2 of the Part list:
                 First phase *** stations ***                $         $ ***

                 Second phase *** stations ***               $         $ ***
</TABLE>



                                  1

***   Confidential material redacted and filed separately with the Commission.




<TABLE>


                 Third phase *** stations++                 $ ***      $ ***

                 Total ***                                              $

b. (a.1.b)       Peripheral equipment for
                 Rec.BS *** incl. *** antennas each          +          *

c. (a.1.b)       Paging Transmitter+                         +          +++ ***

d. (a.1.a)       Calibration Transmission Unit
                 *** - (Item 5 of the Part list              $ ***      $ ***

e. (a.1.b)       Peripheral equipment for
                 transmission ***                            +          +

f. (a.1.c)       Computers and telecom. equipment for CC     +          +

g. (a.1.e.)      Standard test equipment                     +          +
</TABLE>


o  +Note1:  This equipment will be purchased by the Buyer.

o ++Note2: The price of $ *** will be the receiving station unit price for
consecutive Base Stations.

o +++Note3: Paging Transmitter can be purchased from Supplier at the price of
$ *** each.

o Note 4: The Buyer recognizes that there is certain cost of each comprehensive
CCP software package. The price will be further discussed and agreed upon.

2.  Licensing




<TABLE>


a. (a.1.d)      System licensing                                N/A      $ ***
ii. (a.1.d)     NCC software licensing                          N/A      $ ***

3.              Engineering; frequency adaptation, system
                modifications, management, supervision,
                training and consulting services by
                Telematics team (incl. salaries,
                accommodation, travel) in accordance with
                SOW, during the deployment of the system
                in Shanghai ***) base stations)                 N/A      $ ***
</TABLE>


Notes:

Local services provided by local companies and contractors according to the SOW
document are not part of this proposal and include (but not limited to):

                                       2

***   Confidential material redacted and filed separately with the Commission.


a. Site survey and rental agreements

b. On-site infrastructure

c. Geodetic measurements

iv. NCC building reconstruction and modifications

2. END-USER EQUIPMENT COST

Prices:

1. Standard vehicle kit:

a.          Vehicle Location Unit type TULIP                               $ ***

*** +installments of $ *** per year for *** years

b.          TULIP installation kit (Note)                              *** $

2. Optional high-end Vehicle Location Unit and Alarm kit:(*)

a.          TULIP                                                          $ ***

*** +installments of $ *** per year for *** years

b.          Vehicle Alarm Unit type MAPLE                              *** $

c.          MAPLE-TULIP installation kit (Note)                        *** $

            (*)MAPLE provides additional level of protection, if required.

3. Personal Alarm and Locator - PAL                                        $ ***

*** +installments of $ *** per year for *** years

Notes:

Installation kits will be produced or purchased locally (excl. antennas). The
prices are for reference only.

3.  TERMS OF PAYMENT

o  Deployment Phase



<TABLE>


a.           Down-payment ( *** % of the total a.l.a special equipment
             cost) paid upon the signature on this Agreement
             (Effective Date - ED)                                       - $ ***
</TABLE>


                                       3

***   Confidential material redacted and filed separately with the Commission.




<TABLE>


ii.       *** % of the System Licensing and *** % of CC software
          licensing (1.5 months AED)                                   - $ ***

iii.      Preliminary Design Review - *** % of 1.b.3 above
          (1.5 months AED)                                             - $ ***

d.        Critical Design Review - *** % of 1.b.3 (5 months AED)       - $ ***

e.        Shipment of CC and *** BS equipment (7.3 months AED)
          *** % of $ ***                                               - $ ***
          *** % of 22% of $ ***                                        - $ ***
                                                                       - $ ***

f.        Installation of CC and *** BS in China (8.3 months AED)
          - *** % of 1.b.3                                             - $ ***
          *** % of the System Licensing and *** % of CC software
          licensing
                                                                       - $ ***

                                                                       - $ ***

g.        Shipment of *** second phase BS (9 months AED)
          *** % of $ ***                                               - $ ***
          *** % of *** % of $ ***                                      - $ ***
                                                                       ------
                                                                       - $ ***

h.        Installation of *** second phase BS (10.7 months AED) -

           *** % of 1.b.3                                              - $ ***

i.        Shipment of *** third phase BS (11.7 months AED)

          *** % of $ ***                                               - $ ***
          *** % of *** % of $ ***                                      - $ ***
                                                                       - $ ***

j.        Installation of *** third phase BS (13.3 months AED)

          *** % of 1.b.3                                               - $ ***

k.        End of the warranty period (26 months AED)
          *** % of the total equipment cost of 1.b.1                   - $ ***
          *** % of frequency adaptation cost                           - $ ***
                                                                       -------
                                                                       - $ ***

          TOTAL                                                        $4277K
</TABLE>


                                       4


***   Confidential material redacted and filed separately with the Commission.


Letter of Credit issued by First Class International Bank for the total sum of
the Deployment Cost less the Down-Payment will be provided no later than thirty
(30) days AED. Principle terms of this LOC are stipulated in Appendix I of this
Annex.

o  End User equipment
*** % down payment and L/C for the remaining *** % with the order.
*** % payment - upon delivery.

TULIPs:
Total price - $ ***

*** % of total cost       - $ ***
Delivery of  ***  units (9 months AED)          - $ ***

Additional $  ***  per year will be paid at the end of each year during five
years (total of $ *** ).

                                       5

***   Confidential material redacted and filed separately with the Commission.



                                   APPENDIX D

                 INFRASTRUCTURE ACCEPTANCE TEST: BASE STATIONS

Base station's infrastructure acceptance tests will consist of the following:

MAST

o Testing the existence and integrity of all permits required for the
establishment and operation of the base station.

o Approval of the mast by a Safety Engineer.

o Results of geodesic measurements.

o Ensuring that the grounding of the mast meets the standards.

o Painting, illumination, climbing ladder.

o Sealing connectors, marking and path of RF cables

o Antennas: reinforcing arms, jumpers.

STRUCTURE

o Dragging and sealing the structure.

o Ensuring that the grounding of the structure meets the standards.

o Acid-resistant floor coating.

o The type and installation of the air-conditioner.

o Antenna concentrator: sealing, marking and grounding, VSWR for adjusting the
antennas.

o Electricity board in the structure: value and types of switches, marking.

o Cabling in the structure: cable ladders, arrangement, marking, connectors.

o Regularity of communication cables (data and dialing) between the station and
the control center.

o Batteries: type of batteries, rack, connectors to power supply and electricity
board.

o Fire extinguisher: type, working order, method of installation, expiry date.

o Illumination, fire/smoke detector, door-opening sensor.

EQUIPMENT

o Setting up bases in the structure.

o Installing units in bases, connections between units, marking.

o Electrical connections, grounding, communication and RF cables to the system's
units.

o Installation of lightning arresters, AC, RF and communication-installation,
marking.

o Running order of all items of the system in accordance with the results of the
self-test of each unit:

o Running order of the station against the control center.

DOCUMENTATION

o A map of the area indicating the site.

o A map of the site indicating the location of the mast, antennas, the structure
and cables paths.

o A drawing of the interior of the structure indicating equipment bases,
batteries, antenna concentrators, electricity board, and entry points of
communication lines.


                                       6


o A drawing of the interior of the equipment base, indicating all units and
cables.

o Photographs of the site, integrity of the documentation, and its concordance
with the site.



                                       7




                                   APPENDIX E

                 INFRASTRUCTURE ACCEPTANCE TEST: CONTROL CENTER

The control center's infrastructure acceptance tests will consist of the
following:

o Tests of all equipment (computers, communication): connection to power,
markings of sockets and communication points.

o Lighting: running order of the lighting, a sufficient quantity, no glare on
monitors.

o Racks: cables ducting, precise and legible markings, and general quality of
work.

o Floating floor: stability, ducting of cables underneath the floor, markings,
and general quality of work.

o Examining the running order of modems for dialing, including connections to
the communication cables.

o Inspection of the air-conditioning system concordance with the plans.

o Inspection of the communication to the sites from the SMC workstations.

o Inspection of the entire layout of the A/B switches.

o Inspection of the UPS system support.

            o Voltage drop in the network.

            o Continuous good running order of the system.

            o Good running order of the emergency lighting.

            o  Generator activation.

            o After generator activation - activation of the air-conditioning
system.

            o Generator drop in order to measure operation time of UPS
batteries.

ADDITIONAL OPERATIONS:

o Listing all spare equipment in the contractor's warehouse.



                                       8



                                   APPENDIX F

                       SYSTEM ACCEPTANCE TEST PRINCIPLES

The system tests at the end of the Pilot deployment will consist of the
following:

OPERATIONAL TESTING OF THE BASE STATIONS

Operational testing of all the components of each Base Station will be performed
during the period of one week, every three hours, by means of diagnostic
programs from the Control Center.

Availability of the following equipment should be reported during the tests:

o  Atomic Clock or GPS Receivers
o  Paging Transmitters
o  Receivers in the Stations (IBSU)
o  Transmitters Controllers (SPCU)

AVAILABILITY TEST OF THE CONTROL CENTER

The test will be based on the current operation of the system and verification
of compliance with Operating Procedures.

TESTS OF COVERAGE AND LOCATION ACCURACY

The Test will include movement of defined number of PAL and VLU units in the
coverage area and the comparison between the actual location and the location
displayed in the Control Center to demonstrate required CEP accuracy. The test
will include at least 1,000 locations.

In all the locations, the following data will be registered:

o Number of receiving stations participating in the location process.

o The coordinates calculated by the system.

o The coordinates displayed at the operators' workstations.

o Actual location as reported from the field.

o Quality of the signal reception (FOM).

o Stability of location

In addition, the performance of message reception will be verified, including
synchronous and asynchronous messaging.

TEST OF CAPACITY PARAMETERS (NUMBER OF LOCATIONS PER SECOND)

The system will be operated in the continuous interrogation manner to
demonstrate required maximum interrogation rate capability.

The above data, after its processing, will enable to evaluate the quality of the
system service.

                                       9


A detailed System Acceptance Test Procedure will be prepared by the Supplier and
agreed upon with The Buyer at PDR.


                                       10



                                   APPENDIX I

                        LETTER OF CREDIT PRINCIPAL TERMS

DOCUMENTS REQUIRED:

A. DOCUMENTS REQUIRED FOR SUPPLY OF BASE STATIONS AMOUNTING TO US$ *** .

1) 3/3 ORIGINALS PLUS 3 NON NEGOTIABLE COPIES OF CLEAN ON BOARD MARINE BILLS OF
LADING MADE OUT TO ORDER OF ISSUING BANK MARKED PAYABLE AT DESTINATION" NOTIFY:
APPLICANT.

AND/OR

AIRWAYBILL (3RD ORIGINAL FOR SHIPPER) CONSIGNED TO ISSUING BANK MARKED PAYABLE
AT DESTINATION" NOTIFY: APPLICANT.

2) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

3) PACKING LIST IN 3 ORIGINALS AND 3 COPIES.

B. DOCUMENTS REQUIRED FOR SUPPLY OF END USER EQUIPMENT AMOUNTING TO US$ *** .

1) 3/3 ORIGINALS PLUS 3 NON NEGOTIABLE COPIES OF CLEAN ON BOARD MARINE BILLS OF
LADING MADE OUT TO ORDER OF ISSUING BANK

MARKED PAYABLE AT DESTINATION" NOTIFY:  APPLICANT.

AND/OR

AIRWAYBILL (3RD ORIGINAL FOR SHIPPER) CONSIGNED TO ISSUING BANK MARKED PAYABLE
AT DESTINATION" NOTIFY: APPLICANT.

2) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

3) PACKING LIST IN 3 ORIGINALS AND 3 COPIES.

C. DOCUMENTS REQUIRED FOR PRELIMINARY DESIGN REVIEW AMOUNTING TO US$ *** .

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

                                       11


***   Confidential material redacted and filed separately with the Commission.


2) ORIGINAL CERTIFICATE JOINTLY SIGNED BY THE BENEFICIARY AND THE APPLICANT,
CERTIFYING THAT PRELIMINARY DESIGN REVIEW HAS BEEN COMPLETED AND THE REPORT HAS
BEEN PROVIDED TO THE APPLICANT.

D. DOCUMENTS REQUIRED FOR CRITICAL DESIGN REVIEW AMOUNTING TO US$ ***

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL CERTIFICATE JOINTLY SIGNED BY THE BENEFICIARY AND THE APPLICANT,
CERTIFYING THAT CRITICAL DESIGN REVIEW HAS BEEN COMPLETED AND THE REPORT HAS
BEEN PROVIDED TO THE APPLICANT.

E. DOCUMENTS REQUIRED FOR INITIAL LICENSE FOR SYSTEM USE AND CC SOFTWARE USE
AMOUNTING TO US$ ***

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL BENEFICIARY'S CERTIFICATE CERTIFYING THAT INITIAL LICENSE FOR SYSTEM
USE AND FOR CC SOFTWARE USE HAS BEEN SENT TO THE APPLICANT BY DHL AND THE
RELATIVE DHL SHIPMENT AIRWAY BILL IS REQUIRED.

F. DOCUMENTS REQUIRED FOR FINAL LICENSE FOR SYSTEM USE AND CC SOFTWARE USE
AMOUNTING TO US$ ***

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL BENEFICIARY'S CERTIFICATE CERTIFYING THAT FINAL LICENSE FOR SYSTEM
USE AND FOR CC SOFTWARE USE HAS BEEN SENT TO THE APPLICANT BY DHL AND THE
RELATIVE DHL SHIPMENT AIRWAY BILL IS REQUIRED.

3) ORIGINAL APPLICANT'S DECLARATION STATING THAT INSTALLATION OF TEN FIRST PHASE
BASE STATIONS AND NCC IS COMPLETED.

G. DOCUMENTS REQUIRED FOR INSTALLATION AMOUNTING TO US$ ***

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL DECLARATION JOINTLY SIGNED BY BENEFICIARY AND APPLICANT STATING THAT
INSTALLATION OF FIRST OR SECOND OR THIRD PHASE HAS BEEN COMPLETED.

                                       12


***   Confidential material redacted and filed separately with the Commission.


(THE DECLARATION SHALL INCLUDE A NAME OF ONE OF THE FOLLOWING INSTALLATION


MILESTONES).

- INSTALLATION OF *** FIRST PHASE BASE STATIONS.

- INSTALLATION OF *** SECOND PHASE BASE STATIONS.

- INSTALLATION OF *** THIRD PHASE BASE STATIONS.


3) ORIGINAL DECLARATION OF THE BENEFICIARY STATING THAT THE WARRANTY PERIOD HAS
EXPIRED.

PAYMENT TERMS:

I) L/C PORTION COVERING SUPPLY OF BASE STATIONS OF US$ *** REPRESENTS
   *** PERCENT OF THE RELEVANT CONTRACT VALUE AND WILL BE PAID.

AT SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM A AS FOLLOWS:

$  *** FOR PHASE ONE *** BASE STATIONS,
$  *** FOR PHASE TWO *** BASE STATIONS,
$  *** FOR PHASE *** BASE STATIONS,
$  *** WILL BE PAID AT SIGHT AGAINST PRESENTATION OF ORIGINAL BENEFICIARY'S
DECLARATION STATING THAT WARRANTY PERIOD FOR BASE STATIONS HAS EXPIRED.

THE OUTSTANDING *** PERCENT OF THE RELEVANT CONTRACT VALUE IS PAID AS
ADVANCE PAYMENT OUTSIDE THE L/C FRAMEWORK.

2) L/C PORTION COVERING SUPPLY OF END USER EQUIPMENT OF US$ *** REPRESENTS
  *** PERCENT OF THE RELEVANT CONTRACT VALUE AND WILL BE PAID AT SIGHT
AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM B.

THE OUTSTANDING *** PERCENT OF THE RELEVANT CONTRACT VALUE IS PAID AS ADVANCE
PAYMENT OUTSIDE THE L/C FRAMEWORK.

3) L/C PORTION COVERING DELIVERY OF INITIAL SYSTEM USE AND CC SOFTWARE USE
LICENSES OF $ *** WILL BE PAID AT SIGHT AGAINST PRESENTATION OF DOCUMENTS
STIPULATED IN ITEM E.

4) L/C PORTION COVERING DELIVERY OF FINAL SYSTEM USE AND CC SOFTWARE USE
LICENSES OF $ *** WILL BE PAID AT SIGHT AGAINST PRESENTATION OF DOCUMENTS
STIPULATED IN ITEM F.

                                       13


***   Confidential material redacted and filed separately with the Commission.


5) L/C-PORTION COVERING DELIVERY OF PRELIMINARY DESIGN REVIEW IS US$ *** AND
WILL BE PAID AT SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM C.

6) L/C PORTION COVERING DELIVERY OF CRITICAL DESIGN REVIEW IS US$ *** AND
WILL BE PAID AT SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM D.

7) L/C PORTION COVERING INSTALLATION IS US$ *** . THIS SUM WILL BE PAID AS
FOLLOWS:



AT SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM G.1) AND G.2).

$  *** FOR INSTALLATION OF *** FIRST PHASE BASE STATIONS
$  *** FOR INSTALLATION OF *** SECOND PHASE BASE STATIONS
? $ *** FOR INSTALLATION OF *** THIRD PHASE BASE STATIONS


AND AT SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM G.1) AND G.3)
ON THE SUM $ *** FOR EXPIRATION OF WARRANTY PERIOD.

                                       14


***   Confidential material redacted and filed separately with the Commission.


                                   APPENDIX G

             Ituran Location System Operational Control Center (CC(

                              General Description

                                  August 2004

                               [GRAPHIC OMITTED]


                                       1



GENERAL

THE PURPOSE OF THIS DOCUMENT IS TO DESCRIBE ITURAN'S OPERATIONAL CONTROL CENTER.

Ituran Operational NCC configuration

[GRAPHIC OMITTED]



EVENT SERVER

GENERAL

The Event server functionality manages the operational CC's activities. It
receives all incoming alarms received by the Ituran location system from the end
units and routes them to operator workstations. All the operator workstations
are connected to this server. In addition, the workstations are connected to the
location system gateway, and through this gateway they are able to send commands
to the end units and receive messages from the end units (such as location and
various status messages).

The Event Server also takes part in the unit activation process, the concluding
part of every new end unit installation.

MAIN USER INTERFACE

o List of connected Operator Workstations with list of events in every station
and their status

o Communication monitor to the Operator Workstations over TCP/IP

o Control of all the CC's operational parameters (method of workstation routing
and load balancing, operational policy control, workstation role definitions
etc.)

[GRAPHIC OMITTED]

COMMUNICATION TO OPERATOR WORKSTATIONS

The Event Server is connected over TCP/IP to the Operator Workstations. Each
incoming Event message is routed to a workstation selected according to a few
alternate algorithms (the least busy workstation, the "next available" or
according to event type). Only this station can then handle this incoming event.

Main features are:

o New incoming event will be routed to the relevant Operator Workstation that
has currently the lowest number of pending events, or by other parameters
detailed above.

o New event will be added to the list of events.

o An option to temporarily stop routing new events to a specific Controller
Station

                                       2


o Temporarily or permanently close down a specific Operator Workstation and
transfer existing events to another Operator Workstation.

o Transferring events from one Operator Workstation to another Operator
Workstation

o Automatic synchronization between Operator Workstation and Event Server upon
re-connection.

OPERATOR WORKSTATION

Operator Workstation main features:

o One, two or four opened mapping windows with option to display a different
type of map in each window (subject to maps availability).

o A list of open events and their status

o Automatic sorting of incoming alarms risk level based on operational scenarios
entered into the system

o Full and unit communication abilities, allowing it to both monitor the unit
status and send commands to the unit

o Support vector, raster and aerial photo maps

o Specific vehicle real-time tracking

[GRAPHIC OMITTED]

VEHICLE DETAILS SCREEN

This screen displays all vehicle telematics information such as: sensors,
location, velocity and direction (subject to availability of relevant sensors in
the vehicle).

[GRAPHIC OMITTED]

VEHICLE COMMAND DIALOG OPTION

This dialog option is used for sending various commands to the vehicle,
including: location, enabling/disabling vehicle devises.

[GRAPHIC OMITTED]

VEHICLE DISPLAY ON THE MAP

The vehicle will be displayed on the map with an icon. The icon is derived from
the relevant vehicle group.

[GRAPHIC OMITTED]

RECORD AND REPLAY

All incoming and outgoing messages are recorded. The Controller can invoke a
report on any desired event. The report is generated as a table of events, which
can be replayed graphically on the map.

                                       3



                                 ANNEX I - SOW

                                   APPENDIX H

                           Requirements from Digital
                                Mapping Content

                              LOCATIONNET GIS V2.1

                                  AUGUST 2004

                                       1



1.  GENERAL

LocatioNet real-time GIS engines use an underlying layer of propriety GIS binary
data, which is built from spatial databases (digital mapping content). Spatial
databases are supplied by data providers that collect and distribute digital map
information. There are many data providers around the world with different
distribution formats. LocatioNet recommends using data from one of the two major
and leading vendors, TeleAtlas or NavTech if possible, yet will work with the
Operator's chosen vendor. The two most popular data formats used for
distribution are Mif/Mid text files (developed by Maplnfo) and binary Shape
files (developed by ESRI). Data can be easily transformed from one format to the
other. Digital data includes two types of information: geographical layers and
the road network. The geographical layers are used for vector maps drawing. The
road network is used for drawing, routing, creating geocode databases and
reverse geocoding.

1.1  GEOGRAPHICAL LAYERS

Each geographical layer binds geographical items with a common denominator (e.g.
gas stations, parks etc.) .Each geographical item has a set of coordinates that
define its location and shape, and a set of attributes that define its look on
the map. The shapes can be of any type, such as: points, lines, polylines,
polygons and regions (xor combinations of multiple polygons).

Examples for geographical layers:
o  Administrative areas (e.g. states, provinces, cities etc.)
o  Water areas (e.g. rivers, lakes, ponds etc.)
o  Woodland
o  Parks
o  Railroads
o  POI (points of interest) (e.g. restaurants, hospitals, gas stations etc.)

1.2  ROAD NETWORK LAYER

The road layer represents the road network. This layer is very complex;
therefore a lot of information is needed. The road network consists of
intersecting roads. An intersection between two roads is called a node
(junction). A section of a road that lies between two nodes is called a road
segment; therefore every segment has a starting node and an ending node. Each
road can be constructed from one or more road segments. Each road segment has a
set of coordinates that define its location and shape, and a set of attributes
that define the complexity of use of this layer. The shape of a road segment is
always a line or a polyline.

[GRAPHIC OMITTED]

2  MAPS ENGINE

The vector maps engine displays both geographical layers and the road network.

2.1  MINIMUM REQUIREMENTS FOR AN OBJECT IN A GEOGRAPHICAL LAYER

- Unique object id

                                       2


- Name (if any, or blank)

2.2  ADDITIONAL REQUIREMENTS FOR AN OBJECT IN A GEOGRAPHICAL LAYER

Type (i.e.  in the water layer, types can be: river, lake, pond etc.)

Once the type is supplied, there is an option to control each type's draw
attributes separately, instead of applying the same attributes for the entire
layer.

2.3  MINIMUM REQUIREMENTS FOR DRAWING A ROAD SEGMENT

Segment id, unique in its country

Road level (i.e.  national, between cities, main in city, neighborhood etc.)

Road levels function the same way as geographical layers types.

2.4  ADDITIONAL REQUIREMENTS FOR DRAWING A  ROAD SEGMENT

Road type (i.e. highway, ramp, bridge, tunnel, circuit, pedestrian walkway etc.
- allow drawing special features inside road levels)

Road Z level (i.e. a bridge going over a road will have a higher z level)

Route number, if available.

Road name constructed of prefix, base name and suffix (i.e. if there isn't any
sufficient space to draw Calle de Zurita Maria, perhaps there is for Zurita)

Road dividers.

Traffic lights

3.  GEOCODE ENGINE

The road network is also used for building geocode databases (i.e. all the
cities in state, all the streets in city etc.), and for reverse geocoding (i.e.
getting the address of a given coordinates). It is important to get a
description of the administrative hierarchy that the data supports, in order to
fully understand each country's attributes (e.g. Israel has county, cities and
streets while Austria has country, states, cities and streets, etc.).

3.1  MINIMUM GEOCODE REQUIREMENTS

City name of road segment

Road name of road segment

SUPPORTING MINIMUM REQUIREMENTS WILL ALLOW THE GEOCODE TO PERFORM THESE TASKS:

o Return roads' center coordinates

o Transform coordinates into partial addresses

o Get supported countries list

o Get the cities list in state

o Get the roads list in city

                                       3


o Get the cities list in circle or in a rectangle

o Get the roads list in a circle or in a rectangle

3.2  ADDITIONAL GEOCODE REQUIREMENTS

(In each road segment, extra but important)

Zone name in city (neighborhood)
Region name in state (province, canton etc.)
State name in country
Left side house number format (i.e. 0 - odd, E - even, M - mix, U- undefined)
Left from house number (as integer)
Left to house number (as integer)
Left zip code
Right side house number format (as mentioned above)
Right from house number (as integer)
Right to house number (as integer)
Right zip code Road official name and other alternative names
Each roadside may has a different name
Each roadside may belongs to a different city

SUPPORTING EXTRA REQUIREMENTS WILL ALLOW THE GEOCODE ENGINE TO PERFORM THESE
TASKS:

o Convert full addresses into coordinates
o Transform coordinates into full addresses
o Get the cities list in zip code
o Get the roads list in zip code

SUPPORTING EACH SEGMENT'S FROM NODE ID AND TO NODE ID WILL ALLOW THE GEOCODE
ENGINE TO PERFORM THESES TASKS:

o Return a coordinate of an intersection between two roads
o Get the intersections list in a circle or in a rectangle
o Get all intersecting road names to a given road

                                       4

                                    ANNEX II

SYSTEM ACCEPTANCE TEST PRINCIPLES

The system tests at the end of the Pilot deployment (NCC and 10 Base Stations in
Shanghai) will consist of the following:

OPERATIONAL TESTING OF THE BASE STATIONS

Operational testing of all the components of each Base Station will be performed
during the period of one week, every three hours, by means of diagnostic
programs from the Control Center.

Availability of the following equipment should be reported during the tests:

o  Atomic Clock or GPS receivers
o  Paging Transmitters
o  Receivers in the Stations (IBSU)
o  Transmitters Controllers (SPCU)

AVAILABILITY TEST OF THE CONTROL CENTER

The test will be based on the current operation of the system and verification
of compliance with Operating Procedures.

TESTS OF COVERAGE AND LOCATION ACCURACY

The Test will include movement of defined number of PAL and VLU units in the
coverage area and the comparison between the actual location and the location
displayed in the Control Center to demonstrate required CEP accuracy. The test
will include at least 1,000 locations.

In all the locations, the following data will be registered:

o Number of receiving stations participating in the location process.
o The coordinates calculated by the system.
o The coordinates displayed at the operators' workstations.
o Actual location as reported from the field.

o  Quality of the signal reception (FOM.(
o  Stability of location

In addition, the performance of message reception will be verified, including
synchronous and asynchronous messaging.

TEST OF CAPACITY PARAMETERS (NUMBER OF LOCATIONS PER SECOND)

The system will be operated in the continuous interrogation manner to
demonstrate required maximum interrogation rate capability.

The above data, after its processing, will enable to evaluate the quality of the
system service.

                                       1


A detailed System Acceptance Test Procedure will be prepared by the Supplier and
agreed upon with the Buyer at PDR.






                                       2



                                   ANNEX III

[GRAPHIC OMITTED]





                                       1


                                    ANNEX IV

BASIC TECHNICAL DESCRIPTION OF ITURAN SYSTEM

INTRODUCTION

Ituran system is among most advanced location systems existing today. With over
350,000 users in Israel, United States and South America it is also the largest
urban area location system in the world. Derived from most sophisticated
military technology and a result of multimillion-dollar development investment,
Ituran system provides accurate location on the street, in the building and in
the conditions of intentional or unintentional jamming. No other existing
technology, including GPS and cellular-based systems, can provide the
performance of the Ituran system.

1  GENERAL OVERVIEW

1.1  THE SYSTEM

A.  SYSTEM PROFILE

The Ituran real-time positioning system with two-way messaging is a solution,
for commercial applications such as:

o fleet management and monitoring
o cargo tracking o remote data collection
o personnel monitoring

as well as for emergency and security challenges including:

o  stolen vehicle recovery
o  emergency and medical distress
o  roadside assistance

and other applications.

Ituran uses a terrestrial network of base stations to effectively track and
communicate with mobile objects of any type. In addition to the Vehicular
location units that support the above applications, Personal location units
support such applications as locating children and Alzheimer patients, and
tracking employees and emergency personnel. Similar equipment may be used to
track parcels and packages.

The sophisticated, proprietary algorithms developed for Ituran ensure accurate
positioning readings not only in open areas, but also in locations covered by
foliage or blocked by tall buildings. As opposed to GPS based systems, Ituran
supports reliable coverage even indoors, at home and in the office.

Ituran's proven, state-of-the-art spread spectrum technology, derived from
challenging military applications, guarantees maximum immunity to
electromagnetic disturbances and maximum


                                       1


reliability even within dense urban environments. Unlike GPS/cellular-based
technology, Ituran is the only available technology that will withstand the
intentional jamming of the in-vehicle equipment, which will definitely be
exercised by thieves ones the spread of location-based security systems will be
widen.

B.  SYSTEM CONCEPT

Manual and automatic operations are complementary in the Ituran system. Location
and communication activities can be initiated in several ways; however, the
system's essential functionality is defined by a series of transmissions to the
vehicle and from it.

[GRAPHIC OMITTED]

An inquiry, which is input into the system at the Network Control Center (NCC),
triggers a Downlink signal. The Downlink is transmitted in POCSAG format by the
pager transmitters and is addressed to a specific mobile unit (TULIP or PAL
.(Upon receiving this inquiry, the mobile unit will reciprocate by sending an
Uplink transmission which contains data as well as the signal required to
calculate the unit's absolute position. Alternatively, the Uplink transmission
can be triggered by sensing specially defined event, like activation of
vehicle's alarm system, activation of an emergency button or any other sensor,
as programmed in the mobile unit. This Uplink is received at the base stations
which note its TOA (Time Of Arrival) and which then relay this data to the NCC
computer. The location calculations are processed at the NCC and a location fix
is obtained using the Differential Time Of Arrival (DTOA) technique. This data
may then be channeled from the NCC to various users, such as fleet owners or the
security forces.

DTOA technique is based on the concept of comparing between exact times when the
same signal is received at several geographically dispersed known locations
(Base Stations). The geometrical curve representing equal time (= range)
difference between any point on this curve and two Base Stations is hyperbola.
When signal from the vehicle is received by several Base Stations, the NCC
creates hyperbolic curves for each pare of the above Base Stations and
calculates the crossing point of these hyperbolic curves. This point is the
exact location of the terminal location unit.

C.  SYSTEM COMPONENTS

Ituran is comprised of the following components:

1.  Mobile Units

[GRAPHIC OMITTED]

TULIP                          TULIP + MAPLE



Vehicular Location Units (TULIPs) are discretely installed in vehicles. They
deliver real-time positioning and two-way data transmission. The data can be
used to relay written messages (in Fleet management applications, using optional
Driver Terminals), to report the status of the

                                       2


various sensors, or to activate any electronic device on board the vehicle.
TULIPs can be interfaced with special vehicle alarm system MAPLE providing
comprehensive protection and location solution. Alternatively, interfacing with
existing alarm systems is possible.

The Personal Alarm and Location (PAL) units may be carried by individuals or
attached to packages and enable accurate positioning of the carrier in
emergencies or at the request of a third party.

2.  Base Stations

[Two Graphics Omitted]

Receiving (right) and transmitting (left) Base Stations

Scattered base stations are used for complete coverage of the required area. The
base station at each location houses a transmitting or a receiving unit, or
both. The base station equipment channels commands and signals between the
Mobile Units and the Network Control Center.

3. Network Control Center (NCC)

Data originating at the Mobile Units is received at the NCC (there, all
positioning calculations are carried out by the NCC computers) and the results
are presented in such a way so as to fit the operational requirements of the
various Ituran users. Relevant data is relayed forward to the optional,
independent Client Command Posts (CCP) at the fleet manager's office.

General description of Network Control Center is provided in Appendix G of Annex
I (SOW) of this Agreement.

4. Client Command Posts (CCP)

The optional CCPs can be installed at the end-user's preferred location. CCP
comprised of standard PC equipment and are used by fleet operators and security
forces for assistance or pursuit. Private fleets are independently monitored by
the company's own personnel, using dedicated fleet management software. All
location and messaging data is channeled through the NCC.

1.2  APPLICATIONS

The operational flexibility of the Ituran System lends itself to an assortment
of applications. Among these, three major ones stand out:

i.  STOLEN VEHICLE TRACKING

[GRAPHIC OMITTED]

Ituran's characteristics make it uniquely suited for real-time surveillance
activities, in hundreds of thousands of vehicles simultaneously. A real-time
alert, triggered by the TULIPs complimentary vehicle alarm system, is the key to
thwarting theft attempts in their early stages.

                                       3


By collecting the required data promptly, the control center may activate the
security forces at its disposal efficiently, thus avoiding costly and risky
recovery operations.

By breaking into an Ituran protected vehicle and tripping its alarm system, a
thief will unknowingly trigger the vehicle's TULIP to transmit a silent alert.
This signal relays both location data and data regarding the status of the
various sensors installed on the vehicle.

The operators at the NCC will proceed to verify the authenticity of the alarm.
Once this is confirmed, the Police are notified and are continuously guided to
the suspect as he attempts to escape. A chase may develop or else a roadblock
may be set up to apprehend the thief and return the vehicle to its rightful
owners.

Moreover, the NCC operator, constantly monitoring vehicle's whereabouts, can
remotely activate/deactivate vehicle's controls, such as ignition, doors etc.,
thus stopping the vehicle or providing additional services.

ii.  PERSONAL SECURITY

[GRAPHIC OMITTED]

Ituran's portable location unit (PAL) offers a unique technological solution
whose practical implementation is as diverse as it is profound. The very
possibility of being able to accurately locate a person, both outdoors and
indoors as he goes about his daily activities is highly innovative.

All types of field workers and Police personnel are susceptible to distress
situations as they go about their jobs. Ituran enables them to send a panic
signal at the first sign of trouble and enables their supervisors to locate them
and assist them immediately. Such capabilities are equally important for heart
patients and other medically insecure individuals who require that the panic
button be operable everywhere.

Ituran PAL offer reassurance to those who care for others throughout the day.
There is peace of mind in knowing that an elderly parent or a child may always
be contacted and located.

Another market addressed by PAL is tracking of cargo and individual parcels. The
location data may be used both to increase delivery efficiency and to recover
the merchandise in case of theft.

iii.  FLEET MANAGEMENT AND CARGO PROTECTION

[GRAPHIC OMITTED]

Fleet management tools have long ago become a necessity rather than a luxury.
Ituran puts the fleet manager in direct contact with the fleet and serves three
main purposes:

o It enables fleet managers to know the whereabouts of their vehicles in
real-time, thus increasing efficiency by reducing overtime, eliminating
side-jobs, and improving schedule and route adherence.

                                       4




o It improves the communication between dispatcher and drivers, thus minimizing
missed deliveries, unscheduled delays and customer complaints. It enables
dispatchers to exercise the real-time flexibility often required for efficient
use of the fleet resources.

o It enhances driver security serving as a real-time panic button. In addition,
the fleet's vehicles and cargo may be conveniently tracked thus reducing theft
related liabilities significantly.

2.  COMMUNICATIONS PROCESS AND LINKS - DESCRIPTION

2.1  THE ITURAN WIRELESS COMMUNICATIONS PROCESS

Ituran uses sophisticated Differential Time Of Arrival (DTOA) and spread
spectrum Technologies and constitutes a fully independent system that fills two
basic functions:

o  Tracking of the Mobile Units
o  Two way wireless messaging

Two radio links connect the Network Control Center (NCC) with the Mobile Units.

2.2  THE COMMUNICATIONS LINKS

A.  DOWNLINK

The narrowband downlink signal is sent by the NCC, through the pager
transmitters, and is addressed to a specific Mobile Unit. The downlink transmits
commands which trigger the Mobile Unit to do one or more of the following:

o Transmit a positioning signal called the Location/Response link.
o Check the sensors and transmit their status through the Response link.
o Optional activate a function in the vehicle (e.g. turn off the engine, switch
  on the alarm, lock/unlock doors etc.).
o Display an alphanumeric message on the mobile unit's optional LCD screen.

B.  UPLINK: THE LOCATION/RESPONSE LINK

The Location link is a direct sequence, spread spectrum transmission, which is
received by at least four base stations. Each base station is equipped with an
extremely accurate time mechanism which records the precise time the signal is
received. The measurements are then relayed to the NCC through a physical
terrestrial link. DTOA (Differential Times Of Arrival) calculations conducted at
the NCC reveal the Mobile Unit's location.

The Response link is a transmission received by any of the base stations and
relayed to the NCC. It includes two types of data:

o  Status data from the Mobile Unit's sensors or alarm
o  Alphanumeric data originating at the optional Mobile Unit's driver's terminal

2.3  COMMUNICATIONS SPECIFICATIONS


                                       5


A.  THE DOWNLINK

The Downlink communication protocol is a standard pager POCSAG protocol (data
transfer at 2400 bps). The pager transmitters are a slightly modified version of
standard, off-the-shelf products.

The transmitted power is variable (150 - 300w), depending on the density and the
location of the pager infrastructure. The Downlink uses a synchronized Simulcast
mode.

Spectrum requirements: 25 KHz bandwidth 12.5+/-) KHz). Modulation type - FSK

B.  THE UPLINK.

The Uplink link for location purposes is a direct sequence, spread spectrum
signal. It enjoys high immunity to electromagnetic disturbances and jamming and
enables future addition of CDMA capability for system capacity increase. The
modulation is BPSK with chip rate of 1.5MBps.

In Response Link mode, the uplink utilizes BPSK modulation with 12KBps data
transmission, in time slots allocated by system's TDMA protocol.


                                       6



                                    ANNEX V

TASKS TO BE PERFORMED BY TELEMATICS AND ITURAN TEAMS

1.  GENERAL

This ANNEX specifies tasks to be performed by Telematics and Ituran teams
(hereinafter called Telematics team) during the turn-key project of the
deployment of Ituran System. These tasks are in full compliance with the
provisions of the Statement Of Work (ANNEX I of this Agreement) and the goal of
this document is to concentrate the tasks to be performed by the supplier.

2.  PLANNING

A detailed project planning will be performed by Telematics team, to assure
meeting the project schedule as described in Appendix B of ANNEX I of this
Agreement. The detailed plan will be presented at PDR.

3.  TRAINING OF LOCAL ENGINEERING TEAM

Telematics team will perform training of the local team as presented in section
3.3 of ANNEX I (SOW). This training will be at the level to insure further
deployment, operation and maintenance of Ituran system by the local team. The
local team will be at the adequate technical level as described in the above
section.

The above local team will actively participate in all stages of the deployment
process under the supervision of Telematics personnel. They all (especially the
engineers) must have good knowledge of English language. Telematics team will
perform an initial training at Ituran and Telematics facilities in Israel for
about two weeks. Afterwards the local team will work together with Telematics
team in China, continuing its training in OJT form. After the deployment,
integration and initial operation of the first *** Base Stations in Shanghai
(phase one), the local team will perform further deployment of additional Base
Stations under the strict supervision and "as needed" involvement of Telematics
team. In parallel, the local team will prepare the required Installation and
Operating instructions in Chinese, based on their training and experience
gathered during the deployment process and the documentation provided by
Telematics team.

4. SPECIAL EQUIPMENT MODIFICATIONS AND ADAPTATION

In order to enable operation of Ituran system in China, Telematics team will
perform certain engineering changes to the existing Ituran system. These changes
include:

i. Adaptation to the operation on the allocated frequencies (frequency shift).
This task includes the modifications of all the necessary circuitry of Base
Stations, TULIPS and PALs.

ii. Performance of the necessary verifications of modified equipment according
to the company quality assurance plan.

                                       1


***   Confidential material redacted and filed separately with the Commission.


iii. Adaptation of the "man - machine interface" (MMI) to the needs of Chinese
operators of the system (Chinese language).

5. BASE STATIONS MANUFACTURING AND NCC INTEGRATION

Telematics team will produce the special components of the Base Stations, and
perform in Israel full integration of Base Station's racks together with the
standard equipment purchased and provided by the Buyer (Buyer furnished
equipment) before the shipment.

Telematics team will perform in Israel integration of NCC, based on the standard
computing equipment purchased and provided by the Buyer.

6.  NETWORK DESIGN

Upon completion of the field survey, Telematics team will perform the System
Network design. As a result of this design, a primary deployment map and a list
of sites according to priorities will be performed by Telematics team and
provided to the Buyer for location of the appropriate sites.

7.  NCC PREPARATION AND DEPLOYMENT

Telematics team will prepare the specifications for the setting up the Control
Center. The Chinese contractor, chosen by the Buyer and approved by Telematics
team, will plan and set up the infrastructures as described in sections 4.1 and
4.2 of ANNEX I. Telematics team shall approve all the plans before the
implementation stage. Upon the completion of the infrastructure preparation by
local team, Telematics team will perform infrastructure acceptance tests as
specified in Appendix E of ANNEX I (SOW):

Integration and testing of Control Center's equipment will be performed by
Telematics Wireless team together with the Local Engineering team. Initial
integration of the equipment for the Control Center will be performed in Israel
with participation of the Local Engineering team.

8.  BASE STATIONS DEPLOYMENT

Telematics team will perform its relevant tasks described in the section 5 of
ANNEX I. These tasks will include:

i. Verification and approval of the candidate sites

ii. Specification and requirements for the infrastructure installations at the
sites

iii. Approval of local contractor's plan of the construction

iv. Acceptance testing of the Base Stations sites infrastructure as specified in
Appendix D of ANNEX I (SOW)

v. Connection of the Base Station's racks to the on-site infrastructures

vi. Integration with Control Center as described in

                                       2


9. SYSTEM INTEGRATION AND TESTING

Telematics team will perform full system integration upon installation of NCC
and Base Stations. Following the integration phase System acceptance testing
will be performed. This testing will be preceded by the Acceptance Testing of
Base Stations and Acceptance Testing of End User equipment. The detailed
procedures of Acceptance testing will be summarized at CDR. The principles of
System Acceptance concept are presented in Appendix F of ANNEX I (SOW) and
repeated in ANNEX II of this Agreement.

10.  REPORTS AND DESIGN REVIEWS

During the performance of the project Telematics team will submit a monthly
progress report to the Buyer. The report will include a description of the
content of the work planned for the preceding month in the original plan against
actual performance. The report will include a brief description of irregular
incidents and malfunctions in the implementation of the project. The parties
will hold two Design Reviews, PDR and CDR where the detailed status of the
project with a breakdown of activities performed in relation to planning, and a
detailed working plan for the future will be presented. The Design Reviews will
be performed at the locations designated by the Buyer.

11.  DOCUMENTATION

Telematics team shall prepare documentation as specified in section 11 of the
ANNEX I (SOW).

                                       3




                                    ANNEX VI

                  MAINTENANCE AND SUPPORT AGREEMENT PRINCIPLES

This ANNEX presents the principles of Maintenance and Support Agreement to be
executed between the parties before the end of Warranty period. This Agreement
will define the Support of Supplier team provided to the Buyer to insure proper
operation of Ituran System in the Region form the technical aspects.

1. The Agreement shall address following principal issues: End User Equipment,
Base Stations equipment, System Software and System level support.

i.  End User equipment

The maintenance of End User equipment will be performed at the local
manufacturing facility. A unit repair price list will be established and agreed
upon between Buyer and Supplier, based on the average time, material cost and
agreed margin. When the repair will be impractical, the unit will be replaced
with the new unit at new unit price.

Buyer will keep adequate stock of spare End User units at relevant locations to
insure fast turnaround time for the Buyer.

ii.  Base Stations

The maintenance of Base Stations will be performed at the local manufacturing
facility at the level corresponding to the level of local manufacturing at that
time, and at Supplier facility for the higher levels until the local facility
will be ready for the high level maintenance. A unit repair price will be based
on the actual repair time, material cost and agreed margin.

Buyer will keep adequate stock of spare Base Stations unit locations to insure
fast turnaround time for the Buyer.

iii.  System level Support and System Software

In consideration of and due to the payment as specified in paragraph 5 of this
ANNEX, the Supplier shall provide Support Services in response to submission of
a fault report by the Buyer relating to a suspected defect or error in the
Supplier's Software or other system component causing the system's performance
depart from its specifications.

The Supplier shall perform such Support services necessary to insure that
Suppliers software or other system component perform according to the
specifications.

The Supplier shall provide Support Services during its normal working hours. The
Supplier shall use its best efforts to provide emergency support outside of
these hours. The Buyer shall, if so requested by the Supplier, give the Supplier
a listing of output and any other data which the Supplier requires in order to
reproduce operating conditions similar to those present when any defect or error
in the Supplier's Software was discovered.

                                       4


2.  Exclusions

Support Services to be provided by the Supplier under this Agreement do not
include:

i. correction of errors or defects caused by operation of the Supplier's
Software or the Designated Hardware in a manner other than that specified by the
Supplier;

ii. correction of errors or defects caused by modification, revision, variation,
translation or alteration of the Supplier's Software or Hardware not authorized
by the Supplier;

iii. correction of errors caused by the use of computer programs not licensed by
the Supplier to the Buyer;

iv. correction of errors caused by the failure of the Buyer to provide suitably
qualified and adequately trained operating and programming staff for the
operation of the Supplier's Software;

v. rectification of errors caused by use of the Supplier's Software and Hardware
other than in accordance with the Manuals;

vi. rectification of errors caused by inadequate on site equipment maintenance;

vii. furnishing or maintenance of accessories, attachments, supplies,
consumables or associated items not supplied by the Supplier.

If the Buyer so requests, Supplier may provide any of the Services referred to
in 2a2 - g. The Supplier shall make an additional charge for providing such
Services.

3.  Access for the Supplier's Personnel

The Buyer shall, where relevant, ensure the Supplier's personnel have full and
safe access to the Supplier's Software and the Designated Hardware at all
reasonable times for the purpose of providing the Support Services and
installing New Releases.

The Buyer shall also ensure that the Supplier's personnel are provided with all
information, facilities, services and accessories reasonably required by the
Supplier to enable the Supplier to comply with its obligations under this
Agreement.

The Buyer shall, where relevant, provide on request a suitably qualified or
informed representative, agent or employee to accompany the Supplier's support
personnel and to advise the Supplier on access or on any other matter within the
Buyer's knowledge or control which will assist the Supplier in complying with
its obligations under this Agreement.

4.  Additional Services

From the end of Warranty Date, the Supplier shall, in consideration of payment
of the Annual Service Fees and otherwise at no additional cost to the Buyer
undertake the following activities:

                                       5


i. deliver to the Buyer all new software developments and functional
improvements to the Supplier's Network Software undertaken by the Supplier in
the generic development of the product;

ii. deliver new releases of the Supplier's Software in order to preserve
compatibility with the generic Supplier's Network Software.

5. Fees and Payment

The Supplier estimates an annual service fee of $ *** after the Warranty
Period for the services as described in paragraph 1.c and 4. This fee does not
include the payment for the travel and accommodation for Supplier personnel as
may be required for performance of the above services which shall be born by
Buyer. The final annual service fee will be negotiated and agreed upon between
the Supplier and the Operating Company.

The fee for the maintenance and repair of end user equipment and Base Stations
shall be in accordance with paragraphs 1.a and 1.b.

The Buyer shall pay an additional charge as will be mutually agreed between the
Supplier and the Buyer if the Buyer requests the Supplier to provide
modifications, development or any other services relating to the System not
directly embraced by the Support and Maintenance Agreement.

                                       6

***   Confidential material redacted and filed separately with the Commission.



In consideration of the mutual obligations assumed under this Annex, Buyer,
Agent and Supplier agree to this Annex, which is executed by duly authorized
representatives as of the dates below:

AGREED BY:

Telematics Wireless Ltd.                           Telematics Wireless

/s/ Avry Franco                                    /s/ Roman Sternberg
--------------------------------                   -----------------------------
By:  Avry Franco                                   By:  Roman Sternberg
Title:  V.P. & CFO                                 Title:  V.P. Marketing
Date:  29.08.04                                    Date:  29.8.04

Golden Net Communication Technology Ltd

By:  /s/ [in Chinese characters]
Title:  Chairman
Date:  [Chinese characters]

Digitrack (China) Group Co. Ltd
For and on behalf of
Digitrack (China) Group Co. Limited


------------------------------
Authorised Signature(s)
By:  /s/ [in Chinese characters]
Title:  [Chinese characters]
Date:  [Chinese characters]



                                        7



             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

                                ANNEX I-2-BEIJING
                       ITURAN SYSTEM DEPLOYMENT IN BEIJING
                 STATEMENT OF WORK, PRICES AND TERMS OF PAYMENT


1. GENERAL

This document provides a description of the activities to be carried out by
Supplier, its parent company Ituran Location and Control Ltd. (hereinafter
referred to as "Ituran") and local teams of the Buyer as a part of deployment of
Ituran Location System in Beijing, including the responsibilities of each party.

To insure successful deployment and based on the experience of previous
deployments of this system in other countries, a "phased" approach is proposed.
It is based on the initial deployment of a First Phase system in chosen
location. This First Phase will serve as a basis for all future deployments,
will enable proper adaptation to specific local conditions, to train local
technical and operational personnel and to serve as a Demonstration System for
various marketing activities. After completion of First phase deployment, its
initial trial run and performing all necessary further modifications and
adaptations, further deployment can be commenced. The First Phase System will
also serve as a basis for the System Acceptance Testing, after successful
completion of which the System will be officially transferred to the
responsibility of the Operating Company in Beijing.

2.  GENERAL DESCRIPTION OF THE SYSTEM

Ituran System for locating vehicles, cargo and people is composed of the three
following sub-systems:

o Control Center.

o Base Stations.

o PAL (personal Alarm and Locator (also serves as the cargo location unit))/VLU
(Vehicle Location Unit) - transmitter/receiver installed in the vehicle, cargo
or carried by a person.

The CONTROL CENTER is usually installed in the same building with other offices
of the Operating Company. The Control Center is composed of a number of computer
systems with dedicated software, workstations for operators, and communication
systems that connect the Center with the Base Stations. The control center is
the heart of the system, and its availability is of the utmost importance. The
center's systems have a hot backup and all its infrastructures (electricity,
communication lines, air-conditioning, etc.) are also backed-up. A general
description of the Control Center is provided in Appendix G of this SOW.

The characters displayed on Operator stations shall be the official Language of
the People's Republic of China - Simplified Chinese Characters.

The Back Office capabilities, including billing are not part of the proposed
system and should be chosen by the Buyer based on the local systems and
regulations from local vendors.

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             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION


The BASE STATIONS are installed in the chosen locations scattered in required
coverage area and constitute receive-only or receive and transmit sites (The
average proportion between receive-only sites and receive and transmit sites is
3:1). The Base Stations include computer-controlled receivers that receive
signals from the VLU or PAL and transfer the information to the Control Center
via the communication lines (basic technical requirements of such lines are
specified in ANNEX IV of the Comprehensive Agreement) for further processing and
display.

Some of the Base Stations are equipped with standard Paging transmitters
controlled by special controllers. The transmitters receive the information from
the control center and transmit it to the VLU or PAL in a synchronized form.
These transmissions serve for synchronization of all active VLUs/PALs and
interrogation of the chosen unit. The transmitters are timed by Atomic Clocks or
GPS receivers installed at the stations or by other means.

Some of the Base Stations contain special synchronization transmitters,
responsible for precise calibration of the stations.

All of the stations are equipped with appropriate antennas installed on masts,
lightning protection systems, air-conditioning and UPS systems.

3. CONTENT OF THE WORK



3.1 GENERAL

Initial installation of the System in the defined area will include installation
of *** receiving Base Stations and associated equipment. The deployment of full
system will be divided into 4 consecutive phases -

First phase: initial *** Base Stations and CC

Second phase: expansion of the system to *** Base Stations

Third phase: expansion of the system to *** Base Stations

Fourth phase: expansion of the system to *** Base Stations, which will basically
cover the whole city.


This Annex only includes all the activities required for the deployment and
running operation of the control center and first phase *** Base Stations of the
Ituran location system. The system deployed in a first phase will serve as a
basis for the system Acceptance Testing by The Buyer. Upon completion and
Acceptance Testing, the Parties will sign expansion agreement to expand the
First Phase system in three phases to include *** Base Stations, *** Base
Stations, and *** Base Stations.

The stations to be installed in the First Phase are:

o  ***

o  ***

                                       2


***   Confidential material redacted and filed separately with the Commission.


             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION


o  ***

The control center shall be run by defined number of operators and will permit
communication to *** base stations and upgradeable for communications with about
*** Base Stations (Receive and Transmit) with additional hardware.

3.2  PLANNING

Appendix B of this SOW, will be provided at PDR and will present a schedule of
the process of system deployment in a Microsoft ProjectTM format. The plan will
be further discussed between the parties.

3.3  LOCAL ENGINEERING TEAM AND ITS TRAINING

Following is the list of customer's technical personnel recommended to
participate at all the stages of system deployment. This team will work in
parallel with Telematics Wireless/Ituran team and will be trained to perform
further deployment, technical operation and maintenance of the System.

1. Engineering Manager. This person will be the technical leader of the local
team and will have overall responsibility for all the technical aspects of
system's operation and support. This should be an Electronics Engineer,
preferably with wide experience in integration and technical support for large
scale infrastructure-based communications systems (e.g., cellular or paging) and
excellent management skills.

2. Senior System Engineer. This person will be the manager of the Control Center
Engineering team. He should be software engineer with experience in operating
systems (e.g., QNX/UNIX) and real time software.

3. Control Center Engineer. This should be software engineer working under the
supervision of Senior System Engineer.

4. Base Stations Engineer. This person will be responsible for the technical
operation and support of system's Base Stations. He and his team will actively
participate in all the aspects of the deployment and integration of Base
Stations. This should be an Electronics Engineer with experience in
installation, operation and maintenance of RF, communications equipment,
antennas, modems, interfacing with telecom lines and power supply
infrastructure. Preferably, this person should have an experience in integration
and maintenance of Cellular Base Stations sites or Paging Transmission sites.

5. Base Station Technicians. Two or three technicians or junior engineers with
the experience in installation and maintenance of Cellular or Paging sites and
working under the supervision of Base Stations Engineer.

The above team will actively participate in all stages of the deployment process
under the supervision of Telematics personnel. They all (especially the
engineers) must have good knowledge of English language. They will receive an
initial training at Ituran and Telematics facilities in Israel for about two
weeks. Afterwards the team will work together with Telematics

                                       3


***   Confidential material redacted and filed separately with the Commission.


             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

team in China, continuing its training in OJT form. After the deployment,
integration and initial operation of the first *** Base Station, the local team
will be able to perform further deployment of additional *** Stations (phase
two) under the strict supervision and "as needed" involvement of Telematics team
upon execution of the expansion agreement. In parallel, the local team will
prepare the required Installation and Operating instructions in Chinese, based
on their training and experience gathered during the deployment process and the
documentation provided by Supplier. Final Base Stations deployment (phase 3 and
4) will be performed by the local team under the supervision of Telematics team,
but with minimum level of their direct involvement.

3.4  EQUIPMENT PURCHASE

The list of the main items required for the deployment of *** Base Stations and
Control Center is provided in the Appendix A of this SOW. This list is subject
to changes according to the specific local requirements. Some of the standard
items mentioned in the list may be obsolete and should be replaced by the
compatible items. The updated purchase list for standard equipment will be
prepared by Supplier within fifteen (15) calendar days from the initiation of
the project. The list includes recommended quantities for purchase. Exact
quantities for maintenance purposes will be separately agreed upon between
Supplier and Buyer. Supplier shall notify the Buyer to prepare such equipment at
least fifteen (15) calendar days before it shall be used. Supplier has the
responsibility for special equipment supply. Buyer will be responsible for the
standard equipment supply and may propose alternative vendors for specific
items, equal in performance to the defined items. The standard equipment items
purchased by the Buyer must be approved by the Supplier in advance. Any changes
in purchasing must be approved by the Supplier. The purchased equipment will be
shipped to the specific locations as directed by the Supplier for further
integration and installation. The equipment for the first Control Center and
Base Stations will be integrated and tested in Israel prior to the shipment to
China. The Buyer will be responsible for releasing the equipment from customs
and transporting it to the Control Center or other sites as required.

The purchase of End User equipment will be done in accordance with End User
Equipment Purchase Agreement attached as Appendix J of this SOW.

4.  SETTING UP THE CONTROL CENTER

4.1  INFRASTRUCTURE

Supplier will prepare the specifications for the setting up the Control Center.
The Buyer will choose local contractor that shall plan and set up infrastructure
in the Control Center building, based on Telematics' specifications. The
infrastructure will permit the operation of the Control Center, including its
operation during power failures and partial malfunction of the air-conditioning.
The infrastructure set up will include the purchase and installation of a
generator, UPS, electricity boards and their integration in the building's
electricity system.

Based on Telematics' specifications, the local contractor will design and
construct the partitions required for the operation of the Control Center and
the communication room, taking into consideration all the needs of the Operating
Company to be established. A floating floor will be installed in the Control
Center and the communication room for the passage of cables. A

                                       4


***   Confidential material redacted and filed separately with the Commission.


             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

platform for the operators will be constructed in the Control Center, and
contain furnishings for several operating posts. The contractor will install
electricity and communication sockets underneath the floating floor and along
the walls of the Control Center, fluorescent lighting in the ceiling with
anti-glare covers. Electricity boards and carrying equipment of communication to
the sites will be installed in the communication room.

The contractor will design, purchase and install a backed-up air-conditioning
system for the control center and the communication room.

The contractor will present all plans to Supplier and, after their approval,
will continue with the implementation stage.

The Buyer will insure that the design and implementation is performed according
to all applicable regulations. The Local contractor's work will be considered
completed upon full acceptance by Supplier.

4.2  COMPUTERS AND COMMUNICATION

The Local contractor will install the Control Center and operators' posts
equipment in accordance with specifications and guidelines of Supplier.

Integration and testing of the Control Center's equipment will be performed by
Telematics Wireless team together with the Local Engineering team. Initial
integration of the equipment will be performed in Israel with participation of
the Local Engineering team.

Appendix G provides general description of the operational Control Center.
Digital Mapping Content will be supplied by the Buyer according to the
requirements presented in Appendix H. In addition, The Buyer will supply a DTM
file (in known format) that includes the altitude data for all the required
coverage area in a definition of at least 1 minute.

5.  SETTING UP BASE STATIONS

5.1  LOCATING AND PURCHASE OF SITES

Upon completion of the Field Review by Telematics team, The Buyer will be
responsible for the location of appropriate sites for Base Stations, on the
basis of a primary deployment map and a list of sites according to priorities,
that will be prepared and provided by Supplier. This list will be based on a
special analysis using DTM information ("altitude" maps). For each potential
site The Buyer will present more than one alternative, stating the technical and
economic advantages and disadvantages of each. Among other issues, The Buyer
will check the possibility of long-term rental, access to the site during all
hours, the existence of an appropriate electricity feeding line, place for a
mast (or existence of a usable mast) appropriate grounding, and the feasibility
of obtaining a data line. Telematics and Local engineering team will verify if
there is a risk of possible existence of electro-magnetic interference from
nearby radio equipment of third parties as well as general level of
electro-magnetic noise that may have influence on system sensitivity. After one
of the alternatives has been approved by Supplier, The Buyer will handle the
rental contract and obtain from the municipal authorities all required permits
for setting up a base station.

                                       5




             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION


5.2  COMMUNICATION LINES

The Buyer will order for each site allocated for the receiving station the
following communication infrastructures:

o PTP data line between the site and the control center at a rate of minimum 9.6
Kbps asynchronous.

o An ordinary telephone line.

The Buyer will order for each site intended for the receiving and transmission
station the following communication infrastructures:

o Two PTP data lines between the site and the control center at a rate of
minimum 9.6 Kbps asynchronous.

o Two ordinary telephone lines.

o The possibility of working with a line at a rate of 19.2 Kbps and a
multiplexer unit for two ports will be examined at these sites.

5.3  SITE INFRASTRUCTURE

Supplier will provide the specifications and requirements for the infrastructure
installations at Base Stations sites. The Buyer via local contractor will design
the infrastructure for each site intended for Base Station. The contractor will
plan the type and height of the mast (if necessary), the location for the
building/construction (if necessary), the routing of the RF, communication,
power and grounding cables, and submit the design to the Supplier for approval.
The mast will be equipped with a lightning arrester with grounding cable, mast
illumination (if necessary), a cable ladder, and arms appropriate for the
system's antennas. The contractor will submit to Supplier for approval the type
of the construction, the air conditioning system, the method of deployment of
the communication infrastructure. The construction will contain the antennas
concentrator board for the entry of RF cables, lighting, a smoke/fire sensor, a
standard fire extinguisher and a door-opening sensor.

After approval of the plans by Supplier, the local contractor will set up the
infrastructure at the site. This will include the mast and the construction,
installation of RF cables and antennas on the arms, connecting the construction
to the electricity source, the grounding, the communication lines, and the RF.
The contractor will purchase all the needed equipment for the above activities
except antennas.

If necessary, the contractor will design and erect a fence around the station,
and make arrangements with a security company to guard the site.

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             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION


5.4  GEODESIC MEASUREMENTS

At each of the sites The Buyer via local contractor, specifically chosen for
this task, will perform geodesic measurements for the placement of the antennas.
The accepted measuring system is Differential GPS. The required precision is +/-
few centimeters.

5.5  INSTALLING A BASE STATION

Upon completion of the infrastructures deployment at the site, the local
contractor will transport the Base Stations racks to each site and will put it
at the construction location. The Telematics and Local engineering teams will
perform all connections between system's units and the various infrastructures.
The operation of the system at the site shall be performed in accordance with
the guidelines issued by Supplier.

5.6  INTEGRATION WITH THE CONTROL CENTER

Integration of Base Stations with the Control Center will be performed by
Telematics team together with the local engineering team. Each Base Station data
will be defined in the CC, including measured location, name, technical profile,
communication lines definitions etc. After verification of proper functioning of
communication lines using test equipment, each Base Station will be connected to
the CC over the designated line.

Location System will provide real time information regarding the communication
performance and data validity received from the site.

5.7  GENERAL REQUIREMENTS

In all installation works the local contractor will mark all cables with
markings to be agreed upon with Supplier. The cables will be marked at 3 m
intervals and adjacent to end connectors. Routing of cables serving different
purposes (communication, electricity, grounding, etc.) shall be separated.

The local contractor will meet the accepted standards for civil construction,
mechanical work, cabling work, and electrical safety. The Buyer will insure that
the design and implementation is performed according to all applicable
regulations.

6.  MAINTENANCE

During the establishment and trial run stages of the system, the local
contractor will provide maintenance to the general infrastructure of the Control
Center and the Base Stations, including masts installed by the contractor. The
contractor will keep a precise record of all spare equipment stored in the
Control Center warehouse for the purposes of maintaining the system. When an
item of equipment is replaced, the contractor will send the defective item to be
repaired.

During the deployment and trial run stages, the maintenance of all the equipment
supplied by Supplier will be performed by Supplier. The maintenance will be
performed at no additional

                                       7



             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

charge during the warranty period of one year. Further maintenance of this
equipment will be performed according to the Maintenance Agreement that will be
executed between the parties.

Following response times should be insured:

o Every malfunction at the control center will be repaired within 6 hours of
notification.

o Every malfunction at a base station will be repaired within 24 hours of
notification.

Within the warranty period the Supplier shall provide a sufficient level of
Spare Units free of charge, and upon the expiry of the warranty period, the
Buyer will keep a sufficient level of Spare Units to insure the above response
times. Failed equipment will be shipped to Israel for repair and replacement.
The repair time in Israel will be not more than 30 days after receiving the
equipment.

The Buyer will keep a detailed record with regard to the date and type of
malfunctions, the method in which each was handled, and the time it took to
repair the malfunction. Copies of the reports will be submitted to Supplier.



7.  PROJECT MILESTONES

Following are the main milestones of this project and their corresponding
completion dates presented in AED (After Effective Date) terms. The detailed
project schedule will be presented at PDR and will be adapted to the status of
the Shanghai project. In any case, the milestone dates below represent latest
completion dates

o  Field Survey by Project Team
   and Preliminary Design Review                                 1 month AED
o  Local Engineering Team training in Israel                     3 months AED
o  Critical Design Review                                        3 months AED
o  Integration of CC and 10 sites in Israel                      2 months AED
o  Arrival and custom release of CC and 10 sites equipment       3 months AED
o  Phase One system integration and Acceptance Testing           6 months AED


8.  INFRASTRUCTURE ACCEPTANCE TESTS

These acceptance tests refer to the acceptance by Supplier of the infrastructure
preparations and associated works performed by local contractor with regard to
Control Center and Base Stations. Tests of Base Stations' infrastructure are
specified in Appendix D of this SOW. Tests of the Control Center infrastructure
are specified in Appendix E of this SOW. The tests will be performed by Supplier
in the presence and the assistance of the local contractor.

                                       8


             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

9.  SYSTEM ACCEPTANCE TESTS

System Acceptance Testing will be performed according to the Acceptance Test
Procedures that will be agreed upon between the parties. The Acceptance Testing
will be divided into following phases:

- Base Station Acceptance Testing. These tests will demonstrate Base Stations'
equipment compliance with its specifications.

- System Acceptance Testing. This testing will be performed upon completion of
the deployment and trial run of Control Center and 10 Base Stations. This
testing will demonstrate the overall performance of the system in terms of
operating procedures, location capability, messaging capability, coverage,
interrogation rate (capacity parameter) etc. The testing will be performed using
specified number of Vehicle and Personal Location Units. Upon successful
completion of System Acceptance Testing the System will be officially
transferred to the responsibility of The Buyer. The overview of System
Acceptance concept is presented in Annex II of this Agreement.

10.  REPORTS AND DESIGN REVIEWS

During the performance of the project Supplier will submit a monthly progress
report to The Buyer. The report will include a description of the content of the
work planned for the preceding month in the original plan against actual
performance. The report will include a brief description of irregular incidents
and malfunctions in the implementation of the project. The parties will hold two
Design Reviews, PDR and CDR where the detailed status of the project with a
breakdown of activities performed in relation to planning, and a detailed
working plan for the future will be presented. The Design Reviews will be
performed at the locations designated by The Buyer.

11.  SYSTEM DOCUMENTATION

The Supplier will provide following documentation:

- Base Station Specifications
- Vehicle Location Unit Specifications
- Personal Location Unit Specifications
- Control Center Diagrams
- Control Center Infrastructure requirements specifications
- Base Station Infrastructure requirements specifications
- Control Center Operating Procedures
- Fleet Management post Operating Manual
- VLU and PAL Registration and Activation Procedure
- System Acceptance Test Procedures
- Vehicle Location Unit general installation instructions
- Monthly progress reports
- Design Reviews documentation

The above documentation will be in English.

                                       9



             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

Local contractors, responsible for Control Center and Base Station
infrastructure preparation, will maintain documentation for each of the sites to
be established. The documentation of the control center will include a detailed
description of the electricity system, including all interim boards and the main
electricity board, specifying the types of cables and automatic switches. The
markings of the switches in the documentation will be identical to their
markings on electricity boards. The documentation of the system will include
diagrams of the connections of all components of the system, specifying numbers
of cables, types of cables, and names of connectors. The markings in the
diagrams will be identical to the markings on cables and connectors.

For each of the base stations the local contractor will prepare a booklet,
indicating the site on a map with a scale of 1:100000. The booklet will also
contain a descriptive diagram of the site and the mast, specifying the
disposition of the dedicated equipment, and digital photographs of the interior
and exterior of the site. The documentation will include a complete address of
the site, precise coordinates of the antennas, the name and telephone numbers of
the site owner, the name and telephone numbers of the contractor's liaison,
details of electricity feeding up to the structure's main board, and the paths
of communication and grounding lines. The local contractor will provide a
detailed description of the connections between components of the system,
including types of cables, their length, and types of connectors. The contractor
will specify the manufacturer's number of each of the items of equipment
installed at the site, including air-conditioner, electricity board, and
components of the locating system. The station's infrastructure acceptance test
report will be attached to the booklet. All of the material will be submitted on
magnetic media and in a hard copy.

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             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION


LIST OF APPENDIXES

APPENDIX A:  Equipment List

APPENDIX B:  Detailed Project Schedule (to be provided at PDR)

APPENDIX C:  Price and Terms of Payment

APPENDIX D:  Infrastructure Acceptance Test - Base Stations

APPENDIX E:  Infrastructure Acceptance Test - Command Center

APPENDIX F:  System Acceptance Test Principles

APPENDIX G:  Operational Control Center general Description

APPENDIX H:  Requirements from Digital Mapping Content

APPENDIX I:  Letter Of Credit Principal Terms

APPENDIX J:  End User Equipment Purchase Agreement (to be further discussed and
agreed upon)


                                       11



             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

                                   APPENDIX D

INFRASTRUCTURE ACCEPTANCE TEST:  BASE STATIONS

Base station's infrastructure acceptance tests will consist of the following:

MAST

o  Testing the existence and integrity of all permits required for the
establishment and operation of the base station.

o  Approval of the mast by a Safety Engineer.

o  Results of geodesic measurements.

o  Ensuring that the grounding of the mast meets the standards.

o  Painting, illumination, climbing ladder.

o  Sealing connectors, marking and path of RF cables.

o  Antennas:  reinforcing arms, jumpers.

STRUCTURE

o  Dragging and sealing the structure.

o  Ensuring that the grounding of the structure meets the standards.

o  Acid-resistant floor coating.

o  The type and installation of the air-conditioner.

o  Antenna concentrator: sealing, marking and grounding, VSWR for adjusting the
antennas.

o  Electricity board in the structure: value and types of switches, marking.

o  Cabling in the structure: cable ladders, arrangement, marking, connectors.

o  Regularity of communication cables (data and dialing) between the station and
the control center.

o  Batteries: type of batteries, rack, connectors to power supply and
electricity board.

o  Fire extinguisher: type, working order, method of installation, expiry date.

o  Illumination, fire/smoke detector, door-opening sensor.

EQUIPMENT

o  Setting up bases in the structure.

o  Installing units in bases, connections between units, marking.

o Electrical connections, grounding, communication and RF cables to the system's
units.

o  Installation of lightning arresters, AC, RF and communication -installation,
marking.

o  Running order of all items of the system in accordance with the results of
the self-test of each unit.

o  Running order of the station against the control center.

DOCUMENTATION

o  A map of the area indicating the site.

o  A map of the site indicating the location of the mast, antennas, the
structure and cables paths.

o  A drawing of the interior of the structure indicating equipment bases,
batteries, antenna concentrators, electricity board, and entry points of
communication lines.

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             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

o  A drawing of the interior of the equipment base, indicating all units and
cables.

o  Photographs of the site, integrity of the documentation, and its concordance
with the site.






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             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

                                   APPENDIX E

INFRASTRUCTURE ACCEPTANCE TEST:  CONTROL CENTER

The control center's infrastructure acceptance tests will consist of the
following:

o  Tests of all equipment (computers, communication): connection to power,
markings of sockets and communication points.

o  Lighting: running order of the lighting, a sufficient quantity, no glare on
monitors.

o  Racks: cables ducting, precise and legible markings, and general quality of
work.

o  Floating floor: stability, ducting of cables underneath the floor, markings,
and general quality of work.

o  Examining the running order of modems for dialing, including connections to
the communication cables.

o  Inspection of the air-conditioning system concordance with the plans.

o  Inspection of the communication to the sites from the SMC workstations.

o  Inspection of the entire layout of the A/B switches.

o  Inspection of the UPS system support.

            o Voltage drop in the network.

            o Continuous good running order of the system.

            o Good running order of the emergency lighting.

            o  Generator activation.

            o After generator activation - activation of the air-conditioning
            system.

            o Generator drop in order to measure operation time of UPS
            batteries.

ADDITIONAL OPERATIONS:

o Listing all spare equipment in the contractor's warehouse.

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             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION


                                   APPENDIX F

SYSTEM ACCEPTANCE TEST PRINCIPLES

The system tests at the end of the Pilot deployment will consist of the
following:

OPERATIONAL TESTING OF THE BASE STATIONS

Operational testing of all the components of each Base Station will be performed
during the period of one week, every three hours, by means of diagnostic
programs from the Control Center.

Availability of the following equipment should be reported during the tests:

o  Atomic Clock or GPS Receivers
o  Paging Transmitters
o  Receivers in the Stations (IBSU)
o  Transmitters Controllers (SPCU)

AVAILABILITY TEST OF THE CONTROL CENTER

The test will be based on the current operation of the system and verification
of compliance with Operating Procedures.

TESTS OF COVERAGE AND LOCATION ACCURACY

The Test will include movement of defined number of PAL and VLU units in the
coverage area and the comparison between the actual location and the location
displayed in the Control Center to demonstrate required CEP accuracy. The test
will include at least 1,000 locations.

In all the locations, the following data will be registered:

o  Number of receiving stations participating in the location process.

o  The coordinates calculated by the system.

o  The coordinates displayed at the operators' workstations.

o  Actual location as reported from the field.

o  Quality of the signal reception (FOM).

o  Stability of location

In addition, the performance of message reception will be verified, including
synchronous and asynchronous messaging.

                                       15



             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

TEST OF CAPACITY PARAMETERS (NUMBER OF LOCATIONS PER SECOND)

The system will be operated in the continuous interrogation manner to
demonstrate required maximum interrogation rate capability.

The above data, after its processing, will enable to evaluate the quality of the
system service.

A detailed System Acceptance Test Procedure will be prepared by the Supplier and
agreed upon with The Buyer at PDR.



                                       16



             TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION


In consideration of the mutual obligations assumed under this document, Buyer,
Agent and Supplier agree to this document, which is executed by duly authorized
representatives as of the dates below:

AGREED BY:

TELEMATICS WIRELESS LTD.

BY:

TITLE:

DATE:

GOLDEN NET COMMUNICATION TECHNOLOGY LTD.

BY:

TITLE:

DATE:

DIGITRACK (CHINA) GROUP CO. LTD

BY:

TITLE:

DATE:

                                       17



                              APPENDIX I (BEIJING)

                        LETTER OF CREDIT PRINCIPLE TERMS

DOCUMENTS REQUIRED:

A  DOCUMENTS REQUIRED FOR SUPPLY OF BASE STATIONS AMOUNTING TO US$ *** :

1) 3/3 ORIGINALS PLUS 3 NON NEGOTIABLE COPIES OF CLEAN ON BOARD MARINE BILLS OF
LADING MADE OUT TO ORDER OF ISSUING BANK MARKED PAYABLE AT DESTINATION" NOTIFY:
APPLICANT, CONSIGNEE.

AND/OR

AIRWAYBILL (3RD ORIGINAL - FOR SHIPPER) CONSIGNED TO ISSUING BANK MARKED PAYABLE
AT DESTINATION" NOTIFY: APPLICANT, CONSIGNEE.

2) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

3) PACKING LIST IN 3 ORIGINALS AND 3 COPIES.

B. DOCUMENTS REQUIRED FOR SUPPLY OF END USER EQUIPMENT AMOUNTING TO US$ ***

1) 3/3 ORIGINALS PLUS 3 NON NEGOTIABLE COPIES OF CLEAN ON BOARD MARINE BILLS OF
LADING MADE OUT TO ORDER OF ISSUING BANK MARKED PAYABLE AT DESTINATION" NOTIFY:
APPLICANT, CONSIGNEE.

AND/OR

AIRWAYBILL (3RD ORIGINAL - FOR SHIPPER) CONSIGNED TO ISSUING BANK MARKED PAYABLE
AT DESTINATION" NOTIFY: APPLICANT, CONSIGNEE.

2) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

3) PACKING LIST IN 3 ORIGINALS AND 3 COPIES.

C. DOCUMENTS REQUIRED FOR PRELIMINARY DESIGN REVIEW AMOUNTING TO US$ ***

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL CERTIFICATE JOINTLY SIGNED BY THE BENEFICIARY AND THE APPLICANT,
CERTIFYING THAT PRELIMINARY DESIGN REVIEW HAS BEEN COMPLETED AND THE REPORT HAS
BEEN PROVIDED TO THE APPLICANT.

                                       18


***   Confidential material redacted and filed separately with the Commission.


D. DOCUMENTS REQUIRED FOR CRITICAL DESIGN REVIEW AMOUNTING TO US$ ***

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL CERTIFICATE JOINTLY SIGNED BY THE BENEFICIARY AND THE APPLICANT,
CERTIFYING THAT CRITICAL DESIGN REVIEW HAS BEEN COMPLETED AND THE REPORT HAS
BEEN PROVIDED TO THE APPLICANT.

E. DOCUMENTS REQUIRED FOR INITIAL CC SOFTWARE USE AMOUNTING TO US$ ***

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL BENEFICIARY'S CERTIFICATE CERTIFYING THAT INITIAL LICENSE FOR SYSTEM
USE AND FOR CC SOFTWARE USE HAS BEEN SENT TO THE APPLICANT BY DHL AND THE
RELATIVE DHL SHIPMENT AIRWAY BILL IS REQUIRED.

F. DOCUMENTS REQUIRED FOR FINAL LICENSE FOR CC SOFTWARE USE AMOUNTING TO US$ ***


1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY.

2) ORIGINAL BENEFICIARY'S CERTIFICATE CERTIFYING THAT FINAL LICENSE FOR SYSTEM
USE AND FOR CC SOFTWARE USE HAS BEEN SENT TO THE APPLICANT BY DHL AND THE
RELATIVE DHL SHIPMENT AIRWAY BILL IS REQUIRED.

3) ORIGINAL APPLICANT'S DECLARATION STATING THAT INSTALLATION OF *** FIRST PHASE
BASE STATIONS AND NCC IS COMPLETED.

G. DOCUMENTS REQUIRED FOR INSTALLATION AMOUNTING TO US$ ***

1) COMMERCIAL INVOICE IN 3 ORIGINALS AND 3 COPIES SIGNED BY THE BENEFICIARY

2) ORIGINAL DECLARATION JOINTLY SIGNED BY BENEFICIARY AND APPLICANT STATING THAT
INSTALLATION OF FIRST PHASE ( *** BASE STATIONS) HAS BEEN COMPLETED

PAYMENT TERMS:

1) L/C PORTION COVERING SUPPLY OF BASE STATIONS OF US$ *** REPRESENTS
*** PERCENT OF THE RELEVANT CONTRACT VALUE

                                       19


***   Confidential material redacted and filed separately with the Commission.


AND WILL BE PAID AT SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM
A.

THE OUTSTANDING *** PERCENT OF THE RELEVANT CONTRACT VALUE IS PAID AS
ADVANCE PAYMENT OUTSIDE THE L/C FRAMEWORK AND FINAL FIVE (5) PERCENT OF THE
RELEVANT CONTRACT VALUE WILL BE PAID UPON EXPIRATION OF THE WARRANTY PERIOD
OUTSIDE THIS L/C FRAMEWORK.

2) L/C PORTION COVERING SUPPLY OF END USER EQUIPMENT OF US$ *** REPRESENTS
*** PERCENT OF THE RELEVANT CONTRACT VALUE AND WILL BE PAID AT SIGHT
AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM B.

THE OUTSTANDING *** PERCENT OF THE RELEVANT CONTRACT VALUE IS PAID AS ADVANCE
PAYMENT OUTSIDE THE L/C FRAMEWORK.

3) L/C PORTION COVERING DELIVERY OF INITIAL CC SOFTWARE USE LICENSES OF
US$ *** WILL BE PAID AT SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN
ITEM E.

4) L/C PORTION COVERING DELIVERY OF FINAL CC SOFTWARE USE LICENSES OF US$ ***
WILL BE PAID AT SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM F.

5) L/C PORTION COVERING DELIVERY OF PRELIMINARY DESIGN REVIEW IS US$ *** AND
WILL BE PAID AT SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM C.

6) L/C PORTION COVERING DELIVERY OF CRITICAL DESIGN REVIEW IS US$ *** AND WILL
BE PAID AT SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM D.

7) L/C PORTION COVERING INSTALLATION IS US$ *** . THIS SUM WILL BE PAID AT
SIGHT AGAINST PRESENTATION OF DOCUMENTS STIPULATED IN ITEM G.1) AND G.2 ).

                                       20


***   Confidential material redacted and filed separately with the Commission.


                                   APPENDIX C

ITURAN SYSTEM DEPLOYMENT IN BEIJING - FIRST PHASE - PRICES AND TERMS OF PAYMENT

This document addresses the following:

o  Deployment cost
o  End-user equipment cost
o  Licensing fees

All the prices presented below are FOB Israel (for relevant items). The prices
are based on the assumption of the commencement of Beijing deployment project
after the commencement of Shanghai project.

1. ITURAN SYSTEM DEPLOYMENT COST.

a. System deployment cost is divided as follows:

1. Equipment purchase:

     a. Special equipment purchase (manufactured by Telematics)
     b. Standard equipment purchase - Base Stations
     c. Standard equipment purchase - Network Control Center
     d. NCC software licensing
     e. Standard test equipment for engineering team

2. Engineering and consulting services provided by Telematics

Costs described in this document do not include the cost of local services
provided by local companies and contractors as described in the Statement Of
Work document.

The number of base stations needed for the deployment depends on the size of the
required coverage area. Based on our experience, the average density of the
installation of receiving base stations in urban area is around *** square
kilometers per base station.

First Phase of the deployment in Beijing include *** receiving stations *** of
which will transmission stations and *** of which will contain synchronization
stations. The prices below are presented for single unit (single Base Station)
and the Total is calculated for *** Receiving and *** Transmitting Stations, ***
of which include the Calibration Transmitter Unit. Different quantities will
cause corresponding change in total pricing of the project.

                                       1


***   Confidential material redacted and filed separately with the Commission.




<TABLE>


b. Prices    (US$)                                                    Unit             Total
              1. Equipment                                            ----             -----
                  a. (a.1a)  Receiving station  ***                   $ ***             $ ***
                             - item 1 & 2 of the Part list:
                             First phase *** stations

                  b. (a.1.b) Peripheral equipment
                             for Rec.BS ***
                             incl. *** antennas each                     *                *

                  C. (a.1.b) Paging Transmitter ***                      *                *

                  d. (a.1.a) Calibration Transmission
                             Unit *** - Item 5 of
                             the Part list                             $ ***           $ ***


                  e. (a.1.b) Peripheral equipment for
                             transmission ***                            *                *

                  f. (a.1.c) Computers and telecom.
                             equipment for CC                            *                *

                  g. (a.1.e) Standard test equipment                     *                *

               o    *Note1: This equipment will be purchased by the buyer.

               o    **Note2: The price of $ *** will be the receiving station
                    unit price also for consecutive Base Stations.

               o    Note 3: The Buyer recognizes that there is certain cost of
                    each comprehensive CCP software package. The price will be
                    further discussed and agreed upon.

               2. Licensing

                  (a.1.d) NCC software licensing                        ***             ***

               3. Engineering, management, supervision,
               training and consulting services by Telematics team
               (incl. salaries, accommodation, travel) in
               accordance with SOW, during the deployment
               of the first phase system in Beijing ( *** base           ***          $ ***
               stations)

               Notes:

                  Local services provided by local companies and
                  contractors according to the SOW document are
                  not part of this proposal and include (but not
                  limited to):
</TABLE>



                                       2


***   Confidential material redacted and filed separately with the Commission.




<TABLE>



                   a. Site survey and rental agreement
                   b. On-site infrastructure
                   c. Geodetic measurements
                   d. NCC building reconstruction and modifications

2. END-USER EQUIPMENT COST
     Prices:

               1.   Standard vehicle kit;

                                   a.  Vehicle Location Unit type TULIP                $ ***
                                   + *** installments of $ *** per year for *** years
                                   b.  TULIP installation kit (Note)                    $ ***
               2.   Optional high-end Vehicle Location Unit and
                    Alarm kit (*):

                                   a.  TULIP                                           $ ***
                                   + *** installments of $ *** per year for *** years
                                   b.  Vehicle Alarm Unit type MAPLE                    $ ***
                                   c.  MAPLE-TULIP installation kit (Note)              $ ***
                                   (*) MAPLE provides additional level of
                                   protection, if required.
               3.   Personal Alarm and Locator - PAL                                   $ ***

                                   + *** installments of $ *** per year for *** years
Notes:

               Installation kits will be produced or purchased locally
               (excl. antennas). The prices are for reference only.

3.  TERMS OF PAYMENT

o  Deployment Phase

      a. Down-Payment ( *** % of the total special equipment
         cost 1.b.1) paid upon the signature on this
         Agreement
         (Effective Date - ED)                                                         - $ ***
      b. *** % of CC software licensing (1.5 months AED)                               -  $ ***
      c. Preliminary Design Review - *** % of 1.b.3
         above (1.5 months AED)                                                        -  $ ***
      d. Critical Design Review - *** % of 1.b.3
         (5 months AED)                                                                -  $ ***
      e. Shipment of CC and *** BS equipment
         (6.5 months AED)
         *** % of $ ***                                                                - $ ***
         *** % of $ ***                                                                -  $ ***
                                                                                         -----
                                                                                       - $ ***
</TABLE>

                                       3


***   Confidential material redacted and filed separately with the Commission.




<TABLE>


      f. Installation of CC and *** BS in China and ATP
         10 months AED) -
         *** % of l.b.3                                                                - $ ***
         *** % of CC software licensing                                                - $ ***
                                                                                       -------
                                                                                         $ ***

      g. End of the warranty period (22 months AED)
         *** % of the total equipment cost of 1.b.1                                    - $ ***
                                   ------------------------------------------------------------

         TOTAL                                                                          $ ***
</TABLE>


Letter of Credit issued by First Class International Bank for the total sum of
the Deployment Cost less the Down-Payment and less the "end of warranty period"
sum will be provided no later than thirty (30) days AED. Principle terms of this
LOC are stipulated in Appendix I of this Annex. The payment of the "end of
warranty period" will be done thru separate L/C opened 11 months before the
expiration of the warranty period.



<TABLE>


      o     End User equipment
            *** % down payment and L/C for the remaining *** %
            with the order.
            *** % payment - upon delivery.

            TULIPs:

            Total price                                                                -   $ ***
            *** % of total cost                                                        - $ ***
            Delivery of *** units                                                      - $ ***
            (before the Phase One system acceptance testing)
            Additional $ *** per year will be paid at the end of each
            year during five years (total of $ *** ).
</TABLE>




                                       4


***   Confidential material redacted and filed separately with the Commission.



TELEMATICS WIRELESS AND ITURAN PROPRIETARY INFORMATION

IN CONSIDERATION OF THE MUTUAL OBLIGATIONS ASSUMED UNDER THIS DOCUMENT, BUYER,
AGENT AND SUPPLIER AGREE TO THIS DOCUMENT, WHICH IS EXECUTED BY DULY AUTHORIZED
REPRESENTATIVES AS OF THE DATES BELOW.

AGREED BY:

TELEMATICS WIRELESS LTD.

/s/ Roman Sternberg

BY:  Roman Sternberg
TITLE:  VP Marketing & Business Development

DATE:  28 March, 2005

GOLDEN NET COMMUNICATIONS TECHNOLOGY INC.

BY:  /S/ [IN CHINESE CHARACTERS]

TITLE: [IN CHINESE CHARACTERS]

DATES: [IN CHINESE CHARACTERS]

DIGITRACK (CHINA) GROUP CO. LTD.

FOR AND ON BEHALF OF
DIGITRACK (CHINA) GROUP CO. LIMITED

/S/ [IN CHINESE CHARACTERS]
AUTHORIZED SIGNATURE

                                       5



Amendment I of the Agreement between Golden Net, Digitrack and Telematics
Wireless (illegible) for the supply of Ituran Radio Location System in Greater
China.

The Parties agree that Article II to VI of the above agreement dated August 29,
2004 are applicable in its entirety for the Beijing project as well and wherever
"Shanghai" is mentioned in these Annexes, it should be related as "Shanghai or
Beijing, as applicable."

AGREED BY:

TELEMATICS WIRELESS LTD.

/s/ Roman Sternberg
By:  ROMAN STERNBERG

Title:  VP MARKETING & BUSINESS DEVELOPMENT
Date:  MARCH 28, 2005

GOLDEN NET COMMUNICATION TECHNOLOGY LTD.

/s/  [in Chinese characters]
By: [in Chinese characters]
Title: [in Chinese characters]
Date: [in Chinese characters]

DIGITTRACK (CHINA) GROUP CO. LTD.

For and on behalf of
DIGITRACK (CHINA) GROUP CO. LIMITED


Authorized Signature

/s/ [in Chinese characters]
By: [in Chinese characters]
Title: [in Chinese characters]
Date: [in Chinese characters]

                                       6






                                                                   EXHIBIT 10.16

                                          CONFIDENTIAL TREATMENT REQUESTED.
                                          CONFIDENTIAL PORTIONS OF THIS DOCUMENT
                                          HAVE BEEN REDACTED AND HAVE BEEN
                                          SEPARATELY FILED WITH THE COMMISSION.

                                    AGREEMENT
                                    ---------

                 Made and executed in Holon on December 3, 2000

BETWEEN            Arad Technologies, Ltd.  No.
                                               --------------
                   Of: 6 Hacarmel St., Yokneam
                   Hereinafter: "ARAD"

                                                                 THE FIRST PARTY

AND BETWEEN        Tadiran Telematics, Ltd. No. 8-238387-51
                                            ---------------
                   Of: 26 Hashoftim St., Holon Industrial Zone
                   Hereinafter: "TELEMATICS"

                                                                THE SECOND PARTY

WHEREAS            Arad hereby declares that it is a company specializing in the
                   field of automatic meter reading (AMR);

AND WHEREAS        Telematics hereby declares that it is a company specializing
                   in the field of RF;

AND WHEREAS        The parties wish to cooperate together in order to develop,
                   manufacture and market RF systems for the AMR field, whereby
                   subject to the terms of this agreement Arad shall not
                   agreement with any other RF company except for Telematics;
                   and vice versa, Telematics shall not agreement with any other
                   AMR company except for Arad;



          THEREFORE THE PARTIES HAVE AGREED AND STIPULATED AS FOLLOWS:

1.   The declarations of the parties, as specified in the preamble to this
     agreement, shall constitute an integral part of this agreement and its
     terms.

2.   The period of the agreement shall be five years, from the date on which
     this agreement is signed (hereinafter, "the Original Agreement Period").



     Following the end of the Original Agreement Period, the agreement shall be
     renewed automatically for a period of an additional year, each year
     (hereinafter, "the Extension Period"), unless one of the parties shall
     inform the other via registered mail with confirmed delivery, of their
     desire to terminate the agreement, not later than 90 days prior to the end
     of the Original Agreement Period and/or any Extension Period, as relevant.
     Should one party inform the other party of their desire to terminate the
     agreement, as stated, all of the parties' mutual undertakings made during
     the Original Agreement Period or during any Extension Period shall remain
     valid

3.   A)   Telematics hereby declares and undertakes that throughout the entire
          Agreement Period, it shall not develop, manufacture, market, order
          and/or agreement in any manner whatsoever, with any body engaged in
          the "AMR" field, apart from Arad.

     B)   Arad hereby declares and undertakes that throughout the entire
          Agreement Period, it shall not develop, manufacture, market, order
          and/or contract in any manner whatsoever, with any body engaged in the
          "RF" field, apart from Telematics, with regard to AMR-RF systems,
          except as stated in sub-paragraphs (C) and (D) below.

     C)   Notwithstanding the contents of sub-paragraph (B) above, Arad has the
          right to continue its cooperation with bodies, contractors,
          manufacturers and other agents engaged in the RF field, and which are
          specified in Appendix A to this Agreement, with regard to existing
          projects and initiatives, until the conclusion of these agreements
          with the said bodies. Arad shall not renew the agreements it has with
          these bodies and shall contract with Telematics instead - to the
          extent this is possible. As far as possible, Arad and Telematics shall
          act to gradually replace the products of the said bodies with
          Telematics products on an economic basis, and provided that Arad does
          not suffer any damage as a result, such as: violation of existing
          agreements, payment of compensation, payment of excess expenses,
          increased costs, and the like.

     D)   Arad shall continue to grant services, including support, to bodies
          and agencies entitled to such support therefrom, on the basis of
          existing



          agreements and undertakings, even with regard to products originating
          from those said bodies and agencies as described in sub-paragraph (C)
          above.

     E)   In the event new, competitive technologies are developed in the AMR-RF
          field, which shall be more advanced than the technologies that have
          been developed up to that point in time by Telematics under this
          agreement or in general, Telematics shall have the right of first
          refusal to develop technologies at the level of the said new
          technologies.

          In such a case, Arad shall contact Telematics in writing, and shall
          specify the characteristics of the competitive system and shall
          include all information known to it regarding this technology, its
          features and applications, cost, name and supplier, and any other
          information. Not later than 30 days after receiving said communication
          from Arad, Telematics shall send written notice informing Arad whether
          it has decided to exercise its right of refusal or not. Should
          Telematics decide to exercise its right of refusal the parties shall
          agree immediately on a reasonable timetable for developing
          technologies at a comparable level.

          In the event no such notice is given, or in the event that Telematics
          decides not to exercise its aforementioned right of refusal, Arad
          shall be entitled to contract with another supplier for the sole
          purpose of this technology, on condition that it is identical to the
          technology specified in Arad's said communication to Telematics.

4.   Arad and Telematics do hereby undertake to develop, manufacture and market
     together an AMR-RF system according to the system characterization to which
     they shall agree, and financing and responsibility for each of the stages
     shall apply to one of the companies, as specified below:

     A)   SYSTEM CHARACTERIZATION - to be defined together, according to the
          marketing description supplied by Arad. The characterization shall be
          owned by both of the parties.

     B)   DEVELOPMENT - to be carried out together, whereby the system
          characterization shall specifically define the role of each party in
          the



          development process. Each party shall absorb the cost of developing
          its own part, and shall be sole owners of that part of the
          development.

          The development stages shall be agreed between the parties, each stage
          separately, and a joint committee consisting of the directors of both
          companies, the project managers and Arad's marketing director, shall
          decide with regard to its progress in a joint decision.

     C)   MANUFACTURING - to be carried out by Telematics, where Telematics
          shall supply Arad with the electronic system and Arad shall be
          responsible for installing and integrating it into the final product.

          In stage 1, Telematics shall provide a prototype product for the
          purpose of assessment and/or improvement and/or modification; Arad
          shall assess and examine all aspects of the product, and on the basis
          of the outcome of these tests Telematics shall make any modifications
          and improvements accordingly.

     D)   MARKETING - to be carried out by Arad, in consultation with
          Telematics.

     E)   SUPPORT - to be provided by Telematics, subject to a warranty and a
          support agreement, which will also grant any technical assistance that
          may be needed for the various markets, according to the support
          agreements.

     F)   ANCILLARY PRODUCTS - such as: connections to cellular networks,
          connections for hand-held (Palm) devices, etc., Arad shall give
          Telematics the right of first refusal regarding all aspects of
          developing and manufacturing ancillary products in Telematics's field
          of expertise as defined in this agreement. The right of first refusal
          mechanism shall be as stated above in paragraph 3(E), with the
          necessary and relevant changes.

          This paragraph shall not apply in the event the development is carried
          out by Arad (development in analog, digital or cellular fields, etc.),
          but shall apply to development in the RF sphere.

5.   In exchange for manufacturing the system, Telematics shall receive from
     Arad the production costs, as defined above, with the addition of the
     following sums:



     A)   For the sale of up to *** units, the sum of $ *** , not including
          VAT, *** $ *** in NIS (not including VAT).

     B)   For the sale of every unit above the first  ***   units - the sum of
          $ *** in NIS, not including VAT, *** $ *** in NIS (not including VAT).

          For the purpose of this paragraph:

          "Unit" shall mean an RF unit, not including batteries but without the
          housing.

          "Production cost" shall mean the direct cost, i.e., the ex-factory
          cost, without any other associated costs, such as publicity,
          marketing, transportation, insurance, taxes, parts that do not belong
          to the electronic components, such as plastic, glass, etc., and all of
          the other items and components that are not directly associated with
          the assembly line of the electronic product, but including
          Telematics's cost for the ongoing operation of its assembly line and
          support thereof, which shall be calculated once a year, and in any
          case, shall not exceed the cost of an engineer's yearly salary and
          shall not be less than half the cost of an engineer's yearly salary.

     C)   In exchange for manufacturing the system's ancillary components,
          Telematics shall receive from Arad ***% of the production cost.

     D)   It is understood that all of the data required to calculate the
          production costs, as defined above, shall be accessible and available
          to Arad.

     E)   During the Agreement Period, and following completion of the product's
          development according to the characterization and the goals defined,
          Telematics shall begin the process of value engineering, with a view
          to reducing the cost of the product without jeopardizing its quality
          while improving the venture's profitability.

          If Telematics is successful, then Telematics shall receive, after
          carrying out the process, the following sums:



***   Confidential material redacted and filed separately with the Commission.



          (1)  For the first *** units sold - *** % of the total savings X the
               number of units actually sold;

          (2)  Beyond the first *** units sold, no matter what the figure -
               *** % of the total savings X the number of units actually sold.

     F)   The parties shall agree between them regarding the manner and terms of
          the payments Arad is required to transfer to Telematics, according to
          standard market conditions at the time relating to similar
          transactions between companies, such as Net+, etc., and in accordance
          with the payments made to the sub-contractor.

6.   It is hereby agreed between the parties that any advertising and/or
     presentation made by one party to this agreement that uses the name of the
     other party, shall require prior approval by the party so mentioned in the
     advertising and/or presentation.

7.   During the Agreement Period, and even afterwards and subject to any law,
     the parties do hereby undertake one towards the other to maintain absolute
     confidentiality with regard to all of their joint business and/or the
     business of each one separately, and this shall refer to the following
     matters: finances, payments, costs, profit and loss, customers, suppliers,
     sub-contractors, production and marketing techniques, processes and
     methods, etc.

     Any party that shall violate this paragraph shall be considered as if he
     committed a substantial breach of contract, with all of the legal
     consequences this entails.

8.   Changes to the instructions contained in this agreement may be made only in
     writing, and signed by the two parties.

9.   Arad hereby undertakes to transfer to Telematics a deposit payment of
     $  ***  for LLI components within 30 days of the signing of this
     agreement, and this shall be against an order for  ***  units.

   AND IN WITNESS THEREOF THE PARTIES HAVE SIGNED ON THE AFOREMENTIONED DATE:

             (-signed-)                                (-signed-)
---------------------------------------  ---------------------------------------
       Tadiran Telematics, Ltd.                  Arad Technologies, Ltd.



***   Confidential material redacted and filed separately with the Commission.




                                ESCROW AGREEMENT
                                ----------------

This Escrow Agreement dated as of 11 June 2001 is entered into by and among
Tadiran Telematics Ltd. (hereinafter referred to as "Telematics"), a company
organized under the laws of ISRAEL), Arad Technologies Ltd. (hereinafter
referred to as "Arad"), a company organized under the laws of ISRAEL, and
________________ a corporation organized under the laws of Israel ("Escrow
Agent"), with reference to the following facts:

A. Telematics and Arad Technologies Ltd. (hereinafter referred to as "Arad") are
parties to that certain Agreement dated 3 December 2000 (the "AMR Agreement"); a
copy of which is attached hereto as Exhibit "A" concerning the development of an
AMR System (the "Product").

B.  It is the policy of Telematics not to disclose the Production File of the
AMR system, except as provided in this applicable escrow agreement.

C.  Telematics and Arad desire that upon the occurrence of certain events
described in Paragraph 3.1. below Arad will be entitled to use the AMR system
production file subject to the terms of this agreement.

THEREFORE, FOR VALUABLE CONSIDERATION Telematics, Arad and Escrow Agent agree as
follows:

1    Deliveries to Escrow Agent

     1.1  Three months after delivery of the first AMR System production batch,
          Telematics shall deliver the AMR system Production File to Escrow
          Agent. Escrow Agent shall confirm to Arad, in writing, that the AMR
          system production file have been deposited.

     1.2  Telematics shall deliver, when applicable, and, on an annual basis, to
          Escrow Agent the updates and new revision of any document included in
          the AMR system Production File (the "Upgrades").

                                                                          1 of 9




2.   Safekeeping of AMR system Production File

     2.l  The AMR system Documents held by the Escrow Agent shall remain the
          exclusive property of Telematics, and the Escrow Agent shall not use
          the AMR system Documents or disclose the same to any third party
          except as specifically provided for herein. The Escrow Agent shall
          hold the AMR system Documents in safekeeping as applicable for
          commercially sensitive material at its offices indicated below unless
          and until the Escrow Agent is to deliver the AMR system Documents to
          Arad or Telematics.

     2.2  The production file shall be identical to the production file provided
          to the manufacturers and will include PCB layouts, Gerber files, bill
          of material, production instruction, scheme drawings.

3.   Conditions for Release of AMR system Production File

     3.1  The occurrence of any of the following shall constitute a "Condition
          of Release" or by Escrow Agent under this Agreement:

          (a)  The commencement of voluntary or involuntary receivership,
               liquidation, winding up or reorganization proceedings against
               Telematics, that will prevent the Telematics from fulfillment of
               its obligations under the AMR Agreement, unless in the case of
               involuntary matters such proceedings are discharged within ninety
               (90) Days of their commencement, or any interim or permanent
               receiver or liquidator is appointed over the Telematics rights
               under the Contract or if Telematics becomes insolvent;

          (b)  Telematics does not execute a "AMR Purchase order" to Arad within
               120 days of the mutually agreed upon delivery schedule and
               provided that the delay is not due to external causes to which
               Telematics has no control over;

                                                                          2 of 9



     3.2  Arad shall give written notice (the "Release Notice") to the Escrow
          Agent of the occurrence of any Condition of Release. The Release
          Notice shall (a) identify the Agreement and this Escrow Agreement; (b)
          specify the Condition of Release that has occurred; (c) identify the
          AMR system Production File; and (d) demand the delivery of the AMR
          system Documents to Arad.

     3.3  Telematics, at any time, may give written notice (the "Termination
          Notice") to the Escrow Agent. The Termination Notice shall (a)
          identify the Agreement and this Escrow Agreement; (b) specify that the
          Agreement has terminated for reason other than a Condition of Release;
          (c) identify the AMR system Production File; and (d) demand delivery
          of the AMR system Production File to Telematics.

     3.4  Upon receipt of the Release Notice or the Termination Notice, the
          Escrow Agent shall send a copy thereof to the other party. If the
          other party desires to dispute the Release Notice or the Termination
          Notice, such party shall, within forty-five (45) days after the
          receipt of the copy of the Release Notice or the Termination Notice
          from the Escrow Agent, deliver to the Escrow Agent a sworn statement
          (the "Affidavit") stating that the specified condition or termination
          has not occurred, whereupon the provisions of Paragraph 4 below will
          become applicable. If the Escrow Agent received the Affidavit within
          such forty-five (45) day period, the Escrow Agent shall send a copy
          thereof to the party that sent the Release Notice or the Termination
          Notice, and Escrow Agent shall continue to hold the AMR system
          Documents under the terms of this Escrow Agreement. If the Escrow
          Agent does not receive the Affidavit within such forty-five (45) day
          period, the Escrow Agent shall deliver the AMR system Documents to the
          party that sent the Release Notice or the Termination Notice.

4.   Disputes

     4.1  In the event that a party files the Affidavit with the Escrow Agent in
          the manner and within the time period set forth in


                                                                          3 of 9



          Paragraph 3.4 above, the Escrow Agent shall not release the AMR system
          Documents to either party except (a) in accordance with a final
          decision of the arbitration panel as set forth in Paragraph 4.2 below,
          or (b) upon receipt of an agreement executed by Telematics and Arad,
          authorizing the release of the AMR system Documents to Telematics or
          to Arad.

     4.2  Disputes arising out of or relating to this Escrow Agreement, or the
          breach, termination, or invalidity thereof, shall be settled in
          accordance with the applicable dispute resolution provisions set forth
          in Para. 4.3 below. The Escrow Agent shall give prompt effect to any
          authenticated arbitration award. Notwithstanding anything to the
          contrary contained in this paragraph 4.2, neither party may terminate
          the Agreement nor pursue any remedies for its material breach first
          having given the breaching party written notice of the material breach
          and an opportunity to cure such breach within forty-five (45) days of
          the receipt of such written notice.

     4.3  Dispute Resolution and Arbitration

          (a)  If one or more disputes arise between the parties with respect to
               the obligations and responsibilities of either party under this
               Agreement, any such dispute shall be resolved in accordance with
               the process described in this Section 4.3, provided, however,
               that if either party determines that provisional relief (e.g. a
               temporary restraining order or preliminary injunction) is
               required to provide temporary relief, nothing herein shall
               prevent the aggrieved party from applying to a court for
               provisional relief. An application for provisional relief to a
               court shall not relieve either party of its obligation under this
               section 3.4, and shall not alter the power of the arbitrator to
               determine the rights and obligations of the parties under this
               Agreement.

          (b)  The parties shall attempt to select a mutually acceptable
               arbitrator. If, however, after 30 days of the declaring of a
               dispute and the suggestion of a candidate for arbitrator, the
               parties are unable to agree upon an arbitrator who is willing to
               accept the



                                                                          4 of 9





               appointment, the arbitrator shall be selected by the President of
               the Israeli Bar Association, whose selection shall be binding
               upon the parties.

          (c)  The arbitrator's fee and all other incidental costs incurred
               during the arbitration process will be shared equally between the
               parties.

          (d)  The arbitrator shall be neutral and impartial, and shall use the
               laws of the State of Israel to resolve the dispute between the
               parties.

          (e)  The arbitrator shall control the procedural aspects of the
               arbitration. The parties shall cooperate fully with the
               arbitrator at all times.

          (f)  The arbitrator shall, in consultation with the parties, fix the
               agenda for all meetings.

          (g)  Each party may be represented by counsel, who shall be authorized
               to recommend settlement options to their principals. Each party
               shall bear their attorney's fees.

          (h)  The arbitration shall be conducted expeditiously and shall be
               completed in less than 180 days from the date the arbitrator was
               selected. Each representative shall make every effort to be
               available for meetings, and the arbitrator shall ensure that he
               is able to devote all the time necessary to quickly and
               effectively render an arbitration judgement.

          (i)  The entire arbitration shall remain confidential. The parties or
               the arbitrator shall not disclose information regarding the
               process, including settlement terms, unless the parties agree
               otherwise.

               The arbitrator may obtain assistance and independent expert
               advice with the agreement of and at the expense of the parties.

          (j)  The arbitrator shall not be liable for any good faith act or
               omission in connection with his role as arbitrator.


                                                                          5 of 9



          (k)  The arbitration shall take place in Tel-Aviv, Israel.

          (l)  The arbitrator's decision shall be final and binding upon both
               parties.

5.   Payment to Escrow Agent

     The fees of the Escrow Agent for acting as escrow agent hereunder shall be
     shared equally by Telematics and Arad.

6.   Termination

     This Escrow Agreement shall terminate upon delivery of the AMR system
     Production File to either Telematics or Arad in accordance with the terms
     of this Agreement.

7.   Modification; Severability

     This Escrow Agreement shall not be waived, amended or modified except by
     the written agreement of all the parties hereto. Any invalidity, in whole
     or in part, of any provision of this Escrow Agreement shall not affect the
     validity of any other of its provisions.

8.   Notice

     All notices under this Agreement shall be in writing and shall be effective
     when delivered in person to the recipient by courier.

     All Notices to Telematics shall be delivered to:
     Tadiran Telematics Ltd.
     26, Hashoftim St., POBox 267
     Holon 58102
     Tel.: 03-5575700
     Fax:  03-5575703
     Attention: Eddy Kafzy
     All notices to Arad shall be delivered to:
     Arad Technologies Ltd.
     POB 332 Yakedon 20692 Israel

     Tel: 04-9935222
     Fax: 04-9935227

     Attention: Don Winter
     All notices to Escrow Agent shall be sent to:



                                                                          6 of 9



9.   Limitations or Responsibility and Liability

     9.1  The Escrow Agent shall exercise reasonable care as provided in Para.
          2.1 above with respect to safekeeping of the AMR system Documents and
          shall provide at least the same degree of care for the AMR system
          Production File as it maintains for its valuable documents and those
          of its customers lodged in the same location with appropriate
          atmospheric or other safeguards.

     9.2  The Escrow Agent shall be protected in acting upon any written notice,
          request, waiver, consent, receipt, or other paper or document
          furnished to Escrow Agent, not only in assuming the due execution and
          the validity and effectiveness of the provisions of the notice, but
          also as to the truth and acceptability of any information herein
          contained, with Escrow Agent reasonably and in good faith believes.

     9.3  The Escrow Agent shall have no duties except those which are expressly
          set forth herein.

     9.4  Telematics and Arad hereby jointly and severally shall indemnify the
          Escrow Agent against any loss, liability, or damage (other than any
          loss, liability, or damage caused by the gross negligence or willful
          misconduct of Escrow Agent), including reasonable costs of litigation
          and attorneys' fees, arising from and in connection with the
          performance of Escrow Agent's duties and obligations under this
          Agreement as such duties and obligations pertain to the AMR system
          Documents.




                                                                          7 of 9


     9.5  The parties agree that all remedies and damages that might otherwise
          be available against Telematics or Arad for claims arising out of or
          related to this Agreement shall be subject to the limitations set
          forth in the Agreement, including, but not limited to the limitation
          of liability set forth in Section 13 of the Agreement.

10.  Counterparts

     This Escrow Agreement may be executed in multiple counterparts each of
     which shall be deemed an original, and all of which together shall
     constitute one and the same Escrow Agreement.

11.  Choice Of Law

     The governing law of this Agreement shall be that of the State of Israel,
     as if both parties to this Agreement were resident and doing business in
     such state.

12.  Binding Effect

     This Agreement shall be binding on and insure to the benefit of the
     respective successors and permitted assigns of the parties.

13.  Entire Agreement

     This Escrow Agreement, together with the Agreement, constitutes the entire
     agreement of the parties with respect to the escrow of the AMR system
     Documents, and supersedes any and all prior negotiations, correspondence,
     understanding, and agreements between the parties respecting the subject
     matter of this Escrow Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be
executed and delivered by their duly authorized representatives as of the year
and date first-above written.





                                                                          8 of 9






ESCROW AGENT

By:                                   Date:
Name:
Title:
Date:


TADIRAN TELEMATICS                    ARAD

By:    Eddy Kafry   Date: 11/6/01     By:    Dan Winter    Date: 11/6/01
Name:  Eddy Kafry                     Name:  Dan Winter
Title: President                      Title: VP Technology

                                      Date:

Roman Sternberg
/s/ Roman Sternberg












                                                                          9 of 9








                                                                   EXHIBIT 10.17

                                          CONFIDENTIAL TREATMENT REQUESTED.
                                          CONFIDENTIAL PORTIONS OF THIS DOCUMENT
                                          HAVE BEEN REDACTED AND HAVE BEEN
                                          SEPARATELY FILED WITH THE COMMISSION.

                            RMR PRODUCTION AGREEMENT
                            ------------------------

This RMR Production Agreement (the "Agreement") is made as of June 14, 2001 (the
"Effective Date") by and between Tadiran Telematics Ltd., a company having its
address at 26 Hashoftim st., POB 267, Holon 58102, Israel and ARAD Technologies,
a company having its address at 6 Hakarmel st., POB 337, Yokneam Ilit 20692,
Israel ("Buyer") (jointly - the "Parties"), both duly organized and existing
under the laws of Israel and cooperating according to the terms of Agreement
signed on December 3, 2000 (Cooperation Agreement), and the Escrow agreement
signed June 11, 2001

                     THE PARTIES THEREFORE AGREE AS FOLLOWS

1.       AGREEMENT TO PURCHASE AND SELL

Within the term of this Agreement (thirty two months from the date hereof or
completion of the delivery of *** units, whichever is earlier, in accordance
with exhibit C), Buyer shall purchase from Seller, and Seller shall sell to
Buyer one hundred thousand *** Remote Meter Reading (RMR) units. The buyer
is entitled to place additional orders within the term of this agreement, in
which case the term will be extended accordingly.

2.       UNIT SPECIFICATIONS AND CHANGES

2.1 The RMRs shall fully comply with the RMR technical specifications, as set
forth in Exhibit "A" which will be attached hereto and signed by the parties not
later than two weeks upon signature of this agreement (the "Specifications") and
will be an integral part of this agreement. The RMRs shall possess type approval
grants from FCC (USA) and MOC (Israel), as applicable. Possession of both types
approvals are precondition for the delivery of the phase I and following phases
as described in Exhibit "C".

2.2 Subject to provisions of Section 5 below, the Parties may negotiate changes
to the specifications which shall be implemented in a manner that will not
interrupt the then current production of RMRs. The Parties shall determine by
mutual consent the corresponding adjustment in prices and the delivery schedule,
and this Agreement shall be modified in writing accordingly.

3.       PURCHASE PRICE/PAYMENT TERMS

3.1 The parties acknowledge that the actual production cost will be established
after performing the ATP of the Pilot System and FCC approval. The price will be
based on the actual "production cost" at that time (which is expected to be
between $ *** to $ *** but in any case not more than $ *** ) plus compensation
according to the paragraph 5 of the Cooperation Agreement.

The compensation mechanism due to value-engineering cost reduction as specified
in paragraph 5 __ of the Cooperation Agreement will be applied below the
production cost of $ *** .

The above prices exclude the technical support cost to be paid in accordance
with paragraph 5 __ of the Cooperation Agreement and additional cost of up to
$ *** to be paid by the buyer for



***   Confidential material redacted and filed separately with the Commission.


the tools and test equipment, developed by seller and/or its subcontractors for
the purposes of cost reduction, subjected to prior approval by the buyer.

3.2 Subject to the provisions of Section 4 below, the Basic Price is Ex -
factory and does not include freight, handling, insurance, and other delivery
costs but includes packaging according to the industrial standard for similar
products.

3.3 Terms of Payment. Terms for the payment of the Purchase Price are as defined
in Exhibit "B" attached hereto.

4.  DELIVERY TERMS

4.1 Delivery Schedule. Seller shall deliver the RMRs to Buyer according to
the delivery schedule attached as Exhibit "C " (the "Delivery Schedule").
Signature of this agreement constitutes activation of the first phase order as
specified in Exhibit "C". Orders for the second and third phases will be placed
not later than 20-th of relevant month, at least 4 month in advance before
commencing the delivery of each phase (e.g. before January 20 for delivery in
May). The monthly delivery rate (as set forth in Exhibit "C" or amended by the
Parties) may be increased by buyer by up to 25% or decreased by buyer by up to
50% by means of a 60 days prior written notice. Minimum monthly delivery rates
applicable for each phase will be *** for phase I, *** for phase II and
 *** (*) for phase III.

(*) The minimum monthly rate for phase III can be decreased in some months, but
in any case the duration of phase III (delivery of *** units) shall be not
more than 12 months.

4.2 Delivery Point. All RMRs shall be delivered by Seller ex - factory.

4.3 If Seller delays each specific delivery by more than 3 months, Buyer shall
have the rights to cancel the delayed quantity, without prejudice to any rights
that it may have under the provision of this agreement.

5.  REQUEST FOR DEVIATIONS

The Parties may request reasonable deviations from the Specifications in
writing. Requests for deviations must clearly identify the following:
description of the deviation; reference the individual Specification being
deviated; term of deviation, i.e. temporary or permanent; number of RMRs
affected; Effective Date; effect of deviation on any other technical or
performance Specification, including whether, following the deviation, the Unit
remains within the applicable margin or tolerance; anticipated delay, if any, in
Delivery Schedule due to deviation; and reason for deviation. Deviations may be
made only if a written addendum describing the deviations (including the change,
if any, in Delivery Schedule) has been mutually agreed upon and signed by both
parties.

6.  WARRANTY

Seller hereby warrants the RMRs to be in compliance with the Specifications and
to be free from defects in materials and workmanship for one year from the date
the RMR-Bs have been delivered to Buyer. The period defined above shall be
referred to as the Warranty Period. Seller

                                       2


***   Confidential material redacted and filed separately with the Commission.


shall have the option of either repairing or replacing RMRs found to be
defective during the Warranty Period. Time to repair or replace shall not exceed
60 days from the date of actual delivery of the item to Seller's facility.

6.1 Buyer acknowledges that the warranty contained in this Section 6 above shall
not apply to damage, deterioration or malfunctions which, after passage of title
to the buyer, are caused by:

6.1.1 The improper removal or installation of RMRs, performed not according the
agreed upon procedure.

6.1.2 Accidents, acts of nature, misuse, abuse, negligence, neglect,
unauthorized product modification or failure to follow proper instruction
procedure by buyer.

6.1.3    Repair or attempted repair by any person not authorized by Seller.

6.2 Buyer also acknowledges that Buyer shall be responsible and shall bear all
costs and charges related to the de-installation of a defective RMRs and
reinstallation of the RMRs, Seller shall bear the cost of shipment of the RMRs
from Buyer to Seller and back.

6.3 THE WARRANTIES CONTAINED IN THIS SECTION 6 AND THOSE COVERED IN TADIRAN
TELEMATICS' CURRENT PRODUCT LIABILITY INSURANCE ARE IN LIEU OF ALL OTHER
WARRANTIES WHETHER ORAL, WRITTEN, OR EXPRESS, IMPLIED OR STATUTORY. EXCEPT AS
MENTIONED ABOVE IN THIS SECTION, SELLER SHALL NOT BE LIABLE FOR ANY BUSINESS
EXPENSES, LOSS OF PROFIT, INCONVENIENCE, OR DAMAGE, INCLUDING DIRECT, INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM RMR DEFECTS WHETHER
RESULTING FROM BREACH OF WARRANTY OR ANY OTHER LEGAL THEORY. SELLER DISCLAIMS
ALL LIABILITY, WHETHER IN CONTRACT, TORT, WARRANTY OR OTHERWISE TO ANY THIRD
PARTY OTHER THAN BUYER. NOTWITHSTANDING THE ABOVE, SELLER SHALL REMAIN LIABLE TO
BUYER (AND ONLY TO BUYER) UNDER THE ABOVE WARRANTY FOR THE DURATION OF THE
WARRANTY PERIOD, DESPITE PASSAGE OF TITLE TO THE RMRs TO ANY THIRD PARTIES.

7.       CONFIDENTIALITY AND PROPRIETARY RIGHTS

Neither party shall, without the prior written consent of the other party, use
(for any purpose other than that contemplated by this Agreement) or disclose or
divulge to any third party the terms and conditions of this Agreement or any
documents, specifications or information, including technical information,
received from the other party under or in connection with this Agreement,
provided, however, that Seller may disclose to third party, including its
employees and subcontractors (provided they have executed an appropriate NDA),
in connection with the manufacture of the RMRs, the documents, specifications or
information received from Buyer, to the extent that in Seller's reasonable
opinion it is necessary for the purposes of this Agreement. At all times Seller
shall retain exclusive proprietary rights in the RMR developed by the Seller
(including design, configurations, drawings, specifications, etc.) but subjected
to the Cooperation Agreement and nothing herein may be construed as granting any
intellectual property rights in the RMR to the Buyer.

                                       3


8.       USE OF NAME OR TRADEMARKS

For "stand-alone" RMRs, Seller shall print any name or mark requested by Buyer
on the RMRs in addition to the name "Tadiran Telematics". Buyer shall be liable
for an infringement of copyright or trademarks as a result of any name or mark
requested by Buyer on the RMRs. If Buyer elects to use another name in addition
to the name "Tadiran Telematics", Buyer shall give Seller such name or mark to
be used on the RMRs at least 90 days prior to the delivery date for such RMRs.
For "integrated" RMRs (i.e. integrated in the water meter), Buyer shall make an
effort, if it is common to do so, to print the name "Tadiran Telematics" on the
assembled product in a way that this name will be visible to the user.

9.       FORCE MAJEURE

If performance by Parties of their obligations hereunder is prevented by Force
Majeure, affecting the activities of any party connected with the sale,
manufacture, supply, shipment or delivery of RMRs, including but not limited to,
acts of God, flood, typhoon, earthquake, tidal wave, landslide, fire, plague,
commotion, strike, labor disturbances, blockade, arrest or restraint of
government, requisition of vessel or aircraft, explosion, war, government
request, guidance, order or regulation or the boycotting of Israeli goods, or
any other unforeseeable causes or circumstances beyond the reasonable control of
specific party, then this party shall not be liable for loss or damage or
failure or delay in performing its obligations under this Agreement; provided,
however, that this party promptly fulfills its obligations under this Agreement
immediately after such force Majeure ceases.

10.      COMPLIANCE

10.1 Compliance with Agreement. Parties hereby agree to fully cooperate with
each other and to sell and buy RMRs which fully comply with the terms,
conditions, provisions and Specifications of this Agreement, including the
exhibits attached hereto for price set forth herein to be paid in a timely
manner.

10.2 Compliance with Law. Parties shall be in compliance with and the RMRs shall
be in compliance with all federal, state and municipal regulations governing the
sale and use of the RMRs. The Parties shall cooperate in obtaining necessary
government agency approvals.

10.3 Compliance with Proprietary Rights Requirements. Seller shall retain the
right to use all technology, know-how, copyright, trademark and patent rights
used in producing the electronics parts of RMRs, developed by the Seller,
subject to the Cooperation Agreement.

11.      N/A

12.      CONTRACT ADMINISTRATION

ROMAN STERNBERG ("Roman") or his duly appointed successor shall administer the
terms of this Agreement on behalf of Buyer, and DANNY WINTER ("Danny") or his
duly appointed successor shall administer the terms of this Agreement on behalf
of Seller.

                                       4


13.      NOTICES

Any notice, request or demand required to be made or given hereunder by any
party shall be deemed to be duly given or made upon receipt. The notice, request
or demand must be sent by courier or registered or certified mail, or facsimile
to the respective addresses of the parties set forth below, or at such other
address as has been given by either party to the other in writing in accordance
with the terms of this Agreement.

ARAD technologies.
Danny Winter
-------------------
Attention: __________
With a copy to: Beck Gillon

Tadiran Telematics
26 Hashoftim Street
Holon, 58102 Israel
Attention: Roman Sternberg
With a copy to: Eddy Kafry

14.      TERMINATION

Each party shall have the right, as set forth below, to terminate this Agreement
without prejudice to any rights that it may have, whether under the provisions
of this Agreement, in law or in equity or otherwise, upon the occurrence of any
of the following events, hereinafter called "Defaults".

(a) Either party, if the other party defaults in the performance of a material
obligation, provided for in this Agreement; or

(b) Either party, if the other party files a voluntary petition in bankruptcy,
files any voluntary petition seeking any reorganization, arrangement,
readjustment, liquidation, dissolution or similar relief under the present or
any future federal or state bankruptcy or insolvency act; fails to remove an
involuntary petition for a reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief under the present or any future
federal or state bankruptcy or insolvency act within 60 days after the filing of
such petition, or appoints a trustee, receiver or liquidator of its properties.

Notwithstanding the above, a corporate reorganization or spin off not under
bankruptcy or insolvency procedures shall not be considered a default, unless
there is an intention to abandon the business.

The party claiming a Default shall give written notice of termination to the
party alleged to be in Default in accordance with the notice provision set forth
in Section 13. The defaulting party shall have 90 business days in which to
correct any such Default, and failing such, this Agreement shall terminate. If
the defaulting party shall, within ten business days, notify the other party in
writing that it disputes the asserted Default, and the matter cannot be resolved
by mutual


                                       5


agreement of the parties, the matter shall be submitted to dispute resolution
and arbitration procedure as hereinafter provided.

15.      DECREASE OF QUANTITIES AND TERMINATION OF PRODUCTION

Buyer may decrease the total quantity of the RMRs he has undertaken to purchase
under Section 1.1 above under the following conditions:

15.1 Buyer must give Seller prior written notice of Buyer's election to decrease
the quantities of RMRs TO BE delivered under this Agreement ("Decrease Notice")
by choosing not to exercise orders of phase II or phase III as defined on
Exhibit "C". Notwithstanding the above, upon signature of this agreement, Buyer
may not decrease the first phase quantity under *** units, including already
the units addressed in the paragraph 9 of the Cooperation Agreement. In
addition, Buyer may not decrease the second phase quantity of additional ***
units upon placing the order of the second phase and the third phase quantity of
additional *** units upon placing the order of the third phase in accordance
with the provisions of paragraph 4.1.

15.2 Should the consequences of Decrease Notice require any changes in overall
delivery schedule, the Parties shall determine a new delivery schedule by mutual
consent.

15.3 Buyer shall compensate Seller in the amount of US$ *** per each RMR,
canceled in accordance with Sub-sections 15.1 and 15.2 above.

16.      ISRAELI LAW

This Agreement shall be governed by and construed in accordance with the laws of
the state of Israel as the same or any succeeding provision of law may be in
effect from time to time. For the purposes of any dispute between the parties,
this Agreement shall be construed as if all parties were resident and doing
business in Israel. If there are any ambiguities in the Agreement, such
ambiguities shall not be construed against either party on the basis of who
drafted the documents.

17       DISPUTE RESOLUTION

17.1 Disputes arising out of or relating to this Agreement, or the breach,
termination, or invalidity thereof, shall be settled in accordance with the
applicable dispute resolution provisions set forth in Para. 17.2 below.
Notwithstanding anything to the contrary contained in this paragraph 17.1,
neither party may terminate the Agreement nor pursue any remedies for its
material breach first having given the breaching party written notice of the
material breach and an opportunity to cure such breach within forty-five (45)
days of the receipt of such written notice.

17.2     Dispute Resolution and Arbitration

(a) If one or more disputes arise between the parties with respect to the
obligations and responsibilities of either party under this Agreement, any such
dispute shall be resolved in accordance with the process described in this
Section 17.2, provided, however, that if either party determines that
provisional relief (e.g. a temporary restraining order or preliminary
injunction) is required to provide temporary relief, nothing herein shall
prevent the aggrieved party from


                                       6


***   Confidential material redacted and filed separately with the Commission.


applying to a court for provisional relief. An application for provisional
relief to a court shall not relieve either party of its obligation under this
section 17.2, and shall not alter the power of the arbitrator to determine the
rights and obligations of the parties under this Agreement.

(b) The parties shall attempt to select a mutually acceptable arbitrator. If,
however, after 30 days of the declaring of a dispute and the suggestion of a
candidate for arbitrator, the parties are unable to agree upon an arbitrator who
is willing to accept the appointment, the arbitrator shall be selected by the
President of the Israeli Bar Association, whose selection shall be binding upon
the parties.

(c) The arbitrator's fee and all other incidental costs incurred during the
arbitration process will be shared equally between the parties.

(d) The arbitrator shall be neutral and impartial, and shall use the laws of the
State of Israel to resolve the dispute between the parties.

(e) The arbitrator shall control the procedural aspects of the arbitration. The
parties shall cooperate fully with the arbitrator at all times.

(f) The arbitrator shall, in consultation with the parties, fix the agenda for
all meetings.

(g) Each party may be represented by counsel, who shall be authorized to
recommend settlement options to their principals. Each party shall bear their
attorney's fees.

(h) The arbitration shall be conducted expeditiously and shall be completed in
less than 180 days from the date the arbitrator was selected. Each
representative shall make every effort to be available for meetings, and the
arbitrator shall ensure that he is able to devote all the time necessary to
quickly and effectively render an arbitration judgment.

(i) The entire arbitration shall remain confidential. The parties or the
arbitrator shall not disclose information regarding the process, including
settlement terms, unless the parties agree otherwise.

The arbitrator may obtain assistance and independent expert advice with the
agreement of and at the expense of the parties.

(j) The arbitrator shall not be liable for any good faith act or omission in
connection with his role as arbitrator.

(k) The arbitration shall take place in Tel-Aviv, Israel.

(l) The arbitrator's decision shall be final and binding upon both parties.

18. MISCELLANEOUS PROVISIONS

18.1 Successors. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective executors, heirs, legal representatives,
successors and assigns.

                                       7


18.2 Assignment. Parties shall not assign, transfer or sell any of their rights
hereunder to any third party without the prior written permission of the other
Party. No rights hereunder shall devolve by operation of law or otherwise upon
any assignee, receiver, liquidator, trustee or other party. The RMRs delivered
hereunder shall be manufactured only by Tadiran Telematics Ltd., its legitimate
assigns, Tadiran Telematics Ltd's subcontractors, or as specified in Escrow
agreement.

18.3 No Waiver. Failure of either party to insist upon strict performance of any
of the terms, conditions, provisions or Specifications within this Agreement
(including the exhibits), or the delay in exercising any of its remedies, shall
not constitute a waiver of such terms conditions, provisions or Specifications
or a waiver of any default thereof nor the remedy of such default.

18.4 Survival of Obligations. Each party's obligations under this Agreement
which, by their nature, would continue beyond termination or expiration of this
Agreement, including by way of illustration only and not limitation, any Section
related to confidentiality, warranty and indemnification, shall survive
termination or expiration of this Agreement by either party for any reason.

18.5 Remedies. Except as specifically set forth in this Agreement, all remedies
available to either party for breach of this Agreement are cumulative, and may
be exercised concurrently or separately, and the exercise of any one remedy
shall not be deemed an election of such remedy to the exclusion of other
remedies.

18.6 Headings. The paragraph headings used in this Agreement are for convenience
of reference only, and shall not in any way limit or amplify the terms and
provisions hereof, nor enter into the interpretation of this Agreement.

18.7 Binding Agreement. The persons executing this Agreement on behalf of the
parties have been duly and validly authorized to do so, and this Agreement is a
valid and binding obligation of the parties.

18.8 Severability. If any term of this Agreement shall be unlawful, void or
unenforceable, such term shall be deemed omitted to the extent prohibited or
invalid, but the remainder of this Agreement shall not be invalidated and shall
be given effect as far as possible. If any term hereof is found by a court or
arbitrator to be over-broad, such term shall be limited to the extent required
to make it enforceable.

18.9 Modification. This Agreement may not be modified, supplemented or otherwise
changed except by a written instrument executed by both parties.

18.10 Attorney's Fees. If any action or proceeding (judicial or non-judicial) is
brought to interpret any term or provisions of this Agreement, the prevailing
party shall be entitled to costs and reasonable attorney's fees in addition to
any other relief to which it is entitled.

IN WITNESS WHEREOF, THE PARTIES HERETO HAVE SIGNED THIS AGREEMENT AS OF THE DAY
AND YEAR FIRST ABOVE WRITTEN.

Arad Technologies

By /s/ Illegible
     ------------------
     ------------------
Tadiran Telematics

By: /s/ Eddy Kafry

/s/ Roman Sternberg


                                       8

                                    EXHIBIT B
                                    ---------

                                TERMS OF PAYMENT

A down payment of $ *** will be provided within 30 days from of this
agreement. This down payment will be added to the payment of $ *** already
provided by the buyer for the initial purchase of LLI components.

In addition, a revolving irrevocable Letter of Credit of $ *** will be issued
by the buyer with in 30 days the signature of the agreement. The letter of
Credit serves only as guarantee for payments for ordered and shipped RMRs. It
dose not serve for any compensation for unordered phases or units not shipped.

The accumulative down payment of $ *** and the Letter of Credit will remain
in force during the term of the agreement and will be serve as a payment for the
last delivery. The L/C will be canceled after the payment for last delivery.

The payment will be made 60 days upon delivery. In the Israeli market the
payment terms will be coordinated, based on the market requirements.



***   Confidential material redacted and filed separately with the Commission.

                                    EXHIBIT C
                                    ---------

                                DELIVERY SCHEDULE

The RMR units will be delivered as follows:

1. *** Pilot units - supplied.

2. *** prototype units - 2 weeks upon signature of this agreement. These units
will not yet possess FCC type approval.

3. *** pre-production units - 2 weeks upon signature of this agreement. These
units will not yet possess FCC type approval.

4. Buyer shall perform Acceptance Testing and shall approve the prototype and
pre-production units according to the ATP specified in the Exhibit A, no later
than 60 days after delivery of prototype and pre-production units.

5. Phase I order: deliveries of minimum *** units per month for the period of
8 months, starting 2 month upon approval of pre-production and prototype units
by buyer.

6. Phase II order: deliveries of minimum *** units per month for the period of
8 months immediately following the completion of the deliveries of Phase I.

7. Phase III order: deliveries of *** units per month for the period of 9
months immediately following the completion of the deliveries of Phase II. The
duration of this *** units' phase may be extended up to 12 months with
according adjustment of monthly delivery rate.


***   Confidential material redacted and filed separately with the Commission.





                                                                   EXHIBIT 10.18

                                          CONFIDENTIAL TREATMENT REQUESTED.
                                          CONFIDENTIAL PORTIONS OF THIS DOCUMENT
                                          HAVE BEEN REDACTED AND HAVE BEEN
                                          SEPARATELY FILED WITH THE COMMISSION.


             APPENDIX TO THE COOPERATION AGREEMENT AND RMR AGREEMENT
             -------------------------------------------------------

                 Made and executed in Holon on December 11, 2002


BETWEEN          Arad Technologies, Ltd., of: 6 Hacarmel, Yokneam
                 Hereinafter: "ARAD"

AND BETWEEN      Telematics Wireless, Ltd. (formerly, Tadiran Telematics, Ltd.),
                 of: 26 Hamelacha St., Holon
                 Hereinafter: "TELEMATICS"

WHEREAS          The parties have signed agreements between them on December 3,
                 2000 and June 14, 2001 regarding cooperation in the field of
                 AMR;

AND WHEREAS      The parties wish to supplement and update the agreements
                 according to changes in the time requirements,



          THEREFORE THE PARTIES HAVE AGREED AND STIPULATED AS FOLLOWS:

1.   Telematics shall manufacture and provide Arad according to its request, an
     additional *** units as specified below:

     1)   *** units at $ *** per unit distributed according to the order
          appended to this agreement, and which shall be provided not later than
          December 31, 2003. Delivery shall begin no later than 90 days from the
          date on which the first payment of the deposit is received, as
          specified in paragraph 5(A) below.

     2)   An additional *** units, which shall be supplied not later than
          December 31, 2004 at a unit price to be determined between the parties
          by mutual agreement, but in any case not to exceed $ *** per unit.
          The target price is $ *** . Telematics shall make every effort to
          achieve this target.



***   Confidential material redacted and filed separately with the Commission.


     3)   Arad shall inform Telematics at least 90 days in advance regarding the
          quantity required and date of delivery, and Telematics shall supply
          the quantity ordered on time, as stated.

2.   Telematics shall provide units in working order, that is: with standards
     approvals such as those issued by the FCC, or any other approval required
     by the Israeli authorities, such as the Ministry of Communications (MOC).

3.   Telematics shall supply the product under its responsibility with a
     warranty in accordance with Para. 6 of the Production Agreement dated June
     14, 2001. In addition, Telematics shall repair malfunctioning units after
     the warranty period at a price of the *** .

4.   The units that are supplied by Telematics from the aforementioned *** may
     be used for other applications, according to Arad's prerogative. Costs
     for products that differ from the cost of the original product (Dialog3G,
     Telematics Cat. No. 2139090300) will be calculated separately.

5.   A)   Arad shall pay Telematics a deposit against future orders in the
          amount of $ *** in several installments, by December 31, 2002. The
          first payment of $ *** shall be paid immediately upon the signing
          of this agreement.

     B)   Payment shall be made against signed bills of lading and COC
          documents, which include quality data regarding the unit (quality
          assurances).

     C)   The cumulative sum of the deposits totaling $ *** shall remain as
          securities until delivery has been completed, and shall be offset from
          the payment for the final deliveries.

     D)   Should Telematics file for bankruptcy, the cumulative amount of the
          deposits shall be offset from Arad's debt to Telematics for the units
          that were delivered.

6.   Payment terms for the orders - Net + *** days.

7.   In the event that market conditions require it, Arad shall be entitled to
     announce a production halt. In this case Arad can choose one of the
     following two options:



***   Confidential material redacted and filed separately with the Commission.



     1)   Purchasing the entire planned production quantity for three months
          following notification regarding the production halt, or:

     2)   Purchasing the entire planned production quantity for the month
          following the announcement regarding the production halt, and an
          additional payment of half the price of the units planned for
          production during the second and third month following the
          announcement.

8.   The validity of the agreement outlined above between the parties shall be
     five years, subject to orders from Arad.

9.   The previous agreements between the parties shall continue and shall apply
     so long as they do not conflict with the contents of this Appendix. In the
     case of a contradiction, the contents of the Appendix shall take
     precedence.



   AND IN WITNESS THEREOF THE PARTIES HAVE SIGNED ON THE AFOREMENTIONED DATE:



          (-signed-)                                     (-signed-)
--------------------------------             --------------------------------
   Telematics Wireless, Ltd.                      Arad Technologies, Ltd.



           (stamped)

   Telematics Wireless, Ltd.








                                                                   EXHIBIT 10.19

                                          CONFIDENTIAL TREATMENT REQUESTED.
                                          CONFIDENTIAL PORTIONS OF THIS DOCUMENT
                                          HAVE BEEN REDACTED AND HAVE BEEN
                                          SEPARATELY FILED WITH THE COMMISSION.

                SECOND APPENDIX TO THE COOPERATION AGREEMENT AND
                ------------------------------------------------
                                  RMR AGREEMENT
                                  -------------

                 Made and executed in Holon on December 28, 2003



BETWEEN          Arad Technologies, Ltd., of: 6 Hacarmel, Yokneam
                 Hereinafter: "ARAD"

AND BETWEEN      Telematics Wireless, Ltd. (formerly, Tadiran Telematics, Ltd.),
                 of: 26 Hamelacha St., Holon
                 Hereinafter: "TELEMATICS"

WHEREAS          The parties have signed agreements between them on December 3,
                 2000 and June 14, 2001 regarding cooperation in the AMR field,
                 and an appendix to these agreements dated December 11, 2002
                 (hereinafter, "The Agreements");

AND WHEREAS      The parties wish to supplement and update the Agreements
                 according to changes in the time requirements,



          THEREFORE THE PARTIES HAVE AGREED AND STIPULATED AS FOLLOWS:

1.   Telematics shall manufacture and provide Arad with an additional *** units
     as specified below:

     A)   Around *** TMW units at $ ***  per unit. The previous price
          ($ *** ) shall remain valid up to and including the deliveries made in
          February 2004. Units shall be delivered and distributed according to
          the order appended to this agreement, and shall be provided not later
          than


***   Confidential material redacted and filed separately with the Commission.


          December 31, 2004. Deliveries shall begin in January 2004. The TMW
          units slated for the Israeli market shall be sold at an additional
          $ *** per unit.

     B)   An additional *** Universal units, which shall be delivered not
          later than December 31, 2004 for $ ***  per unit for the
          single/dual/clip-on switch type of unit, and $ ***  per unit for the
          Encoder type. These prices shall be valid for deliveries beginning
          from March 2004.

     C)   About *** MMR units of any configuration, except a DriveBy
          configuration, for $ *** per unit, and these shall be delivered not
          later than December 31, 2004.

     D)   About *** MMR units with a DriveBy configuration for $ *** per unit,
          and these shall be delivered not later than December 31, 2004.

     Arad shall inform Telematics at least 90 days in advance regarding the
     quarterly quantity and required delivery distribution according to product,
     and Telematics shall supply the quantity ordered on time, as stated.

2.   Telematics shall provide units in working order, that is: with standards
     approvals such as those issued by the FCC, or any other approval required
     by the Israeli authorities, such as the Ministry of Communications (MOC).
     Additionally, Arad hereby undertakes to act in accordance with the terms of
     the Israeli and foreign authorizations, as these shall be updated from time
     to time.

3.   Telematics shall supply the product under its responsibility with a
     warranty in accordance with Para. 6 of the Production Agreement dated June
     14, 2001. In addition, Telematics shall repair malfunctioning units after
     the warranty period at a price of the direct *** .

4.   Units that are supplied by Telematics may be used for other applications
     employed by the same product, according to Arad's prerogative. Costs for
     products that differ from the cost of the original product (Dialog3G) will
     be calculated separately.

5.   Each month Arad shall register Telematics as an exporter sharing in at
     least 50% of the full value of the products sold by Telematics to Arad.


***   Confidential material redacted and filed separately with the Commission.


6.   The cost of engineering support paid by Arad shall be equal to $ ***  per
     month for the entire delivery period.

7.   A)   The deposit in the amount of $ *** paid to Telematics for previous
          orders shall be offset from the payments due for the aforementioned
          deliveries, beginning in January 2004, in six equal monthly
          installments.

     B)   Payments shall be made against signed bills of lading of Telematics
          products and COC documents that include quality data regarding the
          unit (quality assurances).

8.   Payment terms for the orders - Net + *** days.

9.   In the event there is a halt in sales of AMR, Arad shall be entitled to
     announce a production halt. In such an event Arad shall be obligated to
     purchase the entire production inventory (raw materials and finished
     products) planned for a four-month period following announcement of the
     production halt.

10.  In addition to the contents of paragraph 1 above, Telematics shall develop,
     manufacture and supply Arad with an additional *** units using DSSS
     (Direct Sequence Spread Spectrum) technology. For the purpose of this
     agreement, the start of production of these DSSS units is planned for the
     fourth quarter of 2004. Deliveries shall be is specified below:

     A)   *** TMW-DS units for $ *** per unit, distributed according to the
          order appended to this agreement, and which shall be delivered no
          later than 18 months from the start of production.

     B)   *** additional Universal type units, which shall be delivered no
          later than 18 months from the start of production in exchange for
          about $ *** per single/dual switch type unit, and about $ *** per
          Encoder type unit.

     C)    ***  MMR-DS units with a Repeater configuration (including a cellular
          cell and battery) for $ *** per unit, and with a Concentrated
          configuration for $ *** per unit; and these shall be delivered not
          later than 18 months from the start of production.

     D)    *** MMR-DS units with a DriveBy configuration for $ *** per unit, and
          these shall be delivered not later than 18 months from the start of
          production.


***   Confidential material redacted and filed separately with the Commission.


     E)    *** MMR-DS units with a Low Cost Repeater configuration for around
          $ *** per unit, and these shall be delivered not later than 18 months
          from the start of production.

     Arad shall inform Telematics at least 90 days in advance regarding the
     quarterly quantities and delivery distribution according to product as
     required, and Telematics shall deliver the quantity on time, as stated.

11.  Telematics shall operate directly with the customer from China regarding
     AMR for electricity and gas only. The product sold shall be different from
     the products supplied to Arad. If the sale does not include components
     manufactured by Arad, Telematics shall pay Arad a fee equivalent to 5% of
     the revenue from to the sale of Telematics products from the factory gate
     to this customer, as they are actually received by Telematics. If the sale
     includes Arad components, Arad shall not be entitled to any payment beyond
     payment for the said components.

12.  The validity of the Agreements and this Appendix to the Agreements shall be
     five years from the date on which this Appendix is signed.

13.  The previous Agreements between the parties shall continue and shall apply
     to the mutual relations between the parties, provided they do not conflict
     with the contents of this Appendix. In any event of a contradiction between
     the Agreements and the Appendix, the Appendix shall take precedence.

14.  VAT must be added to all of the prices quoted above, at the rate specified
     by law and against tax invoices.

15.  Payments quoted above shall be paid in New Israeli Shekels according to the
     representative rate of the US dollar on the day the payment is actually
     made.

   AND IN WITNESS THEREOF THE PARTIES HAVE SIGNED ON THE AFOREMENTIONED DATE:



          (-signed-)                                      (-signed-)
-------------------------------                 -------------------------------
   Telematics Wireless, Ltd.                        Arad Technologies, Ltd.



***   Confidential material redacted and filed separately with the Commission.




                                                                   EXHIBIT 10.20


                                          CONFIDENTIAL TREATMENT REQUESTED.
                                          CONFIDENTIAL PORTIONS OF THIS DOCUMENT
                                          HAVE BEEN REDACTED AND HAVE BEEN
                                          SEPARATELY FILED WITH THE COMMISSION.

                 THIRD APPENDIX TO THE COOPERATION AGREEMENT AND
                 -----------------------------------------------
                                  RMR AGREEMENT
                                  -------------
                 Made and executed in Holon on December 28, 2004

                                     BETWEEN

                Arad Technologies, Ltd., of: 6 Hacarmel, Yokneam

                               Hereinafter: "ARAD"



                                   AND BETWEEN

         Telematics Wireless, Ltd. (formerly, Tadiran Telematics, Ltd.),

                           of: 26 Hamelacha St., Holon

                            Hereinafter: "TELEMATICS"



WHEREAS              The parties have signed agreements between them regarding
                     cooperation in the AMR field on December 3, 2000 and June
                     14, 2001, and appendixes to these agreements dated December
                     11, 2002 and March 28, 2003 (hereinafter, "The
                     Agreements");

AND WHEREAS          The parties wish to continue the cooperation between them;

AND WHEREAS          The parties wish to supplement and update the Agreements
                     according to changes in the time requirements,



          THEREFORE THE PARTIES HAVE AGREED AND STIPULATED AS FOLLOWS:

1.   Telematics shall manufacture and provide Arad, during the 2005 calendar
     year, with approximately *** TMW/ETMW units as specified below:

     Around *** ETMW units at $ ***  per unit. The units shall be delivered
     and distributed according to the order appended to this agreement, and
     shall be



***   Confidential material redacted and filed separately with the Commission.


     provided not later than December 31, 2005. Deliveries shall begin in
     January 2005.

     IT IS HEREBY AGREED BETWEEN THE PARTIES THAT TELEMATICS WILL MAKE EVERY
     EFFORT TO REDUCE THE PRICE TO ABOUT $ *** PER UNIT.

     A)   About *** TMW units for $ *** per unit. Up to and including
          delivery by April 2005. The units shall be delivered according to the
          distribution specified in the order appended to this agreement.
          Deliveries shall begin in January 2005. TMW units slated for the
          Israeli market shall be sold at an additional $ *** per unit.

     B)   *** additional Universal type units, which shall be delivered no
          later than December 31, 2005, for about $ *** per single/dual/clip-on
          switch type unit, and $ *** per Encoder type unit. These prices shall
          be valid for deliveries beginning from March 2005.

     C)   *** EMMR units with a Repeater configuration for $ *** per unit, and
          with a Concentrated configuration for $ *** per unit; and these shall
          be delivered not later than 18 months from the start of production.

     D)   About *** MMR units with a DriveBy configuration for $ *** per unit,
          and these shall be delivered not later than December 31, 2005.

     E)   About *** EMMR units with a DriveBy configuration for $ *** per unit,
          and these shall be delivered not later than December 31, 2005.

     F)   About *** Low-Cost units for $ *** per unit (including a Tadiran
          lithium battery, series 54), up to and including deliveries in March
          2006. The units shall be delivered in accordance with the orders
          appended to this agreement. These deliveries shall begin in January
          2005.

     G)   *** MMR-DS units of Low Cost Repeater configuration for $ *** per
          unit, and these shall be delivered not later than 18 months from the
          start of production.

     The condition underlying the quantities ordered shall be completion of the
     development and its approval by Arad, no later than March 2005. In the
     event there is a delay in completing the project (including at least two
     months of field


***   Confidential material redacted and filed separately with the Commission.


     testing without any malfunctions), the order shall be reduced by an
     equivalent 1/12 share of the basic order.

     Arad shall inform Telematics at least 90 days in advance regarding the
     quarterly quantity and required delivery distribution according to product,
     and Telematics shall supply the quantity ordered on time, as stated.

2.   Telematics shall provide units in working order, that is: with standards
     approvals such as those issued by the FCC, or any other approval required
     by the Israeli authorities, such as the Ministry of Communications (MOC).
     Additionally, Arad hereby undertakes to act in accordance with the terms of
     the Israeli and foreign authorizations, as these shall be updated from time
     to time.

3.   Telematics shall supply the product under its responsibility with a
     warranty in accordance with Para. 6 of the Production Agreement dated June
     14, 2001. In addition, Telematics shall repair malfunctioning units after
     the warranty period at a price of the *** .

4.   Units that are supplied by Telematics may be used for other applications
     employed by the same product, according to Arad's prerogative. Costs for
     products that differ from the cost of the original product (Dialog3G) will
     be calculated separately.

5.   Each month Arad shall register Telematics as an exporter sharing in at
     least 50% of the full value of the products sold by Telematics to Arad.

6.   The cost of engineering support paid by Arad shall be equal to $ *** per
     month for the entire delivery period.

7.   Payment terms for the orders - Net + *** days.

8.   In the event there is a halt in sales of AMR, Arad shall be entitled to
     announce a production halt. In such an event Arad shall be obligated to
     purchase the entire production inventory (raw materials and finished
     products) planned for a four-month period following announcement of the
     production halt.

9.   Arad shall inform Telematics at least 90 days in advance regarding the
     quarterly quantity and required delivery distribution according to product,
     and Telematics shall supply the quantity ordered on time, as stated.


***   Confidential material redacted and filed separately with the Commission.


10.  The validity of the Agreements and this Appendix to the Agreements shall be
     five years from the date on which this Appendix is signed.

11.  The previous Agreements between the parties shall continue and shall apply
     to the mutual relations between the parties, provided they do not conflict
     with the contents of this Appendix. In any event of a contradiction between
     the Agreements and the Appendix, the Appendix shall take precedence.

12.  VAT must be added to all of the prices quoted above, at the rate specified
     by law and against tax invoices.

13.  Payments quoted above shall be paid in New Israeli Shekels according to the
     representative rate of the US dollar on the day the payment is actually
     made.


   AND IN WITNESS THEREOF THE PARTIES HAVE SIGNED ON THE AFOREMENTIONED DATE:



          (-signed-)                                   (-signed-)
------------------------------               ------------------------------
   Tadiran Telematics, Ltd.                      Arad Technologies, Ltd.












                                                                   EXHIBIT 10.21

                          CROSS ISRAEL HIGHWAY PROJECT

                            CIH-TRANSPONDER CONTRACT




                                       1



DATED  __________________ 2000

(1) DERECH ERETZ HIGHWAYS (1997) Ltd.

(2) TADIRAN TELEMATICS Ltd.

CIH-TRANSPONDERS Supply Agreement made and signed in Tel-Aviv on _______________

BY AND BETWEEN:

DERECH ERETZ HIGHWAYS (1997) Ltd.  (the "BUYER")

And

TADIRAN TELEMATICS Ltd.  (the "SELLER")

Individually referred to as a "PARTY" and collectively as the "PARTIES".

Recitals

WHEREAS Derech Eretz Highways (1997) Ltd. (the "CONCESSIONAIRE") was appointed
on 16 February 1998 as the concessionaire for the Project known as the Cross
Israel Highway by signature of the Concession Contract between the Government of
Israel acting on behalf of the State of Israel and the Concessionaire.

WHEREAS The Seller is undertaking to design, develop and manufacture
transponders for the electronic toll collection and vehicle operations for the
American market and the Seller is willing to modify such designs in order to
manufacture CIH Transponders.

WHEREAS The Seller has submitted a proposal to design, manufacture, supply,
provide warranty services, test and commission, the CIH-Transponders for the
electronic toll and traffic management system required for the Toll Road, on
terms and conditions as defined in the Contract.

WHEREAS The Seller has been selected by the Buyer to develop and produce,
subject to the terms of the Contract on an exclusive basis the CIH-Transponders,
on terms and conditions as set forth in the Contract; and

WHEREAS The Parties wish to define and settle the legal relationship between
them as defined in the terms of the Contract.




                                       2



NOW THEREFORE in consideration of the mutual covenants, conditions,
representations and warranties set forth herein, the Parties hereto agree as
follows:

1.  The Contract

1.1  Definitions

In addition to the words and expressions defined above and in any Clause below,
for the purposes hereof the following words and expressions shall be defined as
follows (unless the context otherwise requires):

APPROVAL - means any consent, authorization or permit of any type required or
given under and in accordance with the Contract or the Toll Road Law or any
other Laws and Regulations.

ATP - means the Acceptance Test Plan that sets out, or calls for, the tests
designed to demonstrate that the performance of the CIH-Transponders meets the
requirements of the CIH-Transponder specifications required as a condition for
the acceptance by the Buyer and Raytheon of the CIH-Transponders in accordance
with the Contract.

BUSINESS DAY - means any day that banks are open for business in Tel Aviv.

BUYER OR CONCESSIONAIRE - means Derech Eretz Highways (1997) Ltd.

CHANGE - means any change to the work of the Seller as set forth in the SOW or
in the Schedules which is instructed by the Buyer and agreed upon by the Seller
or approved as a Change by the Buyer.

CIH TRANSPONDER DOCUMENTS or "TRANSPONDER DOCUMENTS"- means any of those
documents to be provided by the Seller as defined in Clause 1.6 hereinunder.

CIH TRANSPONDERS - means the transponders to be supplied by the Seller in
accordance with the specifications and the terms of the Contract.

CIH-TRANSPONDER SPECIFICATIONS - means the criteria and specifications in
Schedule 2.3.

CIH TRANSPONDER WORK - means all activities associated with the design,
qualification, testing, integration, production, logistics and documentation.

CONCESSION CONTRACT - means the Concession Contract entered into between the
State and the Concessionaire on 16 February 1998 for the Toll Road and all
annexes and volumes thereto or referred to therein, as amended by an addendum
dated 28th October, 1999 and as may be further amended in accordance with the
terms thereof from time to time.

CONTRACT - means the entirety of this agreement , including, without limitation
the Schedules, as such may be amended in accordance with the terms hereof from
time to time.

                                       3


CONTRACT PERIOD - means the period, commencing on the date of execution of the
Contract.

DAY - means a calendar day.

DETAILED DESIGN - means the detailed design for the CIH-Transponders with its
ICD (Interface Control Document) to the ETTM system.

DISPUTE - as defined in Clause 20.

DISPUTE RESOLUTION PROCEDURE - means the procedure set out in Clause 20.

DOLLAR OR $ - means the lawful currency of the United States of America from
time to time and, subject to any express provision to the contrary, whenever a
conversion is to be made hereunder from Dollars to NIS or vice versa, such
conversion shall be made in accordance with the Representative Rate last
published by the Bank of Israel as at the date of the conversion.

ESCROW AGREEMENT - means the agreement substantially in the form attached hereto
providing for the licensing and other use by the Buyer, or its nominees,
including, without limitation, the State of Israel, of certain intellectual
property of the Seller subject to and in accordance with the provisions of such
agreement, as such may be amended in accordance with the terms thereof from time
to time.

ETTM - means the electronic toll and traffic management system to be installed
by Raytheon Company ("Raytheon") on the Toll Road pursuant to a contract dated
26 April 1999, by and between Raytheon Company and the Derech Eretz Construction
Joint Venture.

FINAL ACCEPTANCE CERTIFICATE - means the certificate issued by the Buyer after
successful completion of all required tests and compliance with quality
assurance specifications.

FORCE MAJEURE - as defined in Clause 19.

INTELLECTUAL PROPERTY - means any and all inventions, patents, patent
applications, statutory invention registrations, mask works, copy rights, trade
secrets, know-how, moral rights and all other proprietary rights or information
in relation to and/or in connection with the CIH-Transponders.

INTERIM PAYMENT CERTIFICATE - means any payment certificate issued by the Buyer
under Clause 17.

ISRAELI CPI - means the Israeli consumer price index (also known as the cost of
living index) which includes fruit and vegetables and which is published by the
Israeli Central Bureau of Statistics or any entity which replaces it.

LAWS AND REGULATIONS - The laws and regulations, orders, rules, ordinances,
statutes, standards and administrative orders in Israel, as amended, and/
supplemented and/or modified from time to time.

                                       4


LICENSE - means the license granted to the Buyer providing for the use by the
Buyer of the Seller's Intellectual Property as set forth herein and in the
Escrow Agreement.

MILESTONE(S) - means a specific deliverable or requirement to be delivered or
met by the Seller by a certain date as may be adjusted in accordance with the
Contract.

MILESTONE PLAN - means the plan that sets out the Milestones to be achieved by
the Seller from time to time.

MILLENNIUM (Y2K) COMPLIANT - as defined in Clause 3.1.

NIS - means New Israeli Shekels and, subject to any express provision to the
contrary, whenever a conversion is to be made hereunder from New Israeli Shekels
to Dollars or vice versa, such conversion shall be made in accordance with the
Representative Rate last published by the Bank of Israel as at the date of the
conversion.

NIS LINKAGE DIFFERENTIAL - means the method of adjusting any NIS amount in the
Contract which is linked to the Basic Index and indexed to the Israeli CPI by
multiplying such amount by a fraction, the numerator of which is the New Index,
and the denominator of which is the Basic Index, where the New Index is the
Israeli CPI published which pertains to the month in which the amount is to be
paid (or, if the context requires, to be determined) in accordance with the
Contract or, under Clause 17, the month to which an Interim Payment Certificate
applies.

PARTY OR PARTIES - means the Buyer, the Seller and/or the Buyer and Seller as
the case may be and the context requires.

PERFORMANCE SECURITIES -has the meaning set out in Clause 3.2.

PERSON - means any individual, partnership, corporation, company, business
organization, trust, or other entity.

PLANS - means all documents, plans, schedules, models, design, samples,
technical information or data (written or oral) and source codes.

REPRESENTATIVE RATE - means the representative rate of exchange for NIS to
Dollar, or vice versa, published by the Bank of Israel.

SCHEDULES - means the schedules to the Contract.

SOW - means Schedule 1 to the Contract called the Statement of Work that sets
out the scope of the work of the Seller in respect of the CIH-Transponders.

SPR - means Schedule 2 to the ETTM supply contract entitled the "System
Performance Requirements" that sets out the functional and performance criterion
and specifications for the ETTM in accordance with related performance criteria
for the CIH Transponders as part of an integrated system.

                                       5


STATE - means the State of Israel acting directly or through an authorized
representative.

SUBCONTRACTOR - means anyone who is a subcontractor, manufacturer or supplier to
the Seller, of any tier.

TAXES - as defined in Clause 17.1.2.

TERMINATION NOTICE - as defined in Clause 18.4.

TOLL ROAD LAW - means the Toll Road (Israel National Highway) Law, 1995 as
amended, and/ supplemented and/or modified from time to time

TOLL ROAD OR HIGHWAY - means the section of the Israel National Road (as defined
in the Toll Road Law) which is known as Cross Israel Highway (Road No. 6) in
memory of Yitzhak Rabin from Route 65 to Route 3.

WARRANTY PERIOD - means, in respect of each delivery of CIH-Transponders, the
period commencing on the date the Seller has issued a notice of acceptance of
delivery accompanied by a certificate of the Buyer's Representative and ending
eighteen (18) months thereafter. The criteria for the batteries will provide
that they are to remain active for a period of six years under operating
conditions, in accordance with the specifications established therefor.

YEAR - means a period of three hundred and sixty-five (365) days.

1.2  INTERPRETATION

Words importing persons or parties shall include firms and corporations and any
organization having legal capacity. Words importing the singular also include
the plural and vice versa where the context requires. Words importing one gender
also include other genders.

Wherever there is a reference to tests or testing in the Contract, such
reference shall encompass verification methodology including inspection,
analysis and demonstration if the context so requires. Wherever there is a
reference to "successful" completion or the "passing" of any test, such
reference means the meeting or passing of such verification methodology or such
test, as the context requires.

1.3  LANGUAGE

The language of the Contract is English and the language for day to day
communications between the Parties shall be English. All documentation to be
provided hereunder shall be provided in English, unless the Buyer stipulates
otherwise in writing, in which case the document will be produced in Hebrew, at
no extra cost to the Buyer.

                                       6


1.4  THE SELLER

1.4.1 The Seller shall assume full responsibility for the proper and timely
development, manufacture and delivery of the CIH-Transponders in accordance with
the Contract. Without limiting the generality of the foregoing, the Seller shall
be solely responsible for the means, methods, techniques, sequences and
procedures for the execution of the Seller's obligations pursuant to the
Contract and the design and manufacture by it of the CIH-Transponders.

1.4.2 The Seller shall at all times ensure that it has sufficient, suitable and
qualified personnel in sufficient number to undertake the responsibilities
vested in the Seller hereunder.

1.5  PRIORITY OF DOCUMENTS

The documents forming the Contract are to be taken as mutually explanatory of
one another. If there is any ambiguity or discrepancy in the documents, the
priority of the documents shall be as follows:

(i) The Contract;

(ii) The Schedules, each Schedule having priority over the other Schedules in
respect of its specific focus;

(iii) The CIH-Transponders requirements and Documents, which documentation of a
later date shall prevail (unless otherwise expressly specified therein or
herein).

1.6  TRANSPONDER DOCUMENTS

The Seller shall provide the Buyer at its designated office (except for those
documents to be submitted into escrow) one complete set of documents forming the
Contract, the CIH-Transponders, CIH Transponder specifications, CIH Transponder
functional requirements data sheets and any Changes thereto.

The list of documents ("TRANSPONDER DOCUMENTS") to be provided is but not
limited to the following: Product tree, Flow charts, Electrical drawings,
Mechanical and layout drawings, Electrical harnesses and wiring drawings, Gerber
Files for Printed Circuit Boards, Assembly instructions and drawings, Parts and
vendors list, Test setup and procedures, Executable Software files, Programming
Instructions for Firmware (ASIC and any other programming devices),
Specifications for Special Components, Authorization letter assignment for the
direct Procurement of standard and special Components.

1.7  COMMUNICATIONS

1.7.1 Wherever provision is made for the giving or the issue of any notice,
instruction, directive, consent, approval, certificate, or determination
hereunder, unless otherwise specified, such communication shall be given in
writing.

                                       7


Wherever provision is made for a communication to be "written" or "in writing",
this means any hand-written, typewritten or printed communication, including one
of the systems of electronic transmission contemplated below.

All certificates, notices or written instructions or directives to be given to
the Seller by the Buyer, and all notices or requests to be given to the Buyer by
the Seller, as required hereunder, shall be delivered by hand, or be sent by
registered mail or by telefax or E-mail. The addresses for the receipt of such
communications shall be as stated below.

1.7.2 Any such notice or other communication shall be duly served:

(a) if personally delivered, at the time of receipt; or

(b) if sent by registered mail, on the fifth day following the date of posting;

(c) if sent by facsimile or other electronic transmission, upon successful
transmission;

For the purpose of such service it shall be sufficient to prove that:

(1) personal delivery was made and verified by written acknowledgment of
receipt;

(2) the letter was properly addressed and dispatched and verified by registered
postal receipt; or

(3) the electronic transmission was properly addressed and dispatched and
immediately backed up by a personal delivery or letter sent by registered mail
and verified in the manner above.

For the purposes of the Contract, the following addresses and fax numbers shall
be deemed to be the addresses of the Parties:

The Buyer

Address:  DERECH ERETZ HIGHWAYS (1997) LTD.
23 Hamelacha Street, Park Afek Industrial Area, Rosh Ha'ayin, Israel
Telefax:  972-3-9036248
E-Mail:  savione@derech-eretz.com
Attention of: Mr. Ehud Savion

The Seller

Address:  TADIRAN TELEMATICS LTD.
26 Hashoftim St. POB 267, Holon 58102, Israel
Telefax:  972-3-557-5703
E-Mail:  eddy@tadiran- telematics.com
Attention of: Mr. Eddy Kafry

or such other address or telefax number as may be specified by the relevant
Party in writing.

                                       8


1.8  PROVISION OF CIH-TRANSPONDER DOCUMENTS

The CIH Transponder Documents shall be prepared in a form and at a level of
detail consistent with good commercial practice and the requirements of the
Schedules.

The Seller shall submit the following documents into escrow, following review by
the Buyer: The documents to be submitted into escrow are the Product tree, Flow
charts, Electrical drawings, Mechanical and layout drawings, Electrical
harnesses and wiring drawings, Gerber Files for Printed Circuit Boards, Assembly
instructions and drawings, Parts and vendors list, Test setup and procedures,
Executable Software files, Programming Instructions for Firmware (ASIC and any
other programming devices), Specifications for Special Components, Authorization
letter assignment for the direct Procurement of standard and special Components.

The Escrow Agreement substantially in the form hereof, shall be entered into
between the Parties and an escrow agent (the identity of whom is to be agreed)
within three months of the signing of the Agreement.

1.9  BUYER'S USE OF SELLER'S DOCUMENTS

(a) The Buyer may use the documents in accordance with the provisions of the
Escrow Agreement for any maintenance or enhancements and/or upgrades only
related to projects in Israel.

(b) The Seller agrees, at the Buyer's request, to take all such actions and
execute all such documents as necessary to give effect to the Contract and
enable the Buyer to exercise, defend or enforce its rights under the Contract.
The Seller agrees that it shall not do or fail to do any act, which would or
might prejudice the Buyer's rights under the Contract.

1.9.1 SELLER'S RIGHT TO THE TRANSPONDER DOCUMENTS

Subject to the provisions of the Escrow Agreement and Clause 5.11 of the
Concession Contract, the Seller shall have the exclusive ownership and right to
use the Transponder Documents and design documents referred for the purpose of
commercial engagement with other parties. All Intellectual Property rights in
the documents issued by the Seller to the Buyer shall (as between the parties)
be owned by the Seller. The Buyer acknowledges and undertakes, if required by
the Seller to sign a non-disclosure agreement in a form to be agreed and to take
all reasonable steps required to maintain confidentiality. The Buyer may, at its
own cost, copy, use and communicate any such documents for the purposes of the
Contract subject to the confidentiality restrictions contained herein (which
restrictions will, in turn, be imposed by the Seller (for the benefit of the
Seller and the Buyer, or its Subcontractors in connection with any such
purposes). Notwithstanding the above, such documents shall not, without the
Seller's consent, be used, copied or communicated to a third party by the Buyer,
except as necessary for the purposes of the Contract and without limiting the
rights and obligations of the Buyer to maintain confidentiality. The Seller
expressly agrees that the documents may be issued to Raytheon subject to the
terms of a non disclosure agreement between them.

                                       9


1.10 SELLER'S USE OF BUYER'S DOCUMENTS

All intellectual Property rights in the documents issued by the Buyer to the
Seller shall (as between the Parties) be owned by the Buyer. The Seller
acknowledges and undertakes to sign a non-disclosure agreement required by
Raytheon Systems Company and to take all acts required to maintain complete
confidentiality. The Seller may (at its cost) copy, use and communicate any such
documents for the purposes of the Contract subject to confidentiality
restrictions contained herein (which restrictions will, in turn, be imposed by
the Seller (for the benefit of the Seller and the Buyer, and if required, also
to Raytheon) or its Subcontractors in connection with any such purposes).
Notwithstanding the above, such documents shall not, without the Buyer's
consent, be used, copied or communicated to a third party by the Seller, except
as necessary for the purposes of the Contract and without limiting the rights
and obligations of the Seller to maintain confidentiality.

1.11  Not used.

1.12 COMPLIANCE

1.12.1 The Seller shall, in all matters arising out of the performance of its
obligations under the Contract, comply with, give all notices under, and pay all
fees if required by the provisions of any Laws or Regulations.

1.12.2 The Seller shall bear full and sole responsibility for the design,
manufacture, supply and successful completion of the ATP.

1.12.3 At the Buyer's request, the Seller shall attend at no extra cost to the
Buyer meetings pertaining to the design of the CIH Transponders with Raytheon,
or any other Person involved in the development of the Toll Road, all as may be
required by the Buyer.

1.13 PROVISIONS OF CONCESSION CONTRACT

1.13.1 The Seller acknowledges that it has received a copy of the Concession
Contract and is fully aware of and understands those terms and conditions of the
Concession Contract (including inter alia, Clause 5.11 thereof) that are
required for the interpretation of the Contract in regard to the CIH-Transponder
development, Intellectual Property and manufacture and utilization by the State
of the Intellectual Property and CIH Transponders for other projects. For the
avoidance of doubt, it is hereby agreed that the Seller shall not be deemed to
be a party to the Concession Contract.

1.13.2 The Buyer shall use best efforts to obtain a reader-beacon unit to
support development tasks until the final acceptance of the CIH Transponders and
beyond, as a factory in-house test and integration tool for at least 3 years
after each batch order has been delivery to the Buyer. The Seller shall pay the
amount payable to the supplier for the purchase of the reader beacon unit. It is
hereby agreed that the Buyer shall not have any absolutely whatsoever for the
reader-beacon including the performance thereof.

                                       10


2.  THE BUYER

2.1  GENERAL OBLIGATIONS

The Buyer shall be responsible for providing the Seller with CIH-Transponder
requirements, and specifications.

The Buyer hereby warrants and represents that there are no limitations upon it
which may prevent it from entering into the Contract, or which will not have
been fulfilled upon it entering into the Contract. The Buyer undertakes to
purchase one hundred and fifty thousand (150,000) CIH Transponders on the terms
and conditions set forth in the Contract, subject to the prior completion by the
Seller of the ATP.

3.  THE SELLER

3.1  GENERAL OBLIGATIONS

Without derogating from the other provisions of the Contract, the Seller
warrants and undertakes that the design of the CIH-Transponders shall be carried
out in a diligent and professional manner and in full compliance with all
requirements and instructions as set forth in the Contract.

The Seller shall perform or cause to be performed all work and services required
in connection with the design, manufacture, supply and successful completion of
the ATP and thereafter the provision of warranty services.

The Seller shall carry out the aforesaid activities in relation to the
CIH-Transponders in accordance with the Program. The Seller shall bear sole
responsibility for the adequacy of the design and compliance with the provisions
of the Contract, Plans and the provisions of any Laws and Regulations, and for
the compatibility of the design to all applicable commercial Transponder
utilization safety standards (radio frequency exposure, electro magnetic
compatibility to vehicle and driving safety) and full compliance to the Ministry
of Communications frequency license and class qualification by authorized
institutes of the Ministry of Communications.

The Seller shall be responsible for all superintendence, labor, plant,
materials, seller's equipment, and all other things, whether of a temporary or
permanent nature, required in and for such design, manufacture, supply and
provision of warranty services.

The Seller shall take all reasonable and prudent measures for the adequacy,
stability and safety of all operations relating to the development and
manufacture of the CIH-Transponders.

All the Seller's personnel who shall perform the Contract shall have the
necessary experience, expertise, and resources to observe, perform and fulfill
their respective obligations under the Contract.

                                       11


The Seller hereby represents and warrants that there is no suit, action,
dispute, civil or criminal litigation, claim, arbitration, or legal,
administrative or other proceeding or governmental investigation, including
appeals and applications for review (collectively: "Suits") or, to the best of
the Seller's knowledge, information and belief, threatened against it, that
would adversely affect (i) the Seller's ability to perform the Contract or, (ii)
the rights delivered to the Buyer pursuant to the Contract. To the best of its
knowledge, information and belief, the Seller warrants that there are no facts
known to it which are likely to give rise to any such Suits. There is not
presently outstanding against it, any judgment, execution, order, decree, or
rule of any court, administrative agency, governmental authority, or arbitrator,
which affects the performance by the Seller under this Contract.

No part of the CIH-Transponders shall contain any "back door", or any protection
feature, contaminants, computer viruses, time locks, "time bombs", "Trojan
horses" or other software routines or hardware components or devices, including,
codes or instructions, that may be used to access (without authorization), deny
access, modify, delete, disrupt, damage, disable, erase or render inoperable any
part of the CIH-Transponders.

The Seller warrants and undertakes that the CIH-Transponders will be "Millennium
(Y2K) Compliant" and as such will be Year 2000 (Y2K) compatible, in that it:

They are designed to be used after 1st January 2000;

Will not be affected either in performance or in functionality by the advent of
the year 2000;

Will always operate without error in connection with data and all fields
relating to dates ("Date Fields"), including but not limited to leap year
calculations; Will not abnormally end, crash, be interrupted in its operation or
generate incorrect values or invalid results whether as a result of Date Fields,
or values in Date Fields, or any code relating to Date Fields, or date-related
user or program interfaces including but not limited to any Date Fields which
represent or reference different centuries or more than one century; and

Will be capable of century recognition, and will correctly carry out all
calculations relating to same century and multi century formulae and date
values.

3.2  PERFORMANCE SECURITY

The Seller shall obtain the Performance Security, in the forms and amount of one
hundred and fifty thousand US Dollars ($150,000) as set forth in Schedule 3.2
and deliver it to the Buyer within [7] - days of the signing of the Contract.
The Performance Security shall be valid until three months following the
delivery of the last batch of fifty thousand CIH Transponders to the Buyer.
Where in respect of any Performance Securities, the entity issuing the
Performance Security has been downgraded such that the Governor of the Bank of
Israel or the supervisor of Israeli banks has exercised any of their respective
powers under Section 8C, 8D(a) (2)(3)(4) or 8D(c) of the Banking Ordinance
(1941) as amended, the Seller shall procure that a replacement


                                       12


Performance Security to the satisfaction of the Buyer is obtained within ten
(10) Days of such downgrade.

In addition, as of the date of the successful delivery of the first batch of 100
CIH transponders as described in Section 9, the Seller hereby undertakes to
cause [parent company of the Seller] to enter into a parental company guarantee
(in a form to be agreed) in favour of the Buyer, guaranteeing all the
representations, covenants and undertakings of the Seller hereunder.

3.3  SELLER PAYMENTS TO SUB-CONTRACTORS

The Seller will be solely responsible for paying each Subcontractor and any
other Person to whom any amount is due from the Seller including, without
limitation, for design, services, equipment, materials or supplies in connection
with the CIH-Transponders.

3.4 CORRECTNESS OF DIMENSIONS

3.4.1 CORRECTNESS AND POSITION

The Seller shall be responsible for the true, proper and accurate
CIH-Transponder performance, specified in the Schedules, and for the correctness
of the dimensions, the withstanding of environmental requirements, software
integrity etc. of all parts of the CIH-Transponders and for the provision of all
necessary instruments, appliances and -labor in connection therewith. If, at any
time before the Buyer's notice of acceptance, any error shall appear during the
progress of the CIH-Transponder development or manufacture, the Seller shall, at
its own cost, rectify such error. If such error is applicable to a complete
batch or Date-Code delivery, the Seller will assume full responsibility for any
error correction.

3.4.2 QUALITY ASSURANCE

The Seller shall institute a Quality Assurance Program to comply with the
requirements of the Contract and ISO-9002, and shall perform the Contract in
accordance with such standards. Compliance with such Quality Assurance Program
shall not relieve the Seller from any of its duties, obligations or
responsibilities under the Contract.

3.4.3 RISKS AND CONTRACT PRICE

The Seller shall be deemed to have obtained all information as to risks,
contingencies and other circumstances, which may influence or affect the
Contract Price, delivery dates, performance and quantities.

                                       13


4.  PROGRAM

4.1  METHOD OF EXECUTION

The Seller shall, whenever reasonably required by the Buyer, provide in writing,
for information, a description of the workflow and sequencing of the work, which
the Seller intends to use for the execution of the Contract.

4.2  INTEGRATION OF THE CIH-TRANSPONDERS WITH THE ETTM WORKS

The Seller shall be responsible for supporting the integrating of the
CIH-Transponders with the ETTM system in Israel and at Raytheon facilities
located at Fullerton, CA, USA, if required.

4.3  PROGRESS REPORTS

Progress reports shall be prepared by the Seller and submitted to the Buyer in a
format instructed by the Buyer. The progress reporting will commence upon the
signing of the Contract. Reports shall be submitted quarterly, each within
fourteen (14) Days of the last Day of the period to which it relates. Reporting
shall continue until the termination of the Contract for the period whenever
services are being performed by the Seller.

(i) Detailed descriptions of progress, including each stage of design,
procurement, manufacture, delivery, and testing;

(ii) Comparisons of actual and planned progress, with details of any aspects
which may jeopardize the completion in accordance with the Contract and the
Program, and the measures being (or to be) adopted to overcome such aspects
(inclusive but not limited to steps to be taken to recovery); and;

(iii) Any other progress status information relating to the CIH-Transponders
reasonably requested by the Buyer.

5. REPRESENTATIONS AND WARRANTIES

(a) Each Party represents and warrants that it is a company duly organized,
validly existing and in good standing under the laws of the State of Israel and
has all requisite corporate powers to carry out its obligations under the
Contract. Furthermore, each Party represents and warrants that it is qualified
to do business and is in good standing under all-applicable laws where its
business is being conducted and where such business will be conducted under the
Contract.

(b) Each Party represents and warrants that the execution and the fulfillment of
the provisions of the Contract in their entirety, on time and precisely, do not
conflict with, violate, create legal impediments under or breach the terms of
the articles of incorporation or other creating documents, its by-laws or any
agreements and Laws and Regulations binding upon it.

                                       14


(c) The Seller represents and warrants that it has fully familiarized itself
with all aspects of the CIH-Transponder requirements and has all the knowledge,
experience, qualifications and ability to carry out the Contract in accordance
with its terms and any Laws and Regulations.

(d) The Seller represents and warrants that it has conducted a full review and
examination of all aspects of the intellectual property involved in executing
the Contract to its satisfaction and accordingly accepts responsibility for the
fact that the execution of the Contract or any part thereof shall not involve an
infringement of any patent and/or design and/or trademark and/or trade secret
and/or know-how and/or good will and/or copyright and/or other right belonging
to any third party.

(e) Each Party represents and warrants that it is not subject to any fines,
penalties, injunctive relief or criminal liabilities which in the aggregate have
materially affected or may materially affect its business operations or
financial condition or its ability to perform the Contract. No representation or
warranty by the Seller contained herein contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make such representation or warranty not misleading in light of the
circumstances under which it was made.

(f) Each Party hereby acknowledges that the undertaking to purchase one hundred
and fifty thousand CIH Transponders, subject to the Seller fulfilling the ATP
and other terms of the Contract forms the basis of the Contract.

Each Party hereby acknowledges that the other Party has entered into the
Contract on the basis of these representations, warranties, information and
data.

6.  DESIGN & PRODUCTION

6.1  GENERAL OBLIGATIONS

The Seller shall carry out, and be responsible for, the preliminary design and
the Detailed Design of the CIH-Transponders. The Seller holds itself, and its
design Subcontractors as having the experience, qualifications and capability
necessary for the fulfillment of the Contract.

6.2  CIH-TRANSPONDER DOCUMENTS

6.2.1 The Seller shall prepare CIH-Transponder Documents in accordance with the
requirements of the Contract.

6.2.2 Subject to the provisions of confidentiality, each of the CIH-Transponder
Documents requiring review and approval by the Buyer, when considered ready for
use, shall be submitted to the Buyer for review. All CIH Transponder Documents
shall be ready for a critical design review within six months of the signing of
the Contract. In this Clause, "review period" means the period required by the
Buyer to carry out its review. Such review shall be carried out expeditiously by
the Buyer and, in any event, such review period shall not exceed twenty-one (21)
Days, calculated from the date on which the Buyer receives a CIH-Transponder
Document and the Seller's notice that it is considered ready, in accordance with
this Clause, for use. If the


                                       15


Buyer, within such review period, notifies the Seller that such CIH-Transponder
Document fails (to the extent stated) to comply with any requirements of the
Contract, it shall be rectified, resubmitted to the Buyer by the Seller and
reviewed by the Buyer within a reasonable period, based on the extent to which
the CIH-Transponder Document fails to comply with such requirements, at the
Seller's cost.

6.2.3 If the Buyer instructs that documents other than CIH-Transponder Documents
are necessary, the Seller shall upon receiving the Buyer's instructions prepare
such documentation (at the Buyer's cost, providing always that such cost is
reasonable) and, if requested by the Buyer, submit such documents for review.

6.2.4 The Seller at its cost shall rectify errors, omissions, ambiguities, and
inconsistencies, inadequacies and other defects in the CIH-Transponder
Documents.

6.2.5 No approval, comment, review or failure to notify the Seller of any defect
by the Buyer as aforesaid shall relieve the Seller of any of its obligations or
responsibilities hereunder or constitute a waiver by the Buyer of any of its
rights hereunder.)

6.3  TECHNICAL STANDARDS AND REGULATIONS

The Detailed Design, the CIH-Transponder Documents, and the performance by the
Seller of the Contract shall comply with the Contract, Laws and Regulations and
ISO 9002.

6.4 Not Used.

6.5  INTELLECTUAL PROPERTY

6.5.1 The Seller hereby acknowledges that all CIH Documents shall be delivered
to the escrow agent in accordance with the Escrow Agreement against delivery of
the first batch of fifty thousand CIH Transponders.

6.5.2 The Intellectual Property shall be the property of the Seller. The Seller
agrees to extend to the Buyer throughout the Contract Period and thereafter all
the requisite licenses for all Intellectual Property, utilized directly or
indirectly in or in connection with the CIH-Transponders as necessary to give
effect to the terms of the Contract and the Concession Contract.

6.5.3 In addition, the Seller shall grant the State any use licenses which the
Buyer is obligated to provide the State pursuant to the Concession Contract.
Without derogating from the generality of the foregoing, the Seller hereby
confirms that:

(i) it shall ensure that at the end of the Concession Period (as defined in the
Concession Contract) or upon the termination of the Concession Contract for any
reason, the State shall be granted all the licenses to use the CIH Transponders
including, without derogating from the generality of the foregoing, the right to
use the CIH Transponders, in connection with the Toll Road and the Miscellaneous
Structures (as both terms are defined in the Concession Contract). The Seller


                                       16


agrees that the State shall be entitled to request modifications, Changes,
upgrades or enhancements to the CIH Transponders and it is hereby agreed that
Clause 17.5 below will apply mutatis mutandis.

(ii) it shall make the CIH Transponders available to the State, for use in other
transport projects in Israel on competitive terms and in any case on such terms
which are no more favourable to the Seller than the terms under this Contract.
The Seller agrees that the State shall be entitled to request modifications,
Changes, upgrades or enhancements to the CIH Transponders to adapt them for use
on other transportation projects in Israel and it is hereby agreed that Clause
17.5 below will apply mutatis mutandis.

(iii) The Seller acknowledges the Buyer's obligation pursuant to the Concession
Contract to ensure the State's right to use the CIH Transponders as set forth in
this Clause throughout the Concession Period (as defined in the Concession
Contract) and thereafter also to other roads throughout the State of Israel,
provided that in such case the terms of the licenses required for use of the CIH
Transponders shall be no less favourable to the State and the public than the
terms which apply with respect to the Toll Road.

6.5.4 The Seller will be responsible for the execution of the Contract without
any infringement of any patent and/or design and/or trade mark and/or trade
secret and/or know-how and/or copyright and/or other intellectual property right
or other proprietary right belonging to a third party (hereinafter "Third Party
Intellectual Property Rights"). The Buyer will indemnify the Seller for any
patent infringement that may be contained in the CIH Transponder specification
furnished to the Seller by the Buyer.
In addition, before receipt of the Final Acceptance Certificate, the Seller
shall deliver to the Buyer written confirmation signed by the Seller and any
third party who was involved in the Contract on behalf of the Seller and whose
identity shall be recorded by the Buyer, whereby the Seller and any such third
party do not have any claim or "moral right" with respect to any element of the
CIH-Transponders which will prevent any changes or amendments being made in any
element of the CIH-Transponders. Such written confirmation shall not apply to
commercial off-the-shelf software.

The Seller is aware that the ETTM and the Toll Road shall be operated by the
Operator and the Seller hereby confirms that the Concessionaire and/or any
nominees or successors thereof shall have the right to assign its rights and
obligations or sub-license to the Operator the right to use the Intellectual
Property in Israel.

6.5.5 The Seller undertakes to indemnify the Buyer from and against any claim or
expense arising from an infringement of Third Party Intellectual Property rights
based upon a claim that the use of the technology in the CIH-Transponders as
authorized under this Contract constitutes such an infringement and shall be
solely responsible for payment of royalties and compensation for such
infringement for any use of patent rights, registered designs, trade marks,
trade secrets, know how, copyright or other intellectual property rights and
shall be solely responsible for any and all related damages, liabilities,
losses, costs, expenses (including attorney's fees), demands,


                                       17


claims, actions, proceedings (whether civil or criminal), orders, judgments,
penalties, fines, damages and other remedies that apply with respect to the
Buyer and/or the State. The Buyer shall afford the Seller the opportunity to
defend itself against any such claim and the Seller shall indemnify the Buyer
within thirty days of a ruling to pay.

The terms and obligations imposed by the above Clause (as between the parties)
shall survive the expiry or termination of the Contract for any reason other
than termination of the Contract due to a breach by the Buyer. The terms and
obligations imposed by the above Clause which apply to the State shall survive
the expiry or termination of the Contract for any reason.

7.  SELLER'S RESPONSIBILITY

The Seller shall be responsible for any loss or damage to the Buyer and/or any
third parties (including those working on the Project or those using the Toll
Road) to the extent arising out of or related to the Seller's negligence or
breach of its obligations under the Contract. The Seller shall be responsible
for any and all damages, liabilities, losses, costs, expenses (including
attorney's fees), demands, claims, actions, proceedings (whether civil or
criminal), orders, judgments, penalties, fines, damages, compensation and other
remedies to the extent arising from or brought in connection with the Seller's
negligence or breach of its obligations under the Contract 8. MANUFACTURE

8.1  INSPECTION

The Buyer (together with representatives of the State pursuant to the Concession
Contract) shall be entitled to, during the manufacture, fabrication and
preparation at any places where work is being carried out, inspect and examine
the manufacture of the CIH Transponders.

8.2  REJECTION

Until the Buyer accepts the CIH-Transponders in accordance with the Contract,
any design or workmanship that is defective or otherwise not in conformity with
the specifications may be rejected by the Buyer, whereupon the Buyer shall
notify the Seller promptly, stating his reasons. The Seller shall then promptly
make good the defect or non-conformity and ensure that the rejected item
complies with the Contract.

If the Buyer identifies, any design or workmanship rejection and re-testing
which in-turn will cause the Seller to incur additional costs, such costs shall
be borne by the Seller. If the Buyer determines that any test or requirement was
not carried out in accordance with the Contract, the Buyer may order a re-test
at the cost of the Seller.

8.3 NO WAIVER

Any inspection, examination, or testing pursuant to the Contract shall not
relieve the Seller from any of its obligations under the Contract including,
without limitation, any warranty obligations. No breach by the Seller shall be
waived or deemed to have been waived by any such inspection, examination or
testing. Failure to carry out any such inspection, examination or testing shall
not


                                       18


constitute a waiver of any of the other rights of the Buyer under this Contract
or of the right to inspection or examination if proper notice in respect thereof
has not been given by the Seller.

9.  COMMENCEMENT, DELAYS AND SUSPENSION

9.1  COMMENCEMENT OF CIH-TRANSPONDER DEVELOPMENT

The Seller shall commence the design and execution of the design and manufacture
of the CIH Transponders in accordance with the Program.

9.2  TIME FOR COMPLETION

The first batch of CIH Transponders, to include the testing and qualification
thereof by Raytheon, excluding warranty services, shall be ready for delivery to
the Buyer in accordance with Clause 14.1 below. The ATP shall occur within
twelve months of the signing of the Contract. If the Seller fails to reach the
ATP by such date or if the Buyer is of the reasonable opinion that the Seller
will be unable to meet such a date, the Buyer shall be entitled to terminate the
Contract.

10.  TESTING

10.1  SELLER'S OBLIGATION

The Seller shall carry out the tests set forth in, or called for under, the
Acceptance Test Plan, in accordance with the Contract.

The Seller shall give twenty (20) Days prior notice of the date which the Seller
will be ready to carry out such tests. The Buyer shall provide notice to the
Implementing Authority (as such term is defined in the Concession Contract) of
those tests which the Concession Contract stipulates that notice thereof must be
provided. Unless otherwise agreed, such tests shall be coordinated with Raytheon
and the results shall be reported in accordance with the appropriate Schedule.

10.2 DELAYED TESTS

If such tests are being unduly delayed by the Seller, the Buyer may by notice
require the Seller to carry out such tests within twenty-one (21) Days after the
receipt of such notice. The Seller shall carry out such tests on such Day or
Days within that period as notified by the Seller to the Buyer.

10.3 RE-TESTING

If any element of the CIH-Transponders fail to pass any one of such tests or any
re-test, the Buyer may require such failed tests, and tests on any related work,
to be repeated.

                                       19


10.4 RE-TESTING FAILURE

After failure of the Seller to pass the re-test as specified in Clause 10.3, the
Seller shall be entitled to an additional sixty days within which to pass such
test, failure to do so, will entitle the Buyer to terminate the Contract.

11. ACCEPTANCE OF THE CIH-TRANSPONDERS.

11.1 ACCEPTANCE OF THE CIH-TRANSPONDERS.

11.1.1 When all the relevant tests have been successfully completed in
accordance with the Acceptance Test Plan, the Buyer shall accept the
CIH-Transponders. No later than ten (10) Business Days following the completion
of such tests the Seller shall by notice to the Buyer make a request for the
acceptance by the Buyer. Such request shall be accompanied by a certificate of
the Raytheon representative certifying acceptance of the CIH Transponder in
accordance with the ATP.

11.2 NOTICE OF ACCEPTANCE

Within ten (10) days of the Seller successfully completing all of the relevant
tests specified in the Acceptance Test Plan, and the correction to the
satisfaction of the Buyer of all outstanding Minor Deficiencies, the Buyer shall
issue a Notice of Acceptance to the Seller provided the Seller has completed all
of its other obligations to be completed by the Seller in accordance with the
Contract up to the ATP Date Milestone.

12. NOT USED.

13. NOT USED.

14. CIH-TRANSPONDERS ORDERS, SUPPLY AND PRICE

14.1 Following the successful completion of the ATP, the Seller undertakes to
supply and the Buyer undertakes to purchase an initial order of forty thousand
(40,000) CIH-Transponders, at a price per CIH Transponder of NIS 100 linked to
the Israeli CPI for the month of April 1996 (the "Initial Batch"). The Seller
shall supply the Initial Batch by no later than 15th April 2002 but no earlier
than 15th January 2002. The Seller shall also provide the Buyer together with
the Initial Batch, at no extra cost, an additional batch of fifteen thousand
(15,000) CIH - Transponders

Subject to Clause 14.2 below, the balance of the CIH Transponders will be
delivered to the Buyer at a price per CIH Transponder of NIS 100 linked to the
Israeli CPI for the month of April 1996 as follows:

15th January 2003 - Sixty Thousand (60,000) Transponders.

15th January 2005 - Twenty five thousand (25,000) CIH Transponders.

                                       20


15th January 2006 - Twenty five thousand (25,000) CIH Transponders.

14.2 Notwithstanding, the Seller hereby undertakes that at the request of the
Buyer, it shall supply consecutive orders of CIH-Transponders, in accordance
with the CIH-Transponder specifications at a minimum batch order and delivery of
twenty five thousand (25,000) CIH-Transponders per year. The Buyer shall provide
the Seller with at least four months prior notice of the date upon which it
requires the CIH Transponders to be delivered (save for the initial batch which
will be delivered in accordance with Clause 9.2 above. These subsequent batch
orders shall be delivered to the Buyer at a unit cost of NIS100 linked to the
Israeli CPI for the month of April 1996. The Buyer shall have the option to
increase base orders by multiples of twenty five thousand (25,000) units.

14.3 Notwithstanding the aforementioned prices, the Seller undertakes to sell
CIH Transponders to the Buyer in Israel on its preferred customer terms and
conditions, including pricing, in the event that these are more favourable than
the terms set forth above. The foregoing shall apply even after the Buyer has
purchased one hundred and fifty thousand (150,000) CIH Transponders pursuant to
the Contract.

14.4 The Seller warrants that any CIH-Transponders to be supplied in accordance
with this Contract will be in accordance with the CIH-Transponder requirements
and will be compatible with the ETTM and otherwise suited for their intended
purpose in accordance with the specifications.

14.5 The Seller shall qualify and validate at its expense with Raytheon on one
occasion one batch of one hundred (100) CIH-Transponders designed and
manufactured by the Seller and certify whether that such batch meets the
CIH-Transponder and ETTM Specifications. The Seller acknowledges that the
qualification and testing shall be under the supervision and guidance of
Raytheon. The Seller shall not be responsible to any costs incurred by Raytheon
in respect thereof, except if the ATP failed and a retest is required.

15.  WARRANTY

15.1 During the Warranty Period, the Seller shall be responsible for and shall
undertake, at its cost, upon notice from the Buyer, to promptly replace, modify,
upgrade or otherwise correct any software or any item of hardware, repair or
replace any defective or failed component or software item or complete the
CIH-Transponders, as identified by the Buyer in such notice. The Buyer shall be
responsible for the delivery of the said CIH Transponders to the Seller's
designated facilities in Israel for the provision of warranty services. All
warranty replacements shall be performed at designated Seller facilities in
Israel. The Seller's warranty shall only apply if the CIH Transponder has been
installed and operated in accordance with the Seller's guidelines and
instructions. Without limiting the Buyer's rights under any Laws and
Regulations, the Seller shall be liable for the costs of remedying any latent
defects and deficiencies notified by the Buyer to the Seller (with full
supporting details) arising during the period from expiry of the Warranty Period
until three (3) years thereafter, provided that such defects and deficiencies
are latent defects.

                                       21


Such warranty shall not extend to any defect or failure of item, which is
directly attributable to a failure by the Buyer.

15.2. Not used.

15.3 If the Seller fails to remedy any defect or deficiency as aforesaid, the
Buyer may rectify such defect or deficiency itself and recover the cost
therefor, directly from the Seller.

16  Not used

17.  PAYMENT OF THE CONTRACT PRICE

17.1 PAYMENT OF THE CONTRACT PRICE

17.1.1 In consideration for the complete and accurate performance of the
Seller's undertaking pursuant to the Contract, the Buyer shall pay the Seller a
fixed price in NIS equivalent to the following:

The NIS equivalent of 100,000 US$ (one hundred thousand US dollars) linked to
Israeli CPI upon the successful completion and acceptance of the 100
CIH-Transponders by Raytheon and as advance payment for the Initial Batch. The
above sum shall be set off from the payment due upon delivery of the Initial
Batch of CIH Transponders.

17.1.2 Payment for each batch of CIH Transponders shall be payable within
(thirty) 30 days of the delivery to the Buyer of such batch.

17.1.3 The Contract Price shall include all risks, non-recurring expenses and
costs incurred in connection with the manufacture, supply, testing and delivery
of the CIH-Transponders and the meeting of the Seller's obligations in
accordance with and subject to the express provisions of the Contract. The
Contract Price shall include, inter alia, all risks and costs incurred in
connection with the Contract, including without limitation, all consents,
approvals, applications, permits, quantity risks, defects, staff and labor, Laws
and Regulations and Taxes other than Value Added Tax.

17.1.4 The Buyer will reimburse the Seller for such Value Added Tax to the
extent applicable to such of the CIH-Transponders that have been supplied and
for which payment is to be made to the Seller. Any such payment will be made
within thirty (30) Days of the receipt by the Buyer of the Seller's invoice for
such Value Added Tax in accordance with the applicable Laws and Regulations.

17.2 PAYMENT

Payments shall be made into a bank account nominated by the Seller in writing to
the Buyer.

                                       22


If payment of any sum payable to the Seller under this Clause or otherwise under
the Contract is delayed, the Seller shall be entitled to receive financing
charges compounded monthly on the amount unpaid during the period of delay.
These financing charges shall be calculated at the rate charged by Bank Hapoalim
B.M. for unauthorized overdrafts.



17.3  NOT USED

17.4  NOT USED

17.5  CHANGES UNDER THE CONTRACT


Technical Changes within the general scope of the Contract may be initiated by
the Buyer at any time, either by instruction or by a request for the Seller to
submit a proposal under this Clause. The Seller acknowledges that certain Buyer
requests for Changes may stem from changes that the State may be entitled to
request from the Buyer pursuant to the provisions of the Concession Contract.
Nothing in the foregoing shall derogate from the Buyer's obligation to pay for
any such changes, if obligated to do so under the Contract.

The Seller shall not carry out any Change unless and until the Buyer instructs
or approves a Change and the Seller agrees to perform such Change (subject to
the terms set forth below). If the CIH-Transponder Documents are not in
accordance with the Contract, the rectification shall not constitute a Change
and, for the avoidance of doubt, shall not be the subject of a claim.

If the Parties are unable to agree on the value of any Change and/or the impact
thereupon on any relevant Milestone, and such Change has been initiated by the
Buyer, the Buyer shall be entitled to instruct the implementation of such Change
and the Seller shall promptly execute such Change subject to receipt by the
Seller of a directive or a series of directives from the Buyer requiring the
Seller not to exceed a specified value of work in the incremental execution of
such Change, and in accordance with appropriate procedures for the accounting of
such value of work and payment therefor as set forth in any such directive. Any
disputes arising out of any such Change or the value of any such work may be
referred to the Dispute Resolution Procedure set forth in Clause 20 below.

The Seller may at any time submit a Seller initiated change or upgrade proposal.
Any such proposal shall be prepared at the cost of the Seller. The Buyer shall,
as soon as practicable after receipt of such a proposal, respond with approval,
rejection or comments.

The Seller shall advise the Buyer of the availability of any enhancement to the
CIH-Transponders which the Seller, in good faith, believes will enhance the
efficiency of ETTM and which the Seller intends to offer as one of its products
in the conduct of its business. If the Buyer wishes to proceed with any such
enhancement, such enhancement will be dealt with as a Buyer initiated Change or
an Upgrade as the case may be.

                                       23



18.   DEFAULT AND TERMINATION

18.1  TERMINATION BY THE SELLER

The Seller may terminate the Contract in the event of:

(a) a failure by the Buyer to pay a sum in accordance with the Contract which
exceeds the NIS equivalent of two hundred and fifty thousand ($250,000) US
Dollars due to the Seller within thirty (30) Days of the same becoming due;

(ii) a breach by the Buyer in respect of the performance of any of its material
     obligations.

(iii) the commencement of voluntary or involuntary receivership, liquidation,
      winding up or reorganization proceedings against the Buyer that will
      prevent the Buyer from fulfillment of its obligations under the Contract,
      unless in the case of involuntary matters such proceedings are discharged
      within ninety (90) Days of their commencement, or any interim or permanent
      receiver or liquidator is appointed over the Buyer's rights under the
      Contract or if the Buyer becomes insolvent;

18.2  TERMINATION PROCEDURE

The Seller shall, prior to exercising its rights, send a written notice to the
Buyer (with a copy to the State) specifying the breach and requiring the Buyer
to remedy the default within the period specified in the notice, which period
shall not be more than ninety (90) Days and no less than 30 Days. If the Buyer
has not remedied the breach within the period specified in the notice, the
Seller may, terminate the Contract forthwith by service of a further notice (the
"TERMINATION NOTICE") (copied to the State), unless the breach may be remedied
within ten (10) Days of such date.

The Termination Notice shall include:

(a) complete details of the fault alleged; and

(b) a copy of the initial notice served above.

The Seller shall invoice the Buyer for all verifiable costs arising from the
performance of the terminated work prior to a termination, loss of direct profit
and non recurring costs already incurred.

18.3 TERMINATION BY THE BUYER

In addition to the rights of the Buyer to terminate the Contract set forth in
the Contract, the following events shall entitle the Buyer to terminate the
Seller's employment under

                                       24



(a) the commencement of voluntary or involuntary receivership, liquidation,
winding up or reorganization proceedings against the Seller, that will prevent
the Seller from fulfillment of its obligations under the Contract, unless in the
case of involuntary matters such proceedings are discharged within ninety (90)
Days of their commencement, or any interim or permanent receiver or liquidator
is appointed over the Seller's rights under the Contract or if the Seller
becomes insolvent.

(b) a failure by the Seller to successfully complete the ATP later than the date
set forth therefor in Clause 9.2 above.

(c) if the Seller ceases to execute the Contract or if the Seller commits a
material breach of any of the terms of the Contract.

(d) a failure by the Seller to provide or maintain the Performance Security or
parental guarantee in accordance with the Contract.

(e) a failure by the Seller to commence the execution of the Contract when
required under the terms hereof or to complete the Contract, excluding warranty
services, in accordance with the Program and /or by the Completion Date;

(f) a failure by the Seller to pay a sum of 5250,000 or more due to the Buyer
within thirty (30) Days;

18.4  TERMINATION PROCEDURE

The Buyer shall, prior to exercising its rights, send a written notice to the
Seller (copied to the State) requiring the Seller to remedy the event giving
rise to the right within the period specified in the notice (or, to begin and
diligently pursue remedy where completion of its efforts within the period
specified is impractical or impossible), which period shall not be more than
ninety (90) Days and no less than 30 Days. If the Seller has not remedied the
event (or has not diligently pursued such remedy as appropriate) within the
period specified in the notice, the Buyer may terminate the Contract forthwith
by a further notice in writing to the Seller (copied to the State). The Buyer
shall be entitled to terminate the Contract with immediate effect upon written
notice. The Buyer shall be entitled to terminate the Contract unless the Seller
can rectify the breach to the satisfaction of the Buyer within ten (10) Days of
a written notice from the Buyer to the Seller of such breach.

18.5  NOT USED

18.6  EFFECTS OF TERMINATION

Upon a termination having been effected, and provided that such termination
shall be without prejudice to any rights or remedies which may have accrued to
the Parties and/or
                                       25



to the State pursuant to, inter alia, Clause 5.11 of the Concession
Contract and/or the Contract (including Clause 6.5.3 ) prior to such date:

the Contract shall cease to have effect, save for (i) breaches or defaults
committed by either Party prior to termination, (ii) ongoing warranty
obligations that warranty services are being provided at the date of
termination, and (iii) obligations of one party to indemnify the other.
Notwithstanding, if the Contract is terminated due to a breach by one Party, the
other Party's obligation to indemnify such Party shall terminate together with
the termination of the Contract;

19.  FORCE MAJEURE

19.1 FORCE MAJEURE DEFINED

19.1.1 Force Majeure shall mean any event beyond the reasonable control of the
Buyer or the Seller which constitutes an exceptional and unforeseeable
circumstance, including war and terrorist activities, which, despite the
exercise of diligent efforts, such Party was unable to prevent, limit or
minimize and which:

(a) materially delays the scheduled time of completion of all or any material
portion of the Contract; or

(ii) causes material and unavoidable physical damage or destruction to all or
any material portion of the CIH Transponders; or

(c) materially interrupts the full and regular operation of all or any part of
the CIH Transponders.

19.1.2 For the avoidance of doubt, the following events (but not only these
events) shall be specifically excluded from the definition of the term Force
Majeure herein above.

(a) shortage of materials or employees available to the Seller except a national
general shortage declared by an order of the Government;

(b) inclement weather and other material disturbances which were or should have
been reasonably foreseen;

(c) physical conditions or obstacles (both above the ground or underneath it)
encountered in the course of carrying out the Toll Works or otherwise;

(d) suspension, termination, interruption, denial or failure to obtain or renew
any permit, license, consent or Approval which is required for the carrying out
of a Party's obligations under the Contract; or

                                       26


19.2  NOTICE OF FORCE MAJEURE

19.2.1 Each Party shall promptly give notice to the other Party of the
occurrence of a perceived event of Force Majeure and again when such event has
ceased to exist, including in such notice details of the nature and extent of
the relevant Force Majeure event and its likely (or if possible, its actual)
duration.

19.3  CONTINUATION

The Seller shall, to the maximum extent possible, continue the design and
production of the CIH-Transponder during the occurrence of any event of Force
Majeure.

19.4  CONSEQUENCES OF FORCE MAJEURE

19.4.1 In the event the Parties have agreed that a perceived event of Force
Majeure is actually an event of Force Majeure, then the Party claiming the event
of Force Majeure shall be excused from whatever performance is prevented
thereby.

19.4.2 Neither Party shall claim damages, penalties, interest or any other
relief from the other Party due to the occurrence of an event of Force Majeure,
including, without limitation, an event of Force Majeure that leads to the
termination of the Contract.

19.4.3 The provisions of this Clause 19.4. shall not release the Party claiming
an event of Force Majeure from neither obligations or undertakings due, nor
compliance required, under the Contract prior to the occurrence of the event of
Force Majeure, or the performance of obligations or undertakings not affected by
the event of Force Majeure. In addition the Parties shall continue their
performance under the Contract when the effects of the event of Force Majeure
are removed or rectified.

19.4.4 In the event of any delay caused by an event of Force Majeure, any
relevant Milestone shall be extended by a time period necessary to take account
of the effects of such Force Majeure in accordance with critical path
methodology.

20.   GOVERNING LAW AND RESOLUTION OF DISPUTES

20.1  GOVERNING LAW

The Contract, its interpretation and the rights and obligations of the Parties
hereunder and any matter arising in connection with the above shall be governed
by the Laws of the State of Israel.

20.1.2 PROCEDURES

In the event of any differences arising between the Parties, the Party raising
the difference shall provide a written notice to the other Party detailing the
difference ("NOTICE OF DIFFERENCE") and shall use its reasonable endeavors to
convene a meeting or

                                       27



otherwise ensure communication between the Parties, for the purpose of
discussing the resolution of the difference referred to in the Notice of
Difference.

20.1.3  DISPUTE RESOLUTION PROCEDURE

The Dispute Resolution Procedure set out herein shall apply to all disputes
between the Parties in regard to the interpretation and application of the
Contract (a "DISPUTE") and any issues arising thereunder and except where
otherwise provided, either Party shall be entitled to refer such a Dispute to
the Dispute Resolution Procedure at any time. Except to the extent otherwise
provided in the Dispute Resolution Procedure, a decision of the Dispute
Resolution Procedure shall be final and binding on the Parties. Dispute
resolution shall be conducted before a panel of three arbitrators. Each of the
Parties shall be entitled to appoint one arbitrator each within 14 days from the
date of receipt of a request of one of the Parties to submit a matter to
arbitration. The arbitrators as hereinabove appointed shall appoint a third
arbitrator. The third arbitrator shall act as president of the arbitral panel.

The arbitrators shall be bound by substantive law and shall give grounds for
their decisions but shall not be bound by the laws of evidence and procedure and
they may retain experts on their behalf and adopt their opinion on matters in
the field of their expertise.

The arbitrators shall not be authorized to rule by way of conciliation without
each of the Party's consent.

In the absence of consent concerning the identity of the third arbitrator or if
the third arbitrator refuses to or is unable to fulfil his position, the third
arbitrator shall be appointed by the District Court of Jerusalem.

The District Court of Jerusalem shall have exclusive jurisdiction with regard to
any matter relating to the arbitration or the Contract and the Parties hereby
consent to such jurisdiction.

The Parties shall copy the State on any notice of submission of a matter to
arbitration. Furthermore, the parties hereby agree that the State may observe,
at its election, in any such arbitration proceedings.


21.  AMENDMENTS

All additions, amendments, supplements and updates to the Contract shall be
binding only if made in writing and signed by duly authorized representatives of
both Parties. Without derogating from the foregoing, the Parties shall not amend
any Clause that may affect the rights granted to the State, unless the prior
written approval of the State shall have been obtained. Furthermore, the Parties
shall not amend any material term unless the prior written approval of the State
shall have been obtained (such approval to be

                                       28



provided within twenty eight days - if no written response shall have been
received within fourteen days, the Parties shall forward a second notice to the
State in which it will advise that if no written response is received from the
State within fourteen days, the Parties shall be entitled to assume that
approval has been provided.)

22.    CONFIDENTIALITY

Except as otherwise expressly provided herein, the Parties shall keep in
confidence all information and documents ("Information") received by it or on
its behalf from the other Party in connection with the CIH Transponders, and
shall not disclose the same in any manner to any third party.

The foregoing shall not apply to:

(a) the disclosure of information where the receiving Party is obliged to make
such disclosure by law or a governmental entity or, provided in either case that
the receiving Party makes every reasonable effort to obtain confidential
treatment of the information so disclosed, and shall have provided to the
original disclosing Party reasonable advance notice of its obligation to
disclose so that the disclosing Party may intervene prior to the disclosure;

(b) information which was lawfully in the hands of the receiving Party (or any
other person on its behalf) prior to such Party's involvement (or the
involvement of its members) in the Contract; and

(c) information which is in the public domain, where such information has not
entered the public domain by reason of the default of the receiving Party.

23.   ENTIRE AGREEMENT

The Contract and its Schedules represents the entire agreement, agreements or
arrangements whether written or oral in of the CIH-Transponder Works or other
contents of the Contract between the Parties and supersedes all previous
representations and agreements.

24.   SCHEDULES

Without derogating from the provisions of Clause I, the Schedules attached to
the Contract shall be an integral part thereof and shall have the same binding
effect. All references to the Contract or to its Schedules (whether or not such
Schedules exist) shall be deemed to refer to and include all such Schedules. Any
breach of any provision of any Schedule shall for all purposes constitute a
breach of the Contract.

25.   SEVERABILITY

If any provision of the Contract is invalid or unenforceable as against any
Person, Party or under certain circumstances, the remainder of the Contract and
the applicability of such provision to other Persons, Parties or circumstances
shall not be affected thereby. Each provision of the Contract shall, except as
otherwise herein provided, be valid and enforceable to the fullest extent
permitted by Laws and Regulations.

                                       29


26.  RIGHTS AND REMEDIES

The duties and obligations imposed by the Contract and the rights and remedies
available hereunder shall be in addition to, and not a limitation upon, any
duties, obligations, rights and remedies otherwise imposed or available at law.

27.  REFERENCE TO LAWS AND REGULATIONS

Any reference to Laws and Regulations in the Contract shall be to the Laws and
Regulations as they apply or are amended from time to time.

28.  RELATIONSHIP OF PARTIES

Each Party confirms that it is an independent contractor and shall not be deemed
an agent of the other.

Except as otherwise specified in the Contract, each Party has the sole authority
to employ, discharge, and control its employees. The Seller has complete and
sole responsibility for its employees, agents, Subcontractors and all other
Persons that it hires in order to assist it in the performance of its
obligations under the Contract ("Seller's Personnel") and neither the Seller nor
the Seller's Personnel shall be deemed to be employees of the Buyer.

29.  ASSIGNMENT

The Seller may not assign, pledge or transfer the Contract without the prior
written approval of the Buyer, which consent shall not be unreasonably withheld.

The Seller hereby confirms and acknowledges that it shall have no right to
oppose the assignment or pledge or charge of the Contract to the State or any
person nominated by the State in accordance with the Concession Contract or by
any Laws and Regulations. Such assignment shall not release the Buyer from its
obligations hereunder.

Furthermore, the Seller hereby confirms and acknowledges that it shall have no
right to oppose the assignment of the Contract to any Substituted Entity (as
defined in the Concession Contract). Without prejudice to the rights that the
Buyer may have against the State pursuant to the Concession Contract, the Seller
hereby acknowledges that the State and/or the Substituted Entity may enforce the
Contract, in the name of the Buyer, provided that the State has requested that
the Buyer exercise its rights vis a vis the Seller and the Buyer did not adhere
to such request within sixty (60) Days from the date of such request.

The Seller shall not be entitled to make or file a contractual claim against the
State whose cause of action derives from or is connected with the Contract,
unless the Contract is assigned to the State.

                                       30


30.  TIME AND INDULGENCE

30.1 The failure of either Party to insist upon the full and strict performance
of any provisions of the Contract, or the failure of either Party to take steps
to enforce its rights or to seek remedies to which it is entitled under the Laws
and Regulations or the Contract shall not be construed as a waiver for such
matter or as a waiver of a subsequent breach. The consent or approval by the
Buyer or the Seller of any act by the other Party requiring the consent or
approval of such Party shall not be construed as waiving or rendering
unnecessary the requirement for the Seller's or the Buyer's, as the case may be,
consent or approval of any subsequent similar act by the other Party. The
payment of any amount due to the other Party under the Contract with knowledge
of a breach of any provision of the Contract by the Party receiving the payment
shall not be deemed a waiver of such breach or as creating any estoppel of the
Party making the payment. No provision of the Contract shall be deemed to have
been waived unless such waiver is expressly made in writing and signed by the
Party making the waiver. If a waiver is made in this manner it shall not be
interpreted as a waiver for any matter of a similar or different nature, unless
expressly stated so.

30.2 Any extension or other indulgence allowed by one Party to the other
regarding performance of its duties and obligations under the Contract or to
remedy any breach shall not be construed as a waiver by the Party giving such
extension or indulgence of any of its rights under the Contract or under any
Laws and Regulations.

30.3 Any provision prescribing a date of payment by one Party to the other under
the Contract shall be deemed a material provision. If any provisions in the
Contract prescribe a duty for payment that does not state the date for payment,
the said payment shall be made by the Party owing it within fifty (50) Days of
the date on which the duty of payment arose and the date shall be deemed a
material condition.

30.4 If a provision prescribing a demand for an approval under the Contract does
not state the date for receiving the approval or not giving the approval, then
this date shall be after forty (40) Days have elapsed from receipt of notice in
writing from the approving person, entity or authority of the subject requiring
approval.

30.5 If payment of any sum payable by one Party to the other under the Contract
is delayed, the Party to whom the sum is payable shall be entitled to receive
financing charges compounded monthly on the amount unpaid during the period of
delay. Financing charges shall be at a rate equal to that charged by Bank
Hapoalim B.M. for unauthorized overdrafts.

31.  NO THIRD PARTY BENEFICIARIES

The Contract is made exclusively for the benefit of the Buyer, the senior
lenders thereof and the State of Israel, and no other third party shall have any
rights hereunder or be deemed to be a beneficiary hereof.

                                       31


The Seller undertakes to enter into a direct agreement with the Lenders of the
Buyer, if so requested thereby to ensure their rights vis a vis the Seller.

32.  DUTY SAME AS COVENANT

Whenever in the Contract any words of responsibility, obligation or duty
regarding the Buyer and the Seller are used, they shall have the same force and
effect as those in the form of express covenant or undertaking.


                                       32



IN WITNESS WHEREOF AND WITH THE INTENT OF BEING BOUND HERETO, THE PARTIES HAVE
PUT THEIR SIGNATURES ON THIS CONTRACT:

TADIRAN TELEMATICS LTD.                      DERECH ERETZ HIGHWAYS (1997) LTD.
/s/ Eddy Kafry  /s/ Izzy Sharazky              /s/ Ehud Savion
---------------------------------             ----------------------------------
By:  Eddy Kafry     Izzy Sharazky             By:  Ehud Savion
Title:  CEO            i.o. Avard             Title:  General Manager


                                       33



                                  SCHEDULE 1.0

                           CROSS ISRAEL HIGHWAY (CIH)
                 Electronic Toll and Traffic Management System

                                  TRANSPONDER

                      TADIRAN TELEMATICS - CIH TRANSPONDER
                               STATEMENT OF WORK

                                     FINAL
                                 1 JANUARY 2001
                                  VERSION 1.1

NOTICE:

All rights are reserved, Derech Eretz Highways, Derech Eretz Construction Joint
Venture and Tadiran Telematics. Unpublished work. If publication occurs, the
following notice applies: Copyright. 2000, Derech Eretz Highways.

PROPRIETARY:

This work contains Proprietary Information furnished by Derech Eretz Highways,
Derech Eretz Construction Joint Venture and Tadiran Telematics for use in
connection with Cross Israel Highway and may be used, disclosed, or copied only
in accordance with the terms of the Transponder Supply Agreement and/or the
Proprietary Information Disclosure Agreement, or other similar or related
agreements, to one of which you, or the company for which you work, must be a
signatory, and, except with written permission of the owners, such information
may not be published, disclosed or used for any other purpose, or duplicated in
whole or in part.


                                       34





                              RECORD OF REVISIONS

         --------------------------------------------------------------------
            REV               DATE            DESCRIPTION OF REVISION
         --------------------------------------------------------------------
            1.0         27th August 2000              Draft
         --------------------------------------------------------------------
            1.1         1st January 2001              Final
         --------------------------------------------------------------------



                                                                          Page i




                               STATEMENT OF WORK
                               Table of Contents

1. PURPOSE 1

2. APPLICABLE DOCUMENTS 1

3. CM TRANSPONDER OVERVIEW 1

3:1 CIH Transponder Purpose   2

3.1.1  Main Objectives  2

3.1.2 Capabilities  2

3.1.3 Support of Smart Card / Electronic Purse Technology   2

3.2 CIH Transponder Overview  3

4.  TASK DESCRIPTIONS   5

4.1 Sellers Program Management requirements   5

4.1.1 Program Management Reports   5



4.2 Quality Assurance   5

4.3 Systems Engineering   6

4.3.1 Specifications    6


4.3.2 Design Reviews  6

4.4 CIH Transponder Development    6

4.4.1 Subsystem Engineering   6

4.4.2 Hardware Design, Selection and Procurement  6

4.4.3 Software and Firmware Development   6

4.4.4 Factory Integration and Factory Acceptance Test   6

4.4.5 Seller's In-Plant Integration and CIH Transponder Test   7

4.5 Warranty  7

4.6 Licenses and Permits   7

4.6.1 Authorizing Laws and Regulations   7

5.  CIH TRANSPONDER DOCUMENTATION   7

                                                                         Page ii





                         TRANSPONDER STATEMENT OF WORK

1.  PURPOSE

The purpose of this schedule is to describe the scope of work and
responsibilities of the Seller in providing the CIH Transponder units for use
with the Electronic Toll and Traffic Management System for the Cross-Israel
Highway. The CIH Transponder, to include specification, design, build,
qualification/validation, procurement and supply, will be provided by the Seller
under the Transponder subcontract to the Buyer.

2.  APPLICABLE DOCUMENTS

The following documents are applicable to the extent specified herein.

i) Israeli Ministry Of Communication Frequency Permit

ii) Israeli Ministry Of Communication transponder Trade License

iii) Raytheon Internally Mounted Transponder Specification

iv) Raytheon Externally Mounted Transponder Specification

v) Raytheon VRC protocol

vi) Portable Reader Specification

vii) Programming Workstation Specification

viii) Validation & Acceptance Test Plan

ix) Israeli and International Commercial standards (such as ANSI C95.1, OSHA
1910.97, IRPA, INIRC) for RF exposure safety

x) Israeli Ministry Of Transportation safety standards for vehicle mounted
equipment.

3. CIH TRANSPONDER OVERVIEW

The Seller shall assume primary responsibility for the compliance to the
functional requirements, design, build, procurement, qualification, validation,
supply and warranty of the CIH Transponder and batteries in accordance with the
Transponder Contract.

The CIH Transponder will meet the requirements in the Transponder and VRC reader
Specs for Internal and external ??? mount units to provide all AVI requirements
for CIH and other applications As will be mutually agreed upon by the parties
during the development phase of the CIH Transponder.
                                                                          Page 1


The CIH Transponder is comprised of a stand-alone self powered unit consisting
,as applicable, of the following sub components: CIH Custom made Case, Antenna,
Printed Circuit Board, Battery, Integrated timing and processing circuitry and
electronic components, internal cabling and connectors etc.

The Transponder unit shall be designed to support future hardware and software
enhancements for ITS applications and smart-card interfaces.

The CIH Transponder unit shall be capable of interfacing with Raytheon VRC
reader over DSRC Protocol subject to all performance requirements listed in the
VRC protocol and Transponder specs.

3.1 CIH TRANSPONDER PURPOSE

3.1.1 MAIN OBJECTIVES:

The CIH Transponder shall comply with the CIH Transponder specifications to
support simple and incremental growth capability for the use of new technology
elements as requirements and economics dictate.

The CIH Transponder shall be designed for a high level of availability and MTBF
and will comply with the CIH Transponder specifications.

3.1.2 CAPABILITIES:

The CIH Transponder is an integrated self contained, all-electronic unit for
toll and ITS traffic applications with roadside equipment installed at selected
locations such as the mainline, ramps, HOMC and interchanges. The CIH
transponder will enable convenient access and ease of use to motorists of CIH
while imposing no restrictions regarding vehicle position within the width of
the transversal roadway for tolling and traffic management.

The CIH Transponder shall have the capability to uniquely identify the correct
ID and vehicle Classification for each motorist trip.

The CIH transponder shall operate so that vehicles can travel at highway design
speeds as per CIH Transponder specifications when entering, traveling along and
leaving the highway.

Within the limits specified in the CIH Transponder specifications, the CIH
Transponder identifies, reports classification in a multi-lane environment
within the Toll Gate and /or Traffic Probe Reader communication zones.

The CIH Transponder is capable of operating during environmental conditions as
defined in the CIH Transponder spec requirements for internal and external
mount.

                                                                          Page 2


3.1.3 SUPPORT OF SMART CARD / ELECTRONIC PURSE TECHNOLOGY

The CIH Transponder will be designed for expandability to support Smart Card /
Electronic Purse technology and future upgradeability to process toll payments
by standard Smart Card / Electronic-Purse technology.

3.2 CIH TRANSPONDER OVERVIEW

The overall architecture of the CIH Transponder is shown in Figure 1 and
consists of the following major subsystems:

1) Power management system to manage Lithium-Ion (or similar) battery
utilization for the purpose of power optimization and transponder sleep mode and
awakening modes of operation.

2) Transceiver (Tx/Rx) to provide 925/928MHz communication capability.
Transceiver Design shall be Electro Magnetic Compatible to support frequency
permit requirements for Slotted-Aloha TDMA communication protocol and spurious
levels.

3) Processing and timing circuitry to support data transactions and providing
the timing signals to support incoming data extraction, outgoing data modulation
and supporting internal data processing and volatile /non-volatile memory
applications.

4) MMI- composed of LED's and audible buzzer function to inform / alert the end
user.

The CIH transponder is using read-write communication with roadside readers at a
500kb/sec data rate using a Slotted-Aloha Time Division Multiple Access (TDMA)
protocol. This protocol permits simultaneous communication with large numbers of
vehicles regardless of lane position or vehicle proximity. CIH Transponders
operate in the 902-928 MHz band at uplink and downlink frequencies of 925 MHz
and 928 MHz.

The CIH transponder has built-in visual and audible transaction indicators
(beeping tone and 3 colored LED's-green, Amber and Red) that communicate various
types of programmable messages to the vehicle driver. CIH Transponder
incorporates both factory-programmed read only data fields and operator
programmable data fields for storing data such as agency/owner and vehicle
classification information. To facilitate specific communications functions,
transponders supports scratch pad memory functionality.

CIH Transponders shall be mounted in the vehicle passenger compartment affixed
to the windshield behind the rear-view mirror. This position allows optimal RF
illumination by the toll gate and TPR's reader's antennas. The internal
lithium-Ion battery shall support at least 6 years of continuous operation under
spec requirements and specified environmental constraints. A wake up timer
conserves battery output by monitoring RF energy exposure and awakening of
transponder communication circuitry at Tollgate communication zone
(approximately 25 meter).

Case design shall resist tampering and internal components resist interrogation
and decoding signals.

CIH Transponders shall retain performance resistance under vibration, shock,
humidity, rain, and temperature extremes.

                                                                          Page 3



Figure 1.  CIH Transponder System Block Diagram

[GRAPHIC OMITTED]

4.  TASK DESCRIPTIONS

4.1 SELLERS PROGRAM MANAGEMENT REQUIREMENTS

Perform all tasks related to the CIH Transponder program and all related
technical management, Buyer's interface and correspondence, contracts,
subcontract and production management, equipment and material procurement and
quality assurance.

Prepare and maintain the CIH Transponder Master Program Schedule including
critical path monitoring. Submit the CIH Transponder Master Program Schedule
updates as required, along with the Program Management Reports subject to the
CIH Transponder contract.

In the event of delays that may impact milestones, prepare and submit
Recovery/Correction Plan and/or analysis and documentation of the delay as
applicable in accordance with the CIH Transponder contract.

4.1.1 PROGRAM MANAGEMENT REPORTS

The Seller shall prepare and submit Program progress reports providing details
of program progress, risk mitigation actions and plans for subsequent reporting
periods in accordance with para. 4.3 in the CIH Transponder contract.

4.2 QUALITY ASSURANCE

Implement the quality procedures and processes as per best commercial standards
and according to ISO 9000 guidelines.

Maintain Configuration Control Procedures to manage and govern engineering
changes, hardware and software change control and component procurement as per
best commercial standards and according to ISO 9000 guidelines.

Create a Trouble Report database to log problems identified and actions taken.

Monitor test conduct, recording of test results and test reporting throughout
the end of the Raytheon qualification and validation test completion.

Maintain in-house Program Notebook library consisting of all documents developed
under contract to include specifications, trade-studies, design documents,
status reports and customer correspondence.

                                                                          Page 5




4.3  SYSTEMS ENGINEERING

4.3.1 SPECIFICATIONS

Develop the CIH Transponder Functional Requirements as flowed-down from and with
direct traceability to CIH Transponder spec (Ref 3,4,5).

4.3.2 DESIGN REVIEWS

Conduct Design Reviews (PDR and CDR). The PDR will be a review of the CIH
Transponder top level design, including the proposed architecture and the
allocation of requirements to the identified submodules. The CDR will be a
review of the CIH Transponder detailed design and functional capabilities.

4.4 CIH TRANSPONDER DEVELOPMENT

Each Subsystem identified herein will follow the development plan described
below to include subsystem engineering, hardware design, selection and
procurement, software development (where applicable), and in-plant integration
testing.

4.4.1 SUBSYSTEM ENGINEERING

The Subsystem will satisfy the performance and functional requirements
specifications. Subsystem requirements will be flowed-down from the CIH
Transponder Specifications.

4.4.2 HARDWARE DESIGN, SELECTION AND PROCUREMENT

Identify hardware requirements, select vendors as appropriate, place purchase
orders and ship equipment to the production, assembly and/or Concesioner HOMC
facilities.

4.4.3 SOFTWARE AND FIRMWARE DEVELOPMENT

Perform top-level design, detailed design, code, unit test and software
integration for each of the defined software and ASIC configuration items.

4.4.4 FACTORY INTEGRATION AND FACTORY ACCEPTANCE TEST

The CIH Transponder will be fully integrated and tested in the factory using
operational software and hardware interfacing to external simulators and a
compliant VRC reader. Test scenarios will be devised to exercise all critical
functional threads and interfaces.

Tests will be conducted to verify that the all CIH Transponder functional and
performance requirements are satisfied.

The Seller will invite and permit the Buyer to witness these tests as they are
scheduled.

                                                                          Page 6




With the exception of minor discrepancies, as determined by the Seller, all
subsystems will successfully pass the subsystem's factory acceptance test prior
to being installed on the CIH project. Any such minor discrepancies will be made
known to the Buyer.

4.4.5 SELLER'S IN-PLANT INTEGRATION AND CIH TRANSPONDER TEST

Seller will conduct in-plant factory integration and acceptance test for 100
units using operational software, hardware and firmware. Tests shall be
conducted in accordance with the Acceptance Teat Plan as specified in the ATP
Annex __ to the contract. The CIH transponders shall pass successfully the ATP
tests.

In-plant integration and system testing will test the CIH Transponder via its
defined interfaces and functionality's, removing internal or external simulators
in the process (except VRC reader), to result in a fully integrated CIH
Transponder test.

Once complete, the In-Plant System Test will verify that the CIH Transponder
satisfies the requirements to the extent testable in an in-plant environment.

The Seller will invite and permit the Buyer to witness these tests as they are
scheduled.

Once completed and approved by the Buyer,100 (One Hundred) production CIH
transponder units shall be shipped to the Raytheon Fullerton facilities for
qualification and validation as per the ATP full set of requirements.

Transponder qualification and validation shall be in accordance with the CIH
Transponder Acceptance Test Plan.

4.5 WARRANTY

The Warranty provisions are as identified in the CIH Transponder contract.

4.6 LICENSES AND PERMITS

4.6.1 AUTHORIZING LAWS AND REGULATIONS

Seller is the responsible party to obtain the Operating, Class and Trade
licenses and permits for Dedicated Short-Range Communications (DSRC) CIH
Transponders. In cases where there is a need for changes (revisions,
clarifications, legal interpretations, and special authorizations) to existing
laws or regulations, the Seller shall provide assistance to the Buyer in
obtaining these changes and approvals.

5. CIH TRANSPONDER DOCUMENTATION

The documentation to be delivered through the execution of the CIH
Transpondercontract shain accordance with para. 1.6 to the contract..





                                  SCHEDULE 2.0

                           CROSS ISRAEL HIGHWAY (CIH)
                 Electronic Toll and Traffic Management System

                                  TRANSPONDER

                      TADIRAN TELEMATICS - CIH TRANSPONDER
                   QUALITY ASSURANCE AND ACCEPTANCE TEST PLAN

                                     FINAL
                                 9 JANUARY 2001
                                  VERSION 1.1

NOTICE:

All rights are reserved, Derech Eretz Highways, Derech Eretz Construction Joint
Venture and Tadiran Telematics. Unpublished work. If publication occurs, the
following notice applies: Copyright, 2000, Derech Eretz Highways.

PROPRIETARY:

This work contains Proprietary Information furnished by Derech Eretz Highways,
Derech Eretz Construction Joint Venture and Tadiran Telematics for use in
connection with Cross Israel Highway and may be used, disclosed, or copied only
in accordance with the terms of the Transponder Supply Agreement and/or the
Proprietary Information Disclosure Agreement, or other similar or related
agreements, to one of which you, or the company for which you work, must be a
signatory, and, except with written permission of the owners, such information
may not be published, disclosed or used for any other purpose, or duplicated in
whole or in part.






                              RECORD OF REVISIONS

         -------------------------------------------------------------------
            REV              DATE           DESCRIPTION OF REVISION
         -------------------------------------------------------------------
            1.0        8th January 2001              Draft
         -------------------------------------------------------------------
            1.1        9th January 2001              Final
         -------------------------------------------------------------------





                                                                          Page 1



INDEX

1.  SCOPE   3

1.1 Overview  3

1.2 Applicable Documents   3

1.3 Seller QA Responsibilities   3

2.  QUALITY ORGANIZATION AND RESOURCES   4

2.1 Quality Organization   4

2.2  Approach to Quality  5

3.  QUALITY PROGRAM RESPONSIBILITIES AND RECORDS   5

3.1 Design Control   5



3.2 Document and Data Control     5

3.3 Purchasing  5

3.4 Product Identification  6

3.5 Control of Test Equipment (Standard & Special Purpose)   6

3.6 Corrective and Preventive Action  6

3.7 Handling, Storage, Packaging, Preservation, and Delivery   6


3.8 Control of Quality Records  6

3.9 Records:   6

4.  CONFIGURATION MANAGEMENT   7

4.1 Purpose   7

4.2   7

4.3  Engineering Changes   7

4.4 Software Configuration Control   7

4.5 Release Control System

                                                                          Page 2



5.  CIH TRANSPONDERS ACCEPTANCE TESTING & OPERATIONAL TEST   7

5.1  Purpose of Tests   7

5.1.1 Factory Integration and Factory Acceptance Test   7

5.1.2  Seller's In-Plant Integration and CIH Transponders Test   8

5.1.3 Operational Test   8

6. ACRONYMS  9

                                                                          Page 3




                       CIH TRANSPONDERS QUALITY ASSURANCE
                               AND VALIDATION PLAN

1.  SCOPE

1.1 OVERVIEW

This CIH Transponders Quality Assurance Plan (QAP) describes the quality
activities to be performed on the Cross Israel Highway Transponder for the use
with the Electronic Toll and Traffic Management System (ETTM).

Applicability of each quality process to hardware, software firmware, and
qualification and production activities is identified in the paragraphs below.

This plan is applicable to the CIH Transponders program throughout development,
integration, lab testing, pre-production, Operational Test, production line and
periodic sample testing.

1.2 APPLICABLE DOCUMENTS

The following documents are applicable to the extent specified herein.

i) ETTM Schedule 8-Quality Assurance Plan
ii) ETTM Schedule 6-Operational Test Plan
iii) Israeli Ministry Of Communication Frequency Permit
iv) Israeli Ministry Of Communication
v) Transponder Trade License
vi) Raytheon Internally Mounted Transponder Specification
vii) Raytheon Externally Mounted Transponder Specification viii) Raytheon VRC
protocol
ix) Portable Reader Specification
x) Programming Workstation Specification
xi) Israeli and International Commercial standards (such as ANSI C95.1, OSHA
1910.97, IRPA, INIRC) for RF exposure safety
xii) Israeli Ministry Of Transportation safety standards for vehicle mounted
equipment. All Raytheon-HTMS related documents will be provided to the
Seller by the Buyer subject to NDA between the Seller and Raytheon-HTMS.

1.3 SELLER QA RESPONSIBILITIES

The objectives of the Quality Program are to deliver a fully compliant CIH
Transponders that meets the following criteria:

i. Complies with the CIH Transponders SOW and the Contract

ii. Complies with the Raytheon VRC Protocol and Raytheon Transponder
specifications.

                                                                          Page 4



iii. Successful conduct of the Acceptance Test and the Operational Test to be
witnessed by the Buyer and verified by the Raytheon HTMS engineering
representatives (coordination with Raytheon shall be Buyer's responsibility) for
the first batch of 100 transponders.

iv. Successful conduct of a laboratory full ATP on a sample of the new 1OO CIH
transponder units to validate the performance of a subsequent production batch
sample units to be witnessed by the Buyer before the release of the full
production batch provided that at least 6 months elapsed from the previous
production line.

Seller shall be responsible to assure proper Quality Assurance Plans and
implementations to be conducted by the various subcontractors, which may be
employed in the process of the development, qualification, and validation and
production of the CIH Transponders.

2.  QUALITY ORGANIZATION AND RESOURCES

2.1 QUALITY ORGANIZATION

The purpose of this section is to describe the CIH Transponders program
organization responsible for fulfillment of and compliance with the QA program
at Tadiran Telematics.

The Seller shall employ the key positions needed to ensure and execute the
Quality Program. The Project Manager (PM), his staff and the Seller's Quality
manager (QM) will be jointly responsible for achieving product quality.

The Project Manager (PM) will have the overall responsibility for ensuring that
an effective Quality Program is in place for the CIH Transponders in accordance
with this QAP. The PM will ensure that adequate and appropriate in-house
resources are performing the specified quality tasks. Quality Manager (QM is
designated as the management representative for the Quality Program and is
responsible for carrying out the activities defined in this QAP. Seller will
maintain Quality Assurance Engineering supervision for the subcontractors and
production facilities. The QM will use standard commercial quality control
practices and procedures to ensure that the development, integration, test,
validation and production of the CIH Transponders hardware, software and
firmware are properly conducted and documented.

2.2 APPROACH TO QUALITY

The Quality Program shall incorporate the following processes and controls to
achieve its goals:

i. A Configuration Control process to manage and govern engineering change
requests and hardware and software change control.

ii. A Trouble Report (TR) database to log all problems identified during formal
test process (such as ATP, Operational Test etc.). The Trouble Reports shall be
allocated to failed components or failed tests. Problems shall be tracked until
resolution and re-test occurs.

                                                                          Page 5



iii. Conduct of technical meetings at least every 3 months to ensure compliance
with the CIH Transponder specifications. The Buyer shall have access to all
design documents where there are prepared.

iv. Monitoring of formal test conducts, recording of test results and test
reporting.

Inspection of each Escrow deliverable document for compliance with established
quality criteria and preparation of a signed quality statement to accompany each
document submitted.

3.  QUALITY PROGRAM RESPONSIBILITIES AND RECORDS

3.1 DESIGN CONTROL

Seller shall implement in-house design control activities to be performed in
accordance with Seller's documented processes and procedures where applicable.

Design input requirements are identified and recorded.

The documented design output shall contain or reference to acceptance criteria
and product characteristics critical to the proper functioning of the CIH
Transponder. Design validation activities, to the extent required will assure
that the product meets requirements under specified operating environments.

Certification of the successful completion of each monitored formal test process
shall also be supported by the QA.

3.2 DOCUMENT AND DATA CONTROL

Design documents and data are issued, controlled, maintained and revised in
accordance with Seller's in-house QA pre-defined processes. Provisions are made
to assure that documents and data are reviewed, released and controlled by
authorized activities. These provisions are made for, but are not limited to,
drawings, specifications, test plans and procedures, test results, quality
assurance practices, and other similar documents and data.

3.3 PURCHASING

Seller shall maintain in-house pre-defined procedures to verify and assure
purchased products conform to specified requirements. Verification shall be
conducted on purchased products at Seller or subcontractor's facilities as per
Seller's in-house pre-defined procedures.

3.4 PRODUCT IDENTIFICATION

Products shall be subjected to identification and date code; catalog numbers
etc. where applicable. Items are identified with unique identification numbers
as specified by drawing or other product requirements (such as CIH Transponders
ID).

                                                                          Page 6



3.5 CONTROL OF TEST EQUIPMENT (STANDARD & SPECIAL PURPOSE)

Procedures shall be established and maintained to control, calibrate and
maintain test equipment and associated software used to ensure the conformance
of a product to its specified requirements at the production line and formal
tests.

3.6 CORRECTIVE ACTION-FORMAL PROCESSES

The requirements for identification of product and process non-conformance, root
cause determination, application of corrective action and assessment of
effectiveness of actions taken will be defined along with the process for
receiving, processing and resolving Buyer-identified discrepancies at formal
testing, qualification and validation of the final product.

3.7 HANDLING, STORAGE, PACKAGING, PRESERVATION, AND DELIVERY

The CIH Transponders shall be handled, stored, packaged and delivered to
preclude damage or deterioration due to physical or environmental conditions.
Handling requirements are specified based on applicable standards.

3.8 CONTROL OF QUALITY RECORDS

Quality data and records are created, controlled and retained as per Seller's
in-house procedures to provide objective evidence of conformance determinations
relating to products. Quality data and records shall be made available to Buyer
representatives.

3.9  RECORDS

As a minimum, the following data and records are created and maintained by the
Seller of the tasks identified above:

i. Results of formal problem reports, Action Items and issues resolution.
ii. Escrow deliverable documentation as specified in the CIH Transponder SOW and
Contract.
iii. Test plans, procedures and results, including pass/fail certifications.
iv. Trouble Report database

4. CONFIGURATION MANAGEMENT

4.1  PURPOSE

The purpose of this section is to identify the Configuration Management (CM)
activities performed to ensure a quality product. CM assists in the operation
and control of hardware and software design, development and production.

                                                                          Page 7



4.2  ENGINEERING CHANGES

Tadiran Telematics program change control procedures to provide for the
initiation, documentation, processing, review and disposition of changes to
released hardware and software data and program deliverable documentation.

4.3 SOFTWARE CONFIGURATION CONTROL

Seller shall implement software configuration control. The Seller shall be
responsible to software documentation and media and updating the affected
software components as necessary.

The Seller shall implement software CM prior to the CIH Transponders formal
acceptance and validation.

5.  CIH TRANSPONDERS ACCEPTANCE TESTING & OPERATIONAL TEST

5.1 PURPOSE OF TESTS

This section defines the process used to verify the functionality and
performance of the CIH Transponders.

Qualification and validation of the CIH Transponders will be conducted by the
following manner:

5.1.1 FACTORY INTEGRATION AND FACTORY ACCEPTANCE TEST

The CIH Transponders will be fully integrated and tested at Seller's facilities
using operational software, firmware and hardware interfacing to external
simulators and a compliant VRC reader. Test scenarios will be devised to
exercise all critical functional threads and interfaces.

Tests will be conducted to verify that the all CIH Transponders functional and
performance requirements are satisfied.

The Seller will invite and permit the Buyer to witness these tests as they are
scheduled.

With the exception of minor discrepancies, as determined by the Seller, the CIH
Transponders will successfully pass the factory acceptance test prior to final
qualification and validation testing. Any such minor discrepancies will be made
formally known to the Buyer in writing.

5.1.2 SELLER'S IN-PLANT INTEGRATION AND CIH TRANSPONDERS TEST

Seller will conduct an in-plant factory integration and acceptance test for 100
units using operational software, hardware and firmware. Tests shall be
conducted in accordance with the Acceptance Teat Plan .The CIH Transponders
shall pass successfully all ATP tests.

In-plant integration and system testing will test the CIH Transponders via its
defined protocol interfaces and functionality's, removing internal or external
simulators in the process (except VRC reader), to result in a fully integrated
CIH Transponders test.

                                                                          Page 8



The Seller will invite and permit the Buyer to witness these tests as they are
scheduled.

Once completed and approved by the Buyer, 100 (One hundred) production CIH
Transponders units shall be validated by Raytheon-HTMS in Israel on a test site
such as Toll Gate 3B subject to availability (south of the Nachsonim
Interchange) or at the Fullerton facilities for qualification and validation as
per the ATP full set of requirements.

Transponder qualification and validation shall be in accordance with the CIH
Transponders Acceptance Test Plan.

5.1.3 OPERATIONAL TEST

The purpose of the Operational Test is to verify that the CIH Transponders are
capable of sustaining the specified level of performance under operational
conditions, that is, when the highway is in use by the public. To this end, the
Operational Test focuses on the ability of the CIH Transponders to be correctly
detected, identified and registered by the ETTM system while its operating under
normal conditions and traffic volumes. The test approach used is to measure the
validate performance relative to a set of controlled vehicles. In this way the
actual Toll Gate crossings made are known in advance and can accurately be
compared to the trips detected by a operational ETTM system. Once this
performance measure is known, as measured under normal operational conditions,
it is applied to the approval of the production file and production line.

Test vehicles and drivers will be provided by the Seller. The Seller, Buyer's
and Raytheon's project QA teams will monitor test planning, conduct, data
collection and analysis. Test data shall be extracted from the RMS and TTP. The
Buyer's QA team will authenticate the data. The Test Review Board will review
test results and any test anomaly reports and may, with justification, stop a
test case or request that a test case be repeated.

The test will be monitored from the Highway Operations and Maintenance Center
(HOMC). The test will use all Toll Gateways installed along the road at the time
of completion of the corresponding Stage.

TEST CONDUCT: A test fleet of 10 passenger vehicles equipped with CIH
Transponders will be used. Each CIH Transponder will be correctly mounted on the
vehicle so it is readable by a toll gateway. The tested CIH Transponders shall
be randomly selected by the Buyer from the 100 CIH Transponders batch. All
controlled vehicles will have Israeli readable license plates and will be
correctly pre-registered with the RMS. All test vehicles shall be on the
exception list so their license plate image will be captured. All trips by the
controlled vehicles will be made while the public live traffic is using the
highway.

Each controlled test vehicle will make 100 gateway trips. Half of the trips will
be made in each direction of travel. To ensure consistency in the test results,
the following test conditions will be followed:

o  Each controlled vehicle will pass through each toll gateway within or between
the normal driving lanes and while maintaining a safe separation from all other
vehicles on the roadway.

                                                                          Page 9



o  The controlled vehicles will drive at safe speeds representative of other
vehicles on the road.
o  When exiting the roadway between trips, the controlled vehicles will remain
off the highway for a minimum amount of time, which will be based on the tolling
policy, unless the next trip is in the opposite direction.
o  The controlled vehicles will make only daylight trips.
o  All trips by all controlled vehicles will be completed within a maximum of
three days.
o  The CIH Transponders shall be tested under conditions which do not exceed the
specified environmental conditions
o  ACCEPTANCE CRITERIA:



               ---------------------------------------------------------------
               PERFORMANCE MEASURE        OPERATING LEVEL*
               ---------------------------------------------------------------
               Detection of AVI           > 98.7%
               Vehicles                   -
               ---------------------------------------------------------------


*The Operational Test environment shall be equally favorable as the
Raytheon-HTMS Operational test environment.




6.  ACRONYMS

AVI   Automatic Vehicle Identification
AVI   equipped vehicle A vehicle equipped with a transponder
ATP   Acceptance Tes Plan
CIH   Cross Israel Highway
CM    Configuration Management
ETTM  Electronic Toll and Traffic Management
HOMC  Highway Operations and Maintenance Center
OCR   Optical Character Recognition
OTP - Operational Test Plan
PM    Program Manager
QA    Quality Assurance
QAP   Quality Assurance Plan
QM    Quality Manager
RMS   Revenue Management System
TR    Trouble Report


                                                                         Page 10



                                Escrow Agreement
                                ----------------

This Escrow Agreement dated as of      is entered into by Tadiran Telematics
Ltd. (hereinafter referred to as "Telematics"), Derech Eretz Highways (1997)
Ltd. a company organized under the laws of Israel (hereinafter referred to as
"Derech Eretz"), and       , a corporation organized under the laws of
("Escrow Agent"), with reference to the following facts:

A. Telematics and Derech Eretz are parties to an agreement dated        (the
"CIH Agreement"), a copy of which is attached hereto as Exhibit "A" concerning
the purchase of certain CIH - TRANSPONDERS (as defined in the CIH Agreement)
(the "Product").

B. The Parties agree that the Transponder Documents (as defined in Clause 1.6 of
the CIH Agreement and referred to herein as either "the Transponder Documents"
or "the Escrow Material") will be held in escrow by an escrow agent to be
mutually agreed to by the Parties in accordance with the terms hereof.

The Escrow Agent has agreed to act as Escrow Agent subject to and in accordance
with the terms of this Agreement.

In consideration of the mutual covenants contained in this Agreement and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties covenant and agree as follows:

1.  DELIVERIES TO ESCROW AGENT

1.1 The Escrow Agent shall receive, hold and preserve the Transponder Documents
in as safe and secure a manner as possible, appropriate for valuable assets
similar in nature to the Production File - in a separate container,
appropriately segregated from materials that do not form part of the subject
matter of this Agreement at a location in the State of Israel to be mutually
agreed upon by Telematics and Derech Eretz with access only by such employees of
the Escrow Agent as are duly authorized by the Escrow Agent from time to time,
and for disposition only in accordance with the provisions of this Agreement.
The Escrow Agent shall have no beneficial rights in the Transponder Documents.

1.2 The Escrow Agent recognizes and agrees that the materials contained in the
Transponder Documents are the valuable assets and proprietary and confidential
information of Telematics and may be required under the terms hereof by Derech
Eretz as contemplated by this Agreement. Further, the Escrow Agent agrees to
hold the Transponder Documents in strictest confidence and take all appropriate
acts to maintain their confidentiality. The Escrow Agent agrees that it will not
use, copy or disclose the Transponder Documents to any person, in any manner
whatsoever, except as expressly provided for herein.

1.3 For the avoidance of doubt, the Transponder Documents will include: product
tree, flow charts, electrical drawings, mechanical and layout drawings,
electrical harnesses and wiring

                                       1



drawings, gerber files for printed circuit boards, assembly instructions and
drawings, parts and vendors list, test setup and procedures, executable software
files, programming instructions for firmware (ASIC and any other programming
devices), specifications for special components, authorization letter assignment
for the direct procurement of standard and special components.

2. Telematics grants to Derech Eretz a non-exclusive, irrevocable, royalty-free
license to use the Transponder Documents for CIH Transponders for use on toll
roads in Israel provided that the Events of Release as defined herein below have
occurred.

3.  CONDITIONS FOR RELEASE OF THE Transponder Documents

3.1 Telematics shall deposit the Transponder Documents with the Escrow Agent by
no later than three months after delivery of the first CIH Transponder
production batch. Together with the aforesaid deposit, Telematics shall deliver
to the Escrow Agent and Derech Eretz an initial deposit certificate and a "DSI
Certificate" for each item contained in the Transponder Documents.

3.2 Telematics shall deliver to the Escrow Agent, subsequent deposits, along
with a "DSI Certificate" within thirty (30) days after implementation of any
revised, changed, modified, upgraded, enhanced or altered version of the
Transponder Documents.

3.3 The Escrow Agent shall promptly notify Derech Eretz of the receipt of each
deposit of material into escrow and, in any event, by no later than ten (10)
days of such deposit.

3.4 Telematics covenants and agrees that during the term of this Agreement, the
Transponder Documents deposited with the Escrow Agent in accordance with this
Agreement shall:

(i) in respect of initial deposits, constitute a full and complete set of
Transponder Documents as at the time of the delivery and in accordance with the
terms of the CIH Agreement; and

(ii) in respect of subsequent deposits, constitute a full and complete set of
the Transponder Documents sufficient to continue manufacture by a CIH
Transponder manufacturer of the CIH Transponders.

3.5 TERMINATION DEPOSIT: In addition to its other obligations to make deposits
hereunder, Telematics shall ensure that, forthwith following termination of this
Agreement and/or the CIH Agreement, due to a breach by Telematics, Telematics
shall deposit all amendments to the Transponder Documents since the last
deposit, and warrants that any deposits made pursuant to this Section will be
complete in accordance with the terms hereof and shall be sufficient as
contemplated by the Section above.

3.6 DEPOSIT INSPECTION: When the Escrow Agent receives any deposit together with
a DSI Certificate, the Escrow Agent will conduct a deposit inspection by
visually matching labeling of the tangible media containing the deposit
materials to the item descriptions and quantity listed on the DSI Certificate.
Upon receipt of notice of a deposit, Derech Eretz shall be entitled (but not
required) to inspect the materials submitted to ensure their compliance with the
CIH Agreement

                                       2



and this Agreement. For the avoidance of doubt, any such inspection shall not
derogate from the responsibility of either Telematics or the Escrow Agent to
perform its obligations hereunder.

3.7 ACCEPTANCE OF DEPOSIT: At the completion of the deposit inspection referred
to above, if the Escrow Agent determines that the labeling of the tangible media
matches the item descriptions and quantity on the DSI Certificate, the Escrow
Agent will sign the DSI Certificate and provide a copy thereof to Telematics and
Derech Eretz confirming that the labeling matches the item descriptions on the
DSI Certificate and the deposit is in conformance with the requirements of this
Agreement. If the Escrow Agent determines that the labeling does not match the
item descriptions and quantity on the DSI Certificate and is not in conformance
with Escrow Schedule, the Escrow Agent shall:

(a) Note the discrepancies in writing on the DSI Certificate;

(b) sign the DSI Certificate with the exceptions noted; and

(c) provide a copy of the DSI Certificate to Telematics and Derech Eretz.

The Escrow Agent's acceptance of the deposit occurs on the signing of the DSI
Certificate by the Escrow Agent confirming that the labeling matches the item
descriptions on the DSI Certificate and that the deposit is in conformance with
this Agreement. Delivery of the signed DSI Certificate to Derech Eretz, as
aforesaid, is Derech Eretz's notice that the deposit materials have been
received and accepted by the Escrow Agent.

Telematics shall not have complied with this Agreement and shall not be deemed
to have made a deposit as may be required hereunder until such time as the
Escrow Agent shall sign the DSI Certificate confirming that the labeling matches
the item descriptions on the DSI Certificate and that the deposit is in
conformance with the requirements of the Agreement.

3.8 If Derech Eretz contests whether Telematics has deposited materials into
escrow as obligated hereunder, it shall be entitled to submit the matter to
dispute resolution.

4.1 REPRESENTATIONS AND WARRANTIES: Telematics acknowledges that the purpose of
this Agreement is to provide Derech Eretz and the State, if there is an Event of
Release, with disclosure of, access to and the right to use, modify, revise,
upgrade, alter and enhance, the material contained in the Transponder Documents
so that Derech Eretz may provide for the manufacture of CIH Transponders without
recourse to, or the involvement or participation of, Telematics. Accordingly,
Telematics makes the following representations and warranties, and acknowledges
that Derech Eretz is relying upon these representations and warranties:

(a) In accordance with and subject to Section 3, during the term of this
Agreement, the Transponder Documents shall be complete and sufficient to enable
the continued manufacture, maintenance and support of the CIH Transponders
without recourse to, or the involvement or participation of Telematics:

                                       3


(b) Telematics holds legal and beneficial title to the Transponder Documents
free and clear of all mortgages, liens, pledges, charges, security interests,
restrictions, claims or encumbrances of any nature whatsoever; and

(c) Telematics has the right to license to Derech Eretz use of the Transponder
Documents in accordance with this Agreement and the CIH Agreement, and has
obtained all consents, authorizations and licenses necessary to the performance
of its obligations under and in accordance with this Agreement and the grant of
the license provided herein.

(d) That following careful and due diligence, to the best of its knowledge, the
Transponder Documents and the use thereof does not and shall not involve or
result in a breach of any intellectual property rights of a third party.

(e) The indemnification provisions of the CIH Agreement shall apply to
Telematics MUTATIS MUTANDIS with respect to any breach of the warranties
hereunder.

GENERAL WARRANTIES

5.1 GENERAL WARRANTIES: Each of the Parties hereto make the following warranties
as of the date of execution of this Agreement and acknowledge that each of the
other Parties is relying on such warranties:

(a) It is a corporation duly incorporated and validly existing under the laws of
its jurisdiction of incorporation and carries on its business as presently
carried on and is duly licensed, registered and qualified in all jurisdictions
where the character of its property owned or leased or the nature of the
activities conducted by it makes such licensing, registration or qualification
necessary;

(b) No steps or proceedings have been taken or are pending to supersede or amend
its incorporation documents or by-laws in a manner which would impair or limit
its ability to carry out its obligations hereunder;

(c) It has full power, legal right and authority to enter into this Agreement,
and to do all acts and things and execute and deliver all other documents as are
required hereunder to be done, observed or performed by it in accordance with
its terms;

(d) It has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement, and to observe and perform the
provisions hereof in accordance with its terms;

(e) This Agreement constitutes its valid and legally binding obligation
enforceable against it in accordance with its terms; and

(f) None of the authorization, creation, execution or delivery of this
Agreement, nor compliance with or performance of the terms and conditions of
this Agreement:

                                       4


(i) has resulted or will result in a violation of its articles or by-laws or a
breach or violation of any shareholder agreement or any resolutions passed by
the board of directors or shareholders or a breach or violation of any laws and
regulations; and

(ii) has resulted or will result in a breach of, or constitute a default under
any agreement, undertaking or instrument to which it is a party or by which it
or its property or assets is bound.

RELEASE OF ESCROW MATERIALS

6.1 EVENT OF RELEASE: An Event of Release occurs in respect of the Transponder
Documents:

(i) if any proceedings are commenced or taken for the dissolution, liquidation
or winding-up of Telematics or for the cessation of operations of Telematics
whether by extra-judicial means or under any statute of any applicable
jurisdiction or otherwise, unless such proceedings have been stayed within
ninety (90) days of commencement;

(ii) if a decree or order of a court having jurisdiction is entered adjudging
Telematics bankrupt or insolvent, or proving as properly filed a petition
seeking a winding-up or arrangement or compromise of Telematics under any
bankruptcy, insolvency or analogous law or issuing process for execution against
Telematics, or against any substantial part of the property of Telematics or
ordering the winding-up or liquidation of Telematics and any such decree or
order continues unstayed and in effect for a period of ninety (90) days of
issuance, or if a trustee, receiver, receiver and manager, interim receiver,
custodian or other Person with similar powers is appointed in respect of
Telematics or in respect of all or a substantial portion of its property or
assets and any such appointment continues unstayed and in effect for ninety (90)
business days;

(iii) if Telematics is in material breach of this Agreement and/or the CIH
Agreement, subject to the provisions thereof and fails to cure such breach
(following receipt of a written notice from Derech Eretz) within the applicable
cure period, but if none is specified, then within a sixty (60) day cure period;

(iv) upon termination of the CIH Agreement, resulting from the breach of any of
the obligations of Telematics thereunder;

(v) If Telematics breaches it obligations vis a vis the State pursuant to Clause
6.5.3 of the CIH Agreement;

6.2 NOTICE OF EVENT OF RELEASE: If Derech Eretz is aware of the occurrence of an
Event of Release as set out in Section 6.1 above, then Derech Eretz may send a
Notice of Release to the Escrow Agent and Telematics by telefacsimile, with an
original by the same-day or overnight courier or by hand, setting out the
particulars of such alleged Event of Release. Subject to Section 6.3 below, the
Escrow Agent, shall within twenty (20) business days of the receipt of the
Notice of Release (the "Notice Period") deliver all the Escrow Materials to
Derech Eretz, subject to the following:

                                       5



6.3 CONTESTING EVENT OF RELEASE: (a) If Telematics; acting in good faith, wishes
to dispute the occurrence of an Event of Release, it must deliver an original
Certificate of Denial to the Escrow Agent and Derech Eretz before the Notice
Period stating that such Event of Release has not occurred. If Telematics
delivers the Certificate of Denial within the Notice Period, the Escrow Agent
shall not release the Escrow Materials to Derech Eretz unless Telematics shall
deliver to the Escrow Agent a Certificate of Derech Eretz in the form attached
herewith as Schedule F (the "Indemnity Certificate"), a copy of which shall be
provided to Telematics by the Escrow Agent promptly after receipt, undertaking
to indemnify and hold harmless Telematics for any loss or damage to be incurred
by Telematics as a result of the release of the Escrow Materials to Derech Eretz
under this Section, in the event that it shall be determined by the dispute
resolution mechanism set forth in the CIH Agreement that there was no Event of
Release. The Escrow Agent shall deliver the Escrow Materials to Derech Eretz no
later than 30 business days after delivery of the Indemnity Certificate by
Derech Eretz to the Escrow Agent. If it is determined as a result of dispute
resolution that there was no Event of Release then Derech Eretz shall
immediately return the Escrow Materials to the Escrow Agent for re-deposit in
the escrow account. The costs of the arbitrators shall be borne equally by the
parties and each party shall bear its own costs and expenses, including legal
fees, incurred thereby related to the dispute resolution process.

(b) Notwithstanding the foregoing, in the event that Telematics contests an
Event of Release, for as long as the dispute is outstanding, the Escrow
Materials shall not be released to Derech Eretz if the continued manufacture
and/or maintenance of the CIH Transponders or modifications thereto may, to the
satisfaction of Derech Eretz, be guaranteed to Derech Eretz by Telematics
directly from a Telematics subcontractor on terms no less favourable to Derech
Erez than the provisions of the CIH Agreement. If at any time during a dispute,
such manufacture and/or maintenance shall cease, the Escrow Agent shall release
the Escrow Materials to Derech Eretz. In the event that the dispute resolution
determines that the consideration paid during the period referred to in this
clause for the CIH Transponders was too high, then Telematics undertakes to
reimburse Derech Eretz with the amount overpaid within 30 days of receiving
written notification of such resolution being made; in the event that the
dispute resolution determines that the consideration payable during the period
referred to in this clause was too low, Derech Eretz undertakes to pay
Telematics the excess payable within 30 days of receiving written notification
of such resolution being made.

6.4 In the event that the State claims that an Event of Release has occurred,
the provisions of Section 6 and Section 7 hereof shall apply mutatis mutandis
between the State, Telematics and the Escrow Agent.

7.1 RELEASE FOR FAILURE OF TELEMATICS TO RESPOND: In the event that the Escrow
Agent does not receive the certificate of Telematics mentioned in Section 6.3
above within the Notice Period, an Event of Release shall be deemed to have
occurred and the Escrow Agent shall, in accordance with Section 7.2, deliver the
Escrow Materials to Derech Eretz.

7.2 DELIVERY OF ESCROW MATERIALS TO DERECH ERETZ: If an Event of Release has
occurred or is deemed to have occurred and the Escrow Agent is required to
deliver the Escrow Materials to


                                       6


Derech Eretz pursuant to this Agreement, the Escrow Agent shall deliver all the
Escrow Materials, to Derech Eretz within the time period as set out above and
the Escrow Agent shall thereafter have no further obligation or responsibility
to Derech Eretz in respect of the Escrow Materials.

ESCROW AGENT

8.1 LIMITED LIABILITY: The Escrow Agent shall be responsible to perform its
obligations under this Agreement and to act in a reasonable and prudent manner
with regard to this escrow arrangement. Provided that the Escrow Agent has acted
in the manner stated in the preceding sentence, each of Derech Eretz and
Telematics shall in equally indemnify, defend and hold harmless the Escrow Agent
from any and all claims, actions, damages, arbitration fees and expenses, costs,
attorney's fees and other liabilities incurred by the Escrow Agent relating in
any way to this escrow arrangement provided, however, for greater certainty,
that the foregoing agreements to indemnify, defend and hold harmless shall not
apply to any claim, action, damage, arbitration fee and expenses, cost,
attorney's fee or other liability which arise as a result of the Escrow Agent's
negligence or willful misconduct. Telematics and Derech Eretz's total liability
hereunder shall not be exceed [TBD].

8.2 SCOPE OF OBLIGATIONS ASSUMED: The Escrow Agent accepts the duties in this
Agreement required to be performed by the Escrow Agent and agrees to perform the
same upon the terms and conditions set forth in this Agreement. The Escrow Agent
shall only have those duties and responsibilities expressly set out in this
Agreement and shall not be obligated to recognize nor have any liability or
responsibility arising under any other agreement to which the Escrow Agent is
not a party, notwithstanding that reference thereto may be made herein.

8.3 VALIDATION OF ESCROW MATERIALS: The Escrow Agent shall not be responsible
for determining whether Telematics has an obligation to deliver material into
Escrow or for verifying their sufficiency, genuineness or validity of, or title
to, any of the Escrow Materials, but shall be responsible to ensure that the
deposits of the Escrow Materials are in conformance with the requirements as set
out in this Agreement and that the labeling of each deposit matches the item and
descriptions and quantity on the DSI Certificate and to notify Derech Eretz of
each deposit.

8.4 ACCEPTABLE RELIANCE: The Escrow Agent may rely upon any instrument in
writing that it believes in good faith to be genuine and sufficient and properly
presented in accordance with the terms of this Agreement.

8.5 RETAINING COUNSEL: The Escrow Agent may retain such counsel or other experts
or advisers or agents as it may reasonably require for the purpose of
discharging its duties hereunder upon the prior written consent of both
Telematics and Derech Eretz.

8.6 RESIGNATION: The Escrow Agent may resign and be discharged from all further
duties and liabilities hereunder by giving ninety (90) days prior written notice
of its intention to resign as Escrow Agent to both Telematics and Derech Eretz.
If the Escrow Agent resigns, a new escrow


                                       7


agent shall be appointed by mutual agreement of Telematics and Derech Eretz. If
Telematics and Derech Eretz can not agree as to a new escrow agent within
forty-five (45) days following receipt of the notice of resignation, the matter
shall be resolved within ninety (90) days by dispute resolution in accordance
the CIH Agreement applied mutatis mutandis. The new escrow agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as the Escrow Agent upon execution of this Agreement.
Notwithstanding the foregoing, the Escrow Agent shall not be released from its
obligations hereunder until a new escrow agent has been appointed who has
assumed all the responsibilities and obligations of the Escrow Agent hereunder
and the Escrow Agent has transferred the Escrow Materials to such new escrow
agent in an appropriate manner and the new escrow agent has confirmed the
receipt of all the Escrow Materials as aforesaid.

8.7 THIRD PARTY PROCEEDINGS AGAINST ESCROW MATERIALS: If:

(a) the Escrow Materials become subject to an order of the Court;

(b) the delivery of the Escrow Materials is stayed or enjoined by any order of
the Court; or

(c) any other order, judgment or decree is made or entered by the Court
affecting the Escrow Materials.

the Escrow Agent is authorized in its sole discretion to obey and comply with
all orders, final judgments or decrees so entered or issued provided that the
Escrow Agent shall immediately notify Telematics and Derech Eretz upon becoming
aware of such order, judgment or decree or the possibility of such order,
judgment or decree coming into effect and in case the Escrow Agent obeys and
complies with any such order, final judgment or decree, the Escrow Agent shall
not be liable to any of the other parties thereto, their successors and assigns
or to any other Person by reason of such compliance.

8.8 FEES: Telematics and Derech Eretz shall each pay the Escrow Agent or Escrow
Agent's authorized representative, designated in writing by the Escrow Agent,
half of any and all fees and taxes associated with the escrow account.
Notwithstanding the foregoing, it is hereby expressly stated and declared that
the Escrow Agent shall, at all times during the term of this Agreement, be under
a duty of care and a fiduciary duty in favor of both Telematics and Derech
Eretz.

TERM AND TERMINATION

9.1 TERM: This Agreement shall commence on the date first written above and,
subject to Section 9.5, shall continue for such period as the CIH Agreement
remains in effect (other than by operation of clauses deemed therein to be of
indefinite duration or the operation of which is prolonged by means of a
"survival clause"), unless terminated in accordance with the provisions of this
Agreement.

                                       8


9.2 TERMINATION: This Agreement may only be terminated:

(a) By instrument in writing executed by Telematics and Derech Eretz:

(b) Upon the delivery of the Escrow Materials to Derech Eretz and/or the State
as the case may be in accordance with Section 7.2 above;

(c) By the Escrow Agent for non-payment of Escrow Agent's fees; in accordance
with Section 9.3

(d) By Telematics vis a vis Derech Eretz upon termination of the CIH Agreement
due to a breach of contract by Derech Eretz. However, for the avoidance of doubt
the terms of this Escrow Agreement shall continue to be binding as between
Telematics and the State. Telematics and the State shall under such
circumstances confirm to the Escrow Agent, the continued payment of the Escrow
fees.

9.3 TERMINATION FOR NONPAYMENT: In the event of non-payment by Telematics of
fees owed to the Escrow Agent by Telematics, Derech Eretz shall have the right
(but not the obligation) to make the payment to the Escrow Agent to cure the
default. If the past due payment is not received in full by the Escrow Agent
within thirty (30) days of the date of receipt by the Parties of written notice
of the past due payment, then the Escrow Agent shall have the right to terminate
this Agreement any time thereafter by sending written notice of termination to
all parties provided that the Escrow Agent shall deliver all the Escrow
Materials to Derech Eretz immediately upon termination. In the event of
non-payment by Derech Eretz of fees owed to the Escrow Agent by Derech Eretz, if
the past due payment is not received in full by the Escrow Agent within thirty
(30) days of the date of receipt by the Parties of written notice of the past
due payment, then the Escrow Agent shall have the right to terminate this
Agreement any time thereafter by sending written notice of termination to all
parties provided that the Escrow Agent shall deliver, all the Escrow Materials
to Telematics immediately upon termination. The Escrow Agent shall have no
obligation to take any other action under this Agreement so long as any payment
due to the Escrow Agent, and for which notice of delinquency has been given by
the Escrow Agent to all Parties, remains unpaid and the Escrow Materials have
been delivered to Derech Eretz or Telematics, as the case may be.

9.4 RETURN OF ESCROW MATERIALS: Upon the termination of this Agreement pursuant
to section 9.2 (a), the Escrow Agent shall return to Telematics, unless
delivered to Derech Eretz pursuant to the terms hereof, all copies of the Escrow
Materials and the Escrow Agent shall thereupon be discharged from all its
obligations under this Agreement.

9.5 SURVIVAL: Sections 2, 7, 9.4, this Section 9.5, and Section 10.6 shall
survive the termination of this Agreement.

                                       9


GENERAL

10.1 RESOLUTIONS OF DISPUTES: The Parties agree that the disputes resolution
procedure set forth herein between Telematics and Derech Eretz shall be in
accordance with the CIH Agreement, applied mutatis mutandis. However, in the
event that a dispute arises between Telematics and the State, the State and
Telematics will each be entitled to appoint one arbitrator. The two arbitrators
will thereafter appoint a third arbitrator who shall serve as chairman of the
arbitration panel. In the absence of consent concerning the identity of the
third arbitrator or if the third arbitrator refuses to or is unable to fulfill
his position, the third arbitrator shall be appointed by the District Court of
Jerusalem. The provisions of clause 20.1.3 of the CIH Agreement shall apply to
the arbitration panel, mutatis mtandis.

10.2 INCORPORATION OF TERMS: The Parties hereto agree that all terms and
covenants contained in the CIH Agreement relating to the Intellectual Property
and confidentiality apply to this Agreement and the Production File, mutatis
mutandis.

10.3 NOTICE: All notices required or permitted by this Agreement, including
notices of release of materials or termination of this Agreement, shall be in
writing and delivered personally or by courier or sent by telecopier to:

(a) in the case of Telematics, at:

Attention:

Fax No.

(b) in the case of Derech Eretz, at:

Attention:

Fax No.

(c) in the case of the Escrow Agent, at:

ATTENTION:

FAX NO.

Or at such address or fax number of which the addressee may from time to time
have notified the addresser. A notice shall be deemed to have been sent and
received on the day it is delivered personally, or the next business Day by
courier, or on the day on which transmission is confirmed, if telecopied. If
such day is not a Business Day or if the notice is received after ordinary
office hours (time of place of receipt), the notice shall be deemed to have been
sent and received on the next Business Day.

                                       10


10.4 TIME OF THE ESSENCE: Time is of the essence of every provision of this
Agreement. Extension, waiver or variation of any provision of this Agreement
shall not be deemed to affect this provision and there shall be no implied
waiver of this provision.

10.5 FURTHER ACTS: The Parties shall do or cause to be done all such further
acts and things as may be reasonably necessary or desirable to give full effect
to this Agreement. Without limiting the foregoing, each of the Parties will at
any time and from time to time execute and deliver or cause to be reasonably
requested by any other party in order to cure any defect in the execution and/or
delivery of this agreement.

10.6 JURISDICTION: This Agreement shall be governed by the laws of the State of
Israel and shall be subject to the exclusive jurisdiction of the competent
courts of Tel Aviv, Israel.

10.7 AMENDMENT: This Agreement may be amended only by written agreement executed
by the Parties.

10.8 WAIVER: Save as otherwise expressly set out herein, no waiver of any
provision of this Agreement shall be binding unless it is in writing. No
indulgence or forbearance by a Party shall constitute a waiver of such Party's
right to insist on performance in full and in a timely manner of all covenants
in this Agreement. Waiver of any provision shall not be deemed to waive the same
provision thereafter, or any other provision of this Agreement at any time.

10.9 ENTIRE AGREEMENT: This agreement, the Schedules forming part of this
Agreement and the Agreements contemplated herein or therein, constitute the
entire agreement among the Parties pertaining to all the matters herein and
supersede all prior agreements, understanding, negotiations and discussions
between the Parties, whether oral or written.

10.10 SEVERABILITY: If any of this Agreement or portion thereof or the
application thereof to any person or circumstances shall to any extent be
invalid or unenforceable:

(a) The reminder of this Agreement or the application of such provision or
portion thereof to any other Person or circumstances shall not be affected
thereby; and

(b) The Parties hereto will negotiate in good faith to amend this Agreement to
implement the intentions set forth herein. Each provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.

10.11 COUNTERPARTS: This Agreement may be executed in one or more counterparts,
which together shall constitute one and the same Agreement.

10.12 ASSIGNMENT: This agreement may not be assigned by the Parties without the
prior written consent of the others, save and except that Derech Eretz shall be
entitled to assign this Agreement to the State or to its lenders.

                                       11


10.13 ENUREMENT AND BINDINGS EFFECTS: This is Agreement shall enure to the
benefit of the Parties hereto and their respective permitted successors and
assigns and beneficiaries and shall be binding upon the Parties hereto and their
respective successors and assigns and beneficiaries.

10.14 NO PARTNERSHIP: It is understood and agreed that nothing contained in this
Agreement shall constitute or be deemed to create a partnership, joint venture
or principal and agent relationship among the Parties.


                                       12



IN WITNESS WHEREOF THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE SIGNED,
SEALED AND DELIVERED BY THEIR RESPECTIVE AUTHORIZED SIGNATORIES EFFECTIVE AS OF
THE DATE FIRST WRITTEN ABOVE.

TELEMATICS
----------

PER:
      ----------------
NAME
      ----------------

TITLE
      ----------------

PER:
      ----------------

NAME
      ----------------
TITLE
      ----------------

DERECH ERETZ HIGHWAYS (1997) LTD.
---------------------------------

PER:
      ----------------

NAME
      ----------------
TITLE
      ----------------

PER:
      ----------------

NAME
      ----------------

TITLE
      ----------------

ESCROW AGENT
------------

PER:
      ----------------

NAME
      ----------------

TITLE
      ----------------

PER:
      ----------------

NAME
      ----------------

TITLE
      ----------------



                                       13








                                                                   EXHIBIT 10.22

                    AGREEMENT WITH AN INDEPENDENT CONTRACTOR
                    ----------------------------------------

            MADE AND EXECUTED IN TEL AVIV ON THE 1ST OF FEBRUARY 2003

BETWEEN:   ITURAN LOCATION AND CONTROL, LTD.
           Of:  3 Hashikma Street
           Azor
           (hereinafter: "THE COMPANY")
                                                        PARTY OF THE FIRST PART;
                                                        ------------------------

AND        MR. IZZY SHERATZKY
           ID No. 007495443
           Of:  14 Dulchin Street
           Tel Aviv
           (hereinafter: "IZZY")
                                                       PARTY OF THE SECOND PART;
                                                       -------------------------

AND        A. SHERATZKY HOLDINGS LTD.
           Private Company No. 51-3230268
           Of:  14 Dulchin Street, Tel Aviv
           (hereinafter: "THE EMPLOYER")
                                                        PARTY OF THE THIRD PART;
                                                        ------------------------


WHEREAS:         Until January 30, 2003, Izzy was employed as an independent
                 worker in the position of its CEO, and beginning on that date,
                 subsequent to a legal arrangement and the decision of the
                 auditing committee, the Board of Directors and the Company's
                 General Meeting, Izzy shall serve as the acting Chairman of the
                 Board of Directors on a full-time basis, instead of his
                 position as Company CEO, and he shall have the status of an
                 independent contractor providing his services to the Company
                 through the Employer;

AND WHEREAS:     Izzy is an employee of the Employer;

AND WHEREAS:     The Company and the Employer wish to establish the terms of the
                 contractual agreement between them, while taking into
                 consideration the fact that




                 Izzy was the party who requested that the relationship be
                 founded on an independent contractor basis through the
                 Employer, compared with that of an employee;

THEREFORE, THE PARTIES DO HEREBY DECLARE, AGREE AND STIPULATE AS FOLLOWS:

1.   PREAMBLE AND HEADINGS

     1.1  The preamble to this agreement constitutes an integral part thereof.

     1.2  The section headings are intended for the convenience of the reader
          only, and should not be used for any interpretive purpose whatsoever.

2.   SUPERVISION OF THE SERVICES, THEIR QUALITY AND NATURE
     In the context of providing the services to be defined below, which the
     Employer will provide through Izzy, the Employer and Izzy will be subject
     to review regarding the quality and nature of the services. The review will
     be carried out by the Company's Board of Director and/or an internal
     auditor and/or the shareholders and/or a party whom the shareholders
     indicate. The Employer undertakes to draw conclusions from the review and
     to correct whatever may require correction, as stated in the review.

3.   DEFINITION OF THE SERVICES
     The Employer shall provide the Company, through Izzy, with administrative
     services of full-time acting Chairman of the Board of Directors and Advisor
     to the Company CEO. The services shall be provided solely by Izzy
     personally. In the context of the services it provides to the Company
     through Izzy, the Employer will see to, inter alia, the following matters
     (above and hereinafter: "THE SERVICES"):

                                       2


     3.1  Ongoing consulting and supervision for the Company CEO.

     3.2  Responsible for activities of subsidiary companies in Israel and
          abroad.

     3.3  Maintaining ongoing and proper work relations with the Company's Board
          of Directors, Izzy's subordinates, and anyone else with whom Izzy may
          be required to be in contact in order to perform his job.

     3.4  Submitting ongoing activity reports to the Company's Board of
          Directors, as well as any other information that may be required of
          him, and providing any assistance that may be needed by the CEO with
          regard to advice and running Board of Directors meetings.

     3.5  Promoting a sense of team spirit and values of high quality service
          among the Company's employees and his subordinates.

     3.6  Quality management, including proposing efficiency initiatives and
          measures to the Company's Board of Directors.

     3.7  Carrying out any assignment given to him by the Company's Board of
          Directors.

4.   Izzy undertakes to immediately notify the Board of Directors concerning any
     significant matter within the Company pertaining to his areas of
     responsibility, and to report to any such matter to the Board of Directors
     without delay.

5.   Izzy undertakes to perform his job faithfully and with dedication, and to
     use all of his skills, knowledge, experience and time for Company's benefit
     and its advancement.

                                       3


6.   Izzy undertakes to notify the Company's Board of Directors immediately and
     without delay, regarding any matter or issue regarding which he has a
     personal stake that creates and/or is liable to create a conflict of
     interests with the Services and with the good of the Company.

7.   As Izzy is an independent contractor employed through the Employer and
     since, even if Izzy were to be considered a Company employee for any reason
     whatsoever - Izzy's job pursuant to this agreement is considered to be one
     of those positions that requires a special degree of personal trust, as
     defined in the Hours of Work and Rest Law, 5711 - 1951; therefore, the
     provisions of such law shall not apply to Izzy nor will he be entitled to
     any additional consideration whatsoever for his work, other than that which
     is expressly set out in this agreement.

8.
     8.1  The Employer undertakes to provide Izzy's Services anywhere they may
          be required, either in Israel or abroad, and without limiting the
          hours and within reason.

9.   Upon the termination of its Services to the Company through Izzy, for any
     reason whatsoever, the Employer and Izzy undertake to transfer their job in
     an orderly fashion to the person the Company shall so instruct them, and to
     surrender to the Company all documents, information and any other material
     he has received or prepared in connection with the Services, until the end
     of the agreement.

10.  THE CONSIDERATION FOR THE SERVICES

                                       4


     As final and absolute consideration for providing the Services to the
     Company and for fulfilling all of the Employer's and Izzy's obligations
     pursuant to this agreement, the Employer and Izzy shall be entitled to the
     following:

     10.1 The Company shall pay monthly consideration to the Employer in the
          amount of 63,250 (sixty-three thousand, two hundred and fifty) New
          Israeli Shekels, plus Value Added Tax (hereinafter: "THE
          CONSIDERATION"), to be paid against the receipt of a proper tax
          invoice and an exemption from tax withholding at the source. In the
          absence of verification of such an exemption, the Company may deduct
          from the Consideration any tax liability imposed on the Employer, and
          which it is required by law to withhold at the source. The
          Consideration shall be linked to the Consumer Price Index, beginning
          with the CPI published on January 30, 2003. It is hereby clarified
          that except as specified below, the Consideration is final and
          absolute consideration for the Services, and any tax liability that
          applies to Izzy in connection with his receipt of the said
          Consideration shall be paid by him.

          In addition to the Consideration, the Company shall pay for Izzy the
          sum of 11,000 (eleven thousand) New Israeli Shekels for managers'
          insurance, to be chosen by Izzy.

          The Employer alone (on behalf of Izzy) shall bear the payment of
          income tax, National Insurance payments, health insurance payments and
          any other payment to any tax authority whatsoever regarding the
          Consideration. In the event that, as a result of this agreement,
          additional tax costs whatsoever shall apply, they shall all apply to
          the Employer and the Company shall not be required to pay them, even
          if requests shall be sent thereto in this regard.


                                       5


     10.2 Izzy shall be entitled to a cellular telephone at the Company's
          expense, and its related costs. Izzy will return the telephone to the
          Company immediately upon the conclusion of the provision of the
          Services by Izzy. Furthermore, Ituran shall pay the Employer at the
          time the Consideration is paid, the sum equivalent to two hundred and
          fifty New Israeli Shekels linked to the CPI of February 1998, as its
          portion of the expense of Izzy's work-related telephone calls from
          home. In addition, the Company shall reimburse Izzy for work-related
          overseas phone calls made from home.

     10.3 Izzy will be entitled to reimbursement for expenses, including per
          diem expenses in Israel and abroad, upon presentation of receipts
          and/or a report in accordance with the Company's accepted procedures,
          and he shall receive two company credit cards to pay for these
          expenses.

     10.4 The Company shall lease a car for Izzy at a const of NIS 8,500 per
          month, and shall bear expenses with regard to gas, insurance and other
          ancillary costs.

     10.5 Izzy will be entitled to vacation of 25 work days for each full year
          of work (based on 6 work days per week), or the financial equivalent;
          and payment of the equivalent of 13 recreation days in the amount of
          NIS 346 per day for each recreation day (linked to February 1998 CPI).

     10.6 In the event of Izzy's illness, the Company shall be entitled to the
          Consideration payment, as set forth in the Sick Leave Law.

     10.7 Izzy shall be entitled to Company profits at a rate of 5% of the
          Company's pre-tax revenue, plus the Company's share of profits (or
          loss) from consolidated companies, on the basis of audited, combined
          financial statements prepared according to

                                       6


          standard accounting principles, as of December 31 of each calendar
          year in which he shall be employed (or any relative part thereof,
          respectively). The said payment shall be made immediately following
          the approval of the Company's audited financial statement.

11.  CONFIDENTIALITY AND NON-COMPETITION

     11.1 Izzy undertakes to keep absolutely confidential any information that
          he receives during and upon the provision of the Services to the
          Company pursuant to this agreement. "Information" shall, in this
          section: include prices, costs, lists of suppliers, customer lists,
          plans, quantities, profit and loss calculations, market research,
          computer software, information systems and any other Company
          information that is not in the public domain. Izzy also undertakes not
          to damage the Company's and/or the shareholders' reputation in any
          manner whatsoever. Izzy's undertaking pursuant to this section shall
          remain in effect even after the conclusion of this agreement.

     11.2 For a period of twelve months from the date on which the provision of
          the Services to the Company shall be terminated, Izzy will not engage,
          neither within the territory of the State of Israel nor within the
          territory of any country in which the Company is active, in any
          business that does or that could directly compete with the Company -
          either by himself and/or through any other agent whatsoever acting on
          his behalf, either as a salaried employee or as an independent worker,
          either directly or indirectly, unless the Company gives its advance
          written consent thereto.

     11.3 To remove all doubt, the parties hereby declare that all existing
          and/or future developments, improvements in the Company's products and
          any intellectual property that may result from Izzy's provision of
          Services to the Company,

                                       7


          including registered/unregistered rights, whether developed by Izzy
          during work hours or outside of work hours, whether at the Company's
          offices or outside of them - including in Izzy's home - whether in
          Israel or abroad, shall be the Company's exclusive property and
          possession.

12.  VALIDITY OF THE AGREEMENT

     12.1 This agreement will enter into effect beginning on January 30, 2003.
          When this agreement shall take effect, the validity of Izzy's
          employment agreement as Company CEO shall expire. This agreement shall
          remain in effect for two years, after which time it shall be renewed
          automatically for an additional two-year period, and so on.

     12.2 Each of the parties may inform the other parties regarding termination
          of the agreement, by way of written notification that shall be given
          at least 180 days in advance (hereinafter: "THE ADVANCE NOTIFICATION
          PERIOD"). During the Advance Notification Period, the provisions of
          this agreement shall continue to bind the parties, but the Company has
          the right to notify Izzy that it does not wish to receive his services
          and that he should not come to the Company's offices. In such a case,
          Izzy shall be entitled to all of his rights pursuant to this
          agreement. At the end of the Advance Notification Period, Izzy will
          return the Company's cellular phone, the car and any Company equipment
          that may be in his possession.

     12.3 Notwithstanding the provisions of section 12.2 above, the Company may
          terminate Izzy's employment immediately, without prior notice and
          without any compensation, upon the occurrence of any one of the
          following:

          12.3.1  Izzy's conviction for a dishonorable offense.

                                       8




          12.3.2  Izzy's breach of his fiduciary duty to the Company.

          12.3.3  Izzy's breach of his duty of care with regard to the Company.

          12.3.4  Izzy's breach of this Agreement through the disclosure of the
                  Company's secrets or by competing with the Company.


     12.4 Without derogating from the generality of the above provisions of this
          section, this Agreement will be automatically cancelled upon the
          dissolution of the Company - as soon as the dissolution shall take
          effect.

13.  IZZY - AN INDEPENDENT CONTRACTOR

     13.1 Izzy hereby declares and undertakes that his status vis-a-vis the
          Company is that of an independent contractor, and that there is no
          employee-employer relationship between him and the Company.

     13.2 Izzy is aware that the Consideration paid to him as described above is
          paid to the Employer by the Company on the basis of his being an
          independent contractor and on the basis of there being no
          employee-employer relationship with regard to this matter; if such a
          relationship existed, it would significantly reduce the amount of the
          Consideration the Company would be paying to Izzy.

     13.3 Based on the above, the parties agree that if, in the future, a
          judicial body determines that notwithstanding the provisions of this
          agreement, there is an employee-employer relationship between the
          parties (or with one of the companies in the Ituran Group,
          hereinafter: "ITURAN"), an alternative arrangement will

                                       9


          apply between the parties whereby 40% of the Consideration received by
          Izzy from the Company in accordance with this agreement will be
          considered an indexed loan, at an annual interest rate of 5%, and
          given to the Employer and Izzy by the Company (hereinafter: "THE
          LOAN"), and the remaining balance of 60% will be considered as wages
          for labor, along with the additional conditions usually paid to a
          Company employee.

     13.4 The Loan and its proceeds will be viewed as being immediately payable
          the day on which the Company or Ituran is first requested to recognize
          the existence of an employee-employer relationship between Izzy and
          the Company and/or Ituran. In such a case, Izzy will be required to
          repay to the Company, immediately upon its first written request, the
          Loan and its proceeds less the sum of all the payments owed to Izzy as
          severance pay and additional social benefits, according to a final
          court ruling.

     13.5 Without derogating from the above, if for any reason whatsoever, the
          tax and/or National Insurance Institute and/or health and/or any other
          authorities demand the payment of any tax provisions whatsoever from
          the Company resulting from the Company's contractual arrangement
          pursuant to this agreement with the Employer and Izzy, the Employer
          and Izzy undertake to indemnify the Company for any such payment,
          immediately upon the Company's first written request.

14.  GENERAL

     14.1 This agreement is an individual and special labor agreement between
          the Company, and the Employer and Izzy, and it fully regulates all of
          the terms of Izzy's employment by the Company. The Employer and Izzy
          undertake to keep the contents of this agreement completely
          confidential.

                                       10


     14.2 Any promise, obligation, undertaking, declaration, representation or
          the like that were given or made on behalf of the Company and/or its
          shareholders prior to the signing of this agreement - if any such were
          made - are hereby null and void, unless and to the extent that they
          are expressly included in this agreement.

     14.3 If any provision whatsoever of this agreement is revoked by any court
          whatsoever, or is declared to be invalid for any reason whatsoever,
          the other provisions of this agreement shall remain in effect.

     14.4 The parties' addresses are as specified in the preamble to this
          agreement. Any notice sent by one party to another via registered mail
          will be considered to have been received by the addressee at the end
          of 72 hours from the time of its receipt by the post office for
          delivery, and if it is hand delivered - at the time of actual
          delivery. If any party changes its address, he shall notify the other
          parties in writing.

     14.5 The parties are signing this agreement after reviewing it carefully,
          and they declare that they are aware of the substance of the
          obligations they are taking upon themselves and according thereto, and
          of their meanings.



        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES:

(Signature)                         Ituran  (Stamp and signature)
----------------------              -----------------------------
IZZY                                THE COMPANY


(Stamp and signature)
----------------------
THE EMPLOYER


                                       11










                                                                   EXHIBIT 10.23

                    AGREEMENT WITH AN INDEPENDENT CONTRACTOR
                    ----------------------------------------

           MADE AND EXECUTED IN TEL AVIV ON THE 5TH OF SEPTEMBER 2002

BETWEEN:     ITURAN LOCATION AND CONTROL, LTD.
             Of: 3 Hashikma Street
             Azor
             (hereinafter: "THE COMPANY")
                                                        PARTY OF THE FIRST PART;
                                                        ------------------------

AND          MR. EYAL SHERATZKY
             ID No. 023909641
             Of: 10 Dulchin Street
             Tel Aviv
             (hereinafter: "THE CONTRACTOR")
                                                       PARTY OF THE SECOND PART;
                                                       -------------------------

AND          A. SHERATZKY HOLDINGS LTD.
             Private Company No. 51-3230268
             Of: 14 Dulchin Street, Tel Aviv
             (hereinafter: "THE EMPLOYER")
                                                        PARTY OF THE THIRD PART;
                                                        ------------------------


WHEREAS:       Until August 1, 2002, the Contractor was employed as an employee
               of the Company in the position of its Deputy CEO, and beginning
               on this date, subsequent to the express wish of the Contractor to
               work as an independent contractor providing his services to the
               Company through the Employer, the Company has granted his
               request;

AND WHEREAS:   The Contractor is an employee of the Employer;

AND WHEREAS:   The Company and the Employer wish to establish the terms of the
               contractual agreement between them, while taking into
               consideration the fact that the Contractor was the party who
               requested that the




               relationship be founded on an independent contractor basis
               through the Employer, compared with that of an employee;


THEREFORE, THE PARTIES DO HEREBY DECLARE, AGREE AND STIPULATE AS FOLLOWS:

1.   PREAMBLE AND HEADINGS

     1.1  The preamble to this agreement constitutes an integral part thereof.

     1.2  The section headings are intended for the convenience of the reader
          only, and should not be used for any interpretive purpose whatsoever.

2.   SUPERVISION OF THE SERVICES, THEIR QUALITY AND NATURE

     In the context of providing the services to be defined below, which the
     Employer will provide through the Contractor, the Employer and the
     Contractor will be subject to review regarding the quality and nature of
     the services. The review will be carried out by the Company's management,
     and/or its shareholders and/or a party whom the shareholders indicate,
     including the Company's CEO. The Employer undertakes to draw conclusions
     from the review and to correct whatever may require correction, as stated
     in the review.

3.   DEFINITION OF THE SERVICES

     The Employer shall provide the Company with administrative services through
     the Contractor, similar to those services that the Contractor had provided
     the Company as an employee - Deputy CEO. The services will be provided
     personally, solely by the Contractor. In the context of the services it



                                       2


     provides to the Company through the Contractor, the Employer will see to,
     inter alia, the following matters (above and hereinafter: "THE SERVICES"):

     3.1  Maintaining ongoing and proper work relations with the Company's Board
          of Directors, the Contractor's subordinates, and anyone else with whom
          the Contractor may be required to be in contact in order to perform
          his job.

     3.2  Submitting ongoing activity reports to the Company's CEO and its Board
          of Directors, as well as any other information that may be required of
          him, and providing any assistance needed by the Chairman of the Board
          of Directors in running the Board of Directors meetings.

     3.3  Promoting a sense of team spirit and values of high quality service
          among the Company's employees and his subordinates.

     3.4  Quality management, including proposing efficiency initiatives and
          measures to the Company's Board of Directors.

     3.5  Carrying out any assignment given to him by the CEO and the Company's
          Board of Directors.

     3.6  Responsibility for the Company's ongoing activity.

4.   The Contractor undertakes to immediately notify the CEO concerning any
     significant matter within the Company pertaining to his areas of
     responsibility, and to report any such matter to the CEO without delay.



                                       3


5.   The Contractor undertakes to perform his job faithfully and with
     dedication, and to use all of his skills, knowledge, experience and time
     for Company's benefit and its advancement.

6.   The Contractor undertakes to notify the Company's Board of Directors
     immediately and without delay, regarding any matter or issue regarding
     which he has a personal stake that creates and/or is liable to create a
     conflict of interests with the Services and with the good of the Company.

7.   As the Contractor is an independent contractor employed through the
     Employer and since, even if the Contractor were to be considered a Company
     employee for any reason whatsoever - the Contractor's job pursuant to this
     agreement is considered to be one of those positions that requires a
     special degree of personal trust, as defined in the Hours of Work and Rest
     Law, 5711 - 1951; therefore, the provisions of such law shall not apply to
     the Contractor nor will he be entitled to any additional consideration
     whatsoever for his work, other than that which is expressly set out in this
     agreement.

8.

     8.1  The Employer undertakes to provide the Contractor's Services anywhere
          they may be required, either in Israel or abroad, and without limiting
          the hours and within reason.

     8.2  If the Contractor is required to provide services abroad, the terms
          regarding the performance of such service (expenses) shall be agreed
          upon with him.



                                       4


9.   Upon the termination of its Services to the Company through the Contractor,
     for any reason whatsoever, the Employer and the Contractor undertake to
     transfer their job in an orderly fashion to the person the Company shall so
     instruct them, and to surrender to the Company all documents, information
     and any other material he has received or prepared in connection with the
     Services, until the end of the agreement.

10.  THE CONSIDERATION FOR THE SERVICES

     As final and absolute consideration for providing the Services to the
     Company and for fulfilling all of the Employer's and the Contractor's
     obligations pursuant to this agreement, the Employer and the Contractor
     shall be entitled to the following:

     10.1 The Company shall pay monthly consideration to the Employer in the
          amount of 48,892 (forty-eight thousand, eight hundred and ninety two)
          New Israeli Shekels, which constitutes the cost of employing the
          Contractor as an employee of the Company, as of July 2002 (less the
          cost of a car and its "grossing-up"), plus Value Added Tax
          (hereinafter: "THE CONSIDERATION"), to be paid against the receipt of
          a proper tax invoice and an exemption from tax withholding at the
          source. In the absence of verification of such an exemption, the
          Company may deduct from the Consideration any tax liability imposed on
          the Employer, and which it is required by law to withhold at the
          source. It is hereby clarified that the Consideration is final and
          absolute consideration for the Services, and any tax liability that
          applies to the Contractor in connection with the said Consideration
          shall be paid by him.

          The Employer alone (on behalf of the Contractor) shall bear the
          payment of income tax, National Insurance payments, health


                                       5


          insurance payments and any other payment to any tax authority
          whatsoever regarding the Consideration.

     10.2 The Contractor shall be entitled to a cellular telephone at the
          Company's expense. The Contractor will return the telephone to the
          Company immediately upon the conclusion of the provision of the
          Services by the contractor.

     10.3 The Contractor will be entitled to reimbursement for expenses,
          including per diem expenses in Israel and abroad, upon presentation of
          receipts and/or a report in accordance with the Company's accepted
          procedures.

     10.4 The Contractor will be entitled to a car at the Company's expense, of
          the same standard that he received as a Company employee, and the
          Company will gross up the value of the said car for the Contractor.

11.  CONFIDENTIALITY AND NON-COMPETITION

     11.1 The Contractor undertakes to keep absolutely confidential any
          information that he receives during and upon the provision of the
          Services to the Company pursuant to this agreement. "Information"
          shall, in this section: include prices, costs, lists of suppliers,
          customer lists, plans, quantities, profit and loss calculations,
          market research, computer software, information systems and any other
          Company information that is not in the public domain. The Contractor
          also undertakes not to damage the Company's and/or the shareholders'
          reputation in any manner whatsoever. The Contractor's undertaking
          pursuant to this section shall remain in effect even after the
          conclusion of this agreement.



                                       6


     11.2 For a period of twelve months from the date on which the provision of
          the Services to the Company shall be terminated, the Contractor will
          not engage, neither within the territory of the State of Israel nor
          within the territory of any country in which the Company is active, in
          any business that does or that could directly compete with the Company
          - either by himself and/or through any other agent whatsoever acting
          on his behalf, either as a salaried employee or as an independent
          worker, either directly or indirectly, unless the Company gives its
          advance written consent thereto.

     11.3 To remove all doubt, the parties hereby declare that all existing
          and/or future developments, improvements in the Company's products and
          any intellectual property that may result from the provision of the
          Contractor's Services to the Company, including
          registered/unregistered rights, whether developed by the Contractor
          during work hours or outside of work hours, whether at the Company's
          offices or outside of them - including in the Contractor's home -
          whether in Israel or abroad, shall be the Company's exclusive property
          and possession.

12.  VALIDITY OF THE AGREEMENT

     12.1 This agreement will enter into effect beginning on August 1, 2002.

     12.2 Each of the parties may inform the other parties regarding termination
          of the agreement, by way of written notification that shall be given
          at least six months in advance (hereinafter: "THE ADVANCE NOTIFICATION
          PERIOD"). During the Advance Notification Period, the provisions of
          this agreement shall


                                       7


          continue to bind the parties, but the Company has the right to notify
          the Contractor that it does not wish to receive the Contractor's
          services and that he should not come to the Company's offices. In such
          a case, the Contractor shall be entitled to all of his rights pursuant
          to this agreement. At the end of the Advance Notification Period, the
          Contractor will return the Company's cellular phone, the car and any
          Company equipment that may be in his possession.

     12.3 Notwithstanding the provisions of section 12.2 above, the Company may
          terminate the Contractor's employment immediately, without prior
          notice and without any compensation, upon the occurrence of any one of
          the following:

          12.3.1 The Contractor's conviction for a dishonorable offense.

          12.3.2 The Contractor's breach of his fiduciary duty to the Company.

          12.3.3 The Contractor's breach of this Agreement through the
                 disclosure of the Company's secrets or by competing with the
                 Company.

          12.3.4 The Contractor's breach of this Agreement through the
                 disclosure of the Company's secrets or competition with the
                 Company.

     12.4 Without derogating from the generality of the above provisions of this
          section, this Agreement will be automatically cancelled upon


                                       8


          the dissolution of the Company - as soon as the dissolution shall take
          effect.

13.  THE CONTRACTOR - AN INDEPENDENT CONTRACTOR

     13.1 The Contractor hereby declares and undertakes that his status
          vis-a-vis the Company is that of an independent contractor, and that
          there is no employee-employer relationship between him and the
          Company.

     13.2 The Contractor is aware that the Consideration paid to him as
          described above is paid to the Employer by the Company on the basis of
          his being an independent contractor and on the basis of there being no
          employee-employer relationship with regard to this matter; if such a
          relationship existed, it would significantly reduce the amount of the
          Consideration the Company would be paying to the Contractor.

     13.3 Based on the above, the parties agree that if, in the future, a
          judicial body determines that notwithstanding the provisions of this
          agreement, there is an employee-employer relationship between the
          parties (or with one of the companies in the Ituran Group,
          hereinafter: "ITURAN"), an alternative arrangement will apply between
          the parties whereby 40% of the Consideration received by the
          Contractor from the Company in accordance with this agreement will be
          considered an indexed loan, at an annual interest rate of 5%, and
          given to the Employer and the Contractor by the Company (hereinafter:
          "THE LOAN"), and the remaining balance of 60% will be considered as
          wages for labor, along with the additional conditions usually paid to
          a Company employee.



                                       9


     13.4 The Loan and its proceeds will be viewed as being immediately payable
          the day on which the Company or Ituran is first requested to recognize
          the existence of an employee-employer relationship between the
          Contractor and the Company and/or Ituran. In such a case, the
          Contractor will be required to repay to the Company, immediately upon
          its first written request, the Loan and its proceeds less the sum of
          all the payments owed to the Contractor as severance pay and
          additional social benefits, according to a final court ruling.

     13.5 Without derogating from the above, if for any reason whatsoever, the
          tax and/or National Insurance Institute and/or health and/or any other
          authorities demand the payment of any tax provisions whatsoever from
          the Company resulting from the Company's contractual arrangement
          pursuant to this agreement with the Employer and the Contractor, the
          Employer and the Contractor undertake to indemnify the Company for any
          such payment, immediately upon the Company's first written request.

     13.6 Mr. Izzy Sheratzky will be a personal guarantor for the fulfillment of
          the Contractor's and the Employer's obligations pursuant to this
          section.

14.  GENERAL

     14.1 This agreement is an individual and special labor agreement between
          the Company, and the Employer and the Contractor, and it fully
          regulates all of the terms of the Contractor's employment by the
          Company. The Employer and the Contractor undertake to keep the
          contents of this agreement completely confidential.



                                       10


     14.2 Any promise, obligation, undertaking, declaration, representation or
          the like that were given or made on behalf of the Company and/or its
          shareholders prior to the signing of this agreement - if any such were
          made - are hereby null and void, unless and to the extent that they
          are expressly included in this agreement.

     14.3 If any provision whatsoever of this agreement is revoked by any court
          whatsoever, or is declared to be invalid for any reason whatsoever,
          the other provisions of this agreement shall remain in effect.

     14.4 The parties' addresses are as specified in the preamble to this
          agreement. Any notice sent by one party to another via registered mail
          will be considered to have been received by the addressee at the end
          of 72 hours from the time of its receipt by the post office for
          delivery, and if it is hand delivered - at the time of actual
          delivery. If any party changes its address, he shall notify the other
          parties in writing.

     14.5 The parties are signing this agreement after reviewing it carefully,
          and they declare that they are aware of the substance of the
          obligations they are taking upon themselves and according thereto, and
          of their meanings.




          AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES:


(Signature)                                        (Stamp and signature)
-----------------------------                      -----------------------------
THE CONTRACTOR                                     THE COMPANY


(Stamp and signature)
-----------------------------
THE EMPLOYER



                                       11


I the undersigned Izzy Sheratzky, ID Number 007495443, of 14 Dulchin Street, Tel
Aviv, do hereby guarantee to the Company, through a personal guarantee, the
Employer's and the Contractor's undertakings as stated in Paragraph 13 above.


(Signature)
-----------------------------
Izzy Sheratzky



                                       12




            ADDENDUM TO THE AGREEMENT WITH AN INDEPENDENT CONTRACTOR,
                             DATED SEPTEMBER 5, 2002


             MADE AND EXECUTED IN TEL AVIV ON OCTOBER 28, 2002

BETWEEN:     ITURAN LOCATION AND CONTROL, LTD.
             3 Hashikma Street
             Azor
             (hereinafter: "THE COMPANY")
                                                        PARTY OF THE FIRST PART;
                                                        ------------------------

AND          MR. EYAL SHERATZKY
             ID No. 023909641
             10 Dulchin Street
             Tel Aviv
             (hereinafter: "THE CONTRACTOR")
                                                       PARTY OF THE SECOND PART;
                                                       -------------------------

AND          A. SHERATZKY HOLDINGS LTD.
             Private Company No. 51-3230268
             14 Dulchin Street, Tel Aviv
             (hereinafter: "THE EMPLOYER")
                                                        PARTY OF THE THIRD PART;
                                                        ------------------------


WHEREAS:       On September 5, 2002, the parties signed an independent
               contractor agreement (hereinafter: "THE AGREEMENT"), pursuant to
               which, inter alia, the cost of the Contractor's employment will
               remain as is without change, as it was prior to the signing of
               the Agreement (hereinafter, "THE COST");

AND WHEREAS:   The parties wish to add to the Agreement provisions protecting
               the Company against cases in which it is required to make
               additional payments to any party whatsoever and as a result of
               which the Cost increases, through the receipt of



                                       13


               indemnification from the Contractor as described below;

          THEREFORE THE PARTIES HAVE AGREED AND STIPULATED AS FOLLOWS:

1.   The preamble to this agreement constitutes an integral part thereof.

2.   The provisions of the agreement shall remain in effect, unless and to the
     extent they are expressly amended in this Addendum.

3.   The Contractor undertakes vis a vis the Company that in any event wherein
     the Company is required to pay to the tax authorities, or to other
     authorities, any tax provisions or other payments whatsoever, as a result
     of the payment of which the Cost increases, and if such additional payments
     derive from the signing of the Agreement and from the Contractor's change
     from the status of an employee to that of an independent contractor
     (including pursuant to the manner in which the Consideration is paid), the
     Contractor will indemnify the Company for the sums for which the Company is
     liable (if it is liable) immediately upon its first written request.

4.   Upon receiving the request for payment of the tax provisions as stated
     above, the Company shall notify the Contractor immediately and will
     transfer to him all of the material relevant to the request. The Contractor
     will undertake, at his responsibility and at his expense, the proceedings
     with the tax authorities, and the Company may not reach a compromise with
     the tax authorities without the Contractor's advance written consent.

5.   The Employer will be a guarantor of the Contractor's obligation pursuant to
     this addendum.

6.   The Contractor and the Employer hereby authorize the Company to offset any
     amount with which it is charged by the tax authorities, and which the
     Contractor has not had reduced or cancelled as stated in Paragraph 4 above,
     from the


                                       14


     Consideration owed to them pursuant to the agreement, to the extent that
     the amount of the debt is not paid within 7 days from the date of the
     request.




                                       15





     AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURE:

(Signature)                                        (Stamp and signature)
-----------------------------                      -----------------------------
THE CONTRACTOR                                     THE COMPANY


(Stamp and signature)
-----------------------------
THE EMPLOYER




                                       16



ITURAN
CAR COMMUNICATION & LOCATION

                        ITURAN LOCATION AND CONTROL LTD.
                        --------------------------------
                                  "THE COMPANY"

                                     MINUTES

 FROM A SPECIAL GENERAL MEETING THAT TOOK PLACE AT THE COMPANY'S OFFICES
ON 2.24.04 AT 3:30PM

IN ATTENDANCE: SHAREHOLDERS LISTED IN ATTACHMENT A OF THESE MINUTES.
ELECTED CHAIRMAN: ADV. GUY AHARONOV.

ON THE AGENDA:

1.  Discussing and making a decision on adding an annual bonus to the terms of
    employment of the company's co-CEOs as of 2004. The inspection committee and
    the directorate indicated in their arguments that so far the two co-CEOs
    have not received any monetary bonus in accordance with the company's
    operations and that their terms of employment have not been changed over the
    past four years. If was further indicated that awarding bonuses to CEOs as
    percentage of the company's profits is customary among public companies in
    general and among subsidiary companies of the group in particular, as part
    of an encouragement plan for the co-CEOs and strengthening the connection
    between the company's operations and the compensation that they are given.
    In addition, it was indicated that the salary of the co-CEOs of the company
    is significantly lower that the salary of the CEOs of the subsidiary
    companies.

There is a quorum and the meeting started.

IT WAS DECIDED WITH A MAJORITY OF VOTES ACCORDING TO A QUORUM VOTING AS STATED
IN ATTACHMENT A OF THESE MINUTES:

After the approval of the inspection committee and the company's directorate, it
was decided to approve a change in the employment terms of the company's co-CEOs
so that each one of the co-CEOs (Eyal and Nir Sheratzky) would be entitled to a
1% (one percent) annual bonus from the company's profits before taxes plus the
company's share in the profits (or losses) of included companies, based on its
consolidated and inspected financial reports that are executed according to
customary accounting rules on 12/31 of each calendar year in which he is
employed (or any relative part of it, respectively) as of 2004.

IN FAVOR - 3,477,079 SHARES (75.69%); AGAINST - 1,097,594 SHARES (23.9%);
ABSTAIN - 19,193 SHARES (0.41%). TOTAL NUMBER OF PARTICIPANTS AND VOTES -
4,593,866 SHARES.

WITHOUT ANY ADDITIONAL SUBJECTS ON THE AGENDA, THE MEETING HAS ENDED.

[Signature]
Adv. Guy Aharonov, Chairman
                                                                    Minutes 1164

  3 Hashikma Street, Azor Industrial Area, 58001. Mailing address:
                        P.O. Box 11473 Azor 58001 Israel.
                           Telephone: +972-3-5571314;
                               Fax: +972-3-5571393





[Attachment A, which contains the shareholders in attendance in the meeting has
been omitted]












                                                                   EXHIBIT 10.24

                    AGREEMENT WITH AN INDEPENDENT CONTRACTOR

           MADE AND EXECUTED IN TEL AVIV ON THE 5TH OF SEPTEMBER 2002

BETWEEN: ITURAN LOCATION AND CONTROL, LTD.
         Of:  3 Hashikma Street
         Azor
         (hereinafter: "THE COMPANY")
                                                       PARTY OF THE FIRST PART;

AND      MR. NIR SHERATZKY
         ID No. 02925187-7
         Of:  13 Moshe Perlok Street
         Tel Aviv
         (hereinafter: "THE CONTRACTOR")
                                                      PARTY OF THE SECOND PART;

AND      A. SHERATZKY HOLDINGS LTD.
         Private Company No. 51-3230268
         Of:  14 Dulchin Street, Tel Aviv
         (hereinafter: "THE EMPLOYER")
                                                       PARTY OF THE THIRD PART;


WHEREAS:             Until August 1, 2002, the Contractor was employed as an
                     employee of the Company in the position of its Deputy CEO,
                     and beginning on this date, subsequent to the express wish
                     of the Contractor to work as an independent contractor
                     providing his services to the Company through the Employer,
                     the Company has granted his request;

AND WHEREAS:         The Contractor is an employee of the Employer;

AND WHEREAS:         The Company and the Employer wish to establish the
                     terms of the contractual agreement between them, while
                     taking into consideration the fact that the Contractor was
                     the party who requested that the




                     relationship be founded on an independent contractor basis
                     through the Employer, compared with that of an employee;

THEREFORE, THE PARTIES DO HEREBY DECLARE, AGREE AND STIPULATE AS FOLLOWS:

1.  PREAMBLE AND HEADINGS

    1.1     The preamble to this agreement constitutes an integral part thereof.

    1.2     The section headings are intended for the convenience of the reader
            only, and should not be used for any interpretive purpose
            whatsoever.

2.  SUPERVISION OF THE SERVICES, THEIR QUALITY AND NATURE

    In the context of providing the services to be defined below, which the
    Employer will provide through the Contractor, the Employer and the
    Contractor will be subject to review regarding the quality and nature of the
    services. The review will be carried out by the Company's management, and/or
    its shareholders and/or a party whom the shareholders indicate, including
    the Company's CEO. The Employer undertakes to draw conclusions from the
    review and to correct whatever may require correction, as stated in the
    review.

3.  DEFINITION OF THE SERVICES

    The Employer shall provide the Company with administrative services through
    the Contractor, similar to those services that the Contractor had provided
    the Company as an employee - Deputy CEO. The services will be provided
    personally, solely by the Contractor. In the context of the services it

                                       2


    provides to the Company through the Contractor, the Employer will see to,
    inter alia, the following matters (above and hereinafter: "THE SERVICES"):

    3.1     Maintaining ongoing and proper work relations with the Company's
            Board of Directors, the Contractor's subordinates, and anyone else
            with whom the Contractor may be required to be in contact in order
            to perform his job.

    3.2     Submitting ongoing activity reports to the Company's CEO and its
            Board of Directors, as well as any other information that may be
            required of him, and providing any assistance needed by the Chairman
            of the Board of Directors in running the Board of Directors
            meetings.

    3.3     Promoting a sense of team spirit and values of high quality service
            among the Company's employees and his subordinates.

    3.4     Quality management, including proposing efficiency initiatives and
            measures to the Company's Board of Directors.

    3.5     Carrying out any assignment given to him by the CEO and the
            Company's Board of Directors.

    3.6     Responsibility for the Company's ongoing activity.

4.  The Contractor undertakes to immediately notify the CEO concerning any
    significant matter within the Company pertaining to his areas of
    responsibility, and to report any such matter to the CEO without delay.

                                       3


5.  The Contractor undertakes to perform his job faithfully and with dedication,
    and to use all of his skills, knowledge, experience and time for Company's
    benefit and its advancement.

6.  The Contractor undertakes to notify the Company's Board of Directors
    immediately and without delay, regarding any matter or issue regarding which
    he has a personal stake that creates and/or is liable to create a conflict
    of interests with the Services and with the good of the Company.

7.  As the Contractor is an independent contractor employed through the Employer
    and since, even if the Contractor were to be considered a Company employee
    for any reason whatsoever - the Contractor's job pursuant to this agreement
    is considered to be one of those positions that requires a special degree of
    personal trust, as defined in the Hours of Work and Rest Law, 5711 - 1951;
    therefore, the provisions of such law shall not apply to the Contractor nor
    will he be entitled to any additional consideration whatsoever for his work,
    other than that which is expressly set out in this agreement.

8.

    8.1     The Employer undertakes to provide the Contractor's Services
            anywhere they may be required, either in Israel or abroad, and
            without limiting the hours and within reason.

    8.2     If the Contractor is required to provide services abroad, the terms
            regarding the performance of such service (expenses) shall be agreed
            upon with him.

                                       4


9.  Upon the termination of its Services to the Company through the Contractor,
    for any reason whatsoever, the Employer and the Contractor undertake to
    transfer their job in an orderly fashion to the person the Company shall so
    instruct them, and to surrender to the Company all documents, information
    and any other material he has received or prepared in connection with the
    Services, until the end of the agreement.

10. THE CONSIDERATION FOR THE SERVICES

    As final and absolute consideration for providing the Services to the
    Company and for fulfilling all of the Employer's and the Contractor's
    obligations pursuant to this agreement, the Employer and the Contractor
    shall be entitled to the following:

    10.1    The Company shall pay monthly consideration to the Employer in the
            amount of 49,307 (forty-nine thousand, three hundred and seven) New
            Israeli Shekels, which constitutes the cost of employing the
            Contractor as an employee of the Company, as of July 2002 (less the
            cost of a car and its "grossing-up"), plus Value Added Tax
            (hereinafter: "THE CONSIDERATION"), to be paid against the receipt
            of a proper tax invoice and an exemption from tax withholding at the
            source. In the absence of verification of such an exemption, the
            Company may deduct from the Consideration any tax liability imposed
            on the Employer, and which it is required by law to withhold at the
            source. It is hereby clarified that the Consideration is final and
            absolute consideration for the Services, and any tax liability that
            applies to the Contractor in connection with the said Consideration
            shall be paid by him.

            The Employer alone (on behalf of the Contractor) shall bear the
            payment of income tax, National Insurance payments, health

                                       5


            insurance payments and any other payment to any tax authority
            whatsoever regarding the Consideration.

    10.2    The Contractor shall be entitled to a cellular telephone at the
            Company's expense. The Contractor will return the telephone to the
            Company immediately upon the conclusion of the provision of the
            Services by the contractor.

    10.3    The Contractor will be entitled to reimbursement for expenses,
            including per diem expenses in Israel and abroad, upon presentation
            of receipts and/or a report in accordance with the Company's
            accepted procedures.

    10.4    The Contractor will be entitled to a car at the Company's expense,
            of the same standard that he received as a Company employee, and the
            Company will gross up the value of the said car for the Contractor.

11. CONFIDENTIALITY AND NON-COMPETITION

    11.1    The Contractor undertakes to keep absolutely confidential any
            information that he receives during and upon the provision of the
            Services to the Company pursuant to this agreement. "Information"
            shall, in this section: include prices, costs, lists of suppliers,
            customer lists, plans, quantities, profit and loss calculations,
            market research, computer software, information systems and any
            other Company information that is not in the public domain. The
            Contractor also undertakes not to damage the Company's and/or the
            shareholders' reputation in any manner whatsoever. The Contractor's
            undertaking pursuant to this section shall remain in effect even
            after the conclusion of this agreement.

                                       6


    11.2    For a period of twelve months from the date on which the provision
            of the Services to the Company shall be terminated, the Contractor
            will not engage, neither within the territory of the State of Israel
            nor within the territory of any country in which the Company is
            active, in any business that does or that could directly compete
            with the Company - either by himself and/or through any other agent
            whatsoever acting on his behalf, either as a salaried employee or as
            an independent worker, either directly or indirectly, unless the
            Company gives its advance written consent thereto.

    11.3    To remove all doubt, the parties hereby declare that all existing
            and/or future developments, improvements in the Company's products
            and any intellectual property that may result from the provision of
            the Contractor's Services to the Company, including
            registered/unregistered rights, whether developed by the Contractor
            during work hours or outside of work hours, whether at the Company's
            offices or outside of them - including in the Contractor's home -
            whether in Israel or abroad, shall be the Company's exclusive
            property and possession.

12. VALIDITY OF THE AGREEMENT

    12.1    This agreement will enter into effect beginning on August 1, 2002.

    12.2    Each of the parties may inform the other parties regarding
            termination of the agreement, by way of written notification that
            shall be given at least six months in advance (hereinafter: "THE
            ADVANCE NOTIFICATION PERIOD"). During the Advance Notification
            Period, the provisions of this agreement shall

                                       7


            continue to bind the parties, but the Company has the right to
            notify the Contractor that it does not wish to receive the
            Contractor's services and that he should not come to the Company's
            offices. In such a case, the Contractor shall be entitled to all of
            his rights pursuant to this agreement. At the end of the Advance
            Notification Period, the Contractor will return the Company's
            cellular phone, the car and any Company equipment that may be in his
            possession.

    12.3    Notwithstanding the provisions of section 12.2 above, the Company
            may terminate the Contractor's employment immediately, without prior
            notice and without any compensation, upon the occurrence of any one
            of the following:



            12.3.1    The Contractor's conviction for a dishonorable offense.

            12.3.2    The Contractor's breach of his fiduciary duty to the
                      Company.

            12.3.3    The Contractor's breach of his duty of care with regard to
                      the Company.

            12.3.4    The Contractor's breach of this Agreement through the
                      disclosure of the Company's secrets or by competing with
                      the Company.


    12.4    Without derogating from the generality of the above provisions of
            this section, this Agreement will be automatically cancelled upon
            the dissolution of the Company - as soon as the dissolution shall
            take effect.

                                       8


13. THE CONTRACTOR - AN INDEPENDENT CONTRACTOR

    13.1    The Contractor hereby declares and undertakes that his status
            vis-a-vis the Company is that of an independent contractor, and that
            there is no employee-employer relationship between him and the
            Company.

    13.2    The Contractor is aware that the Consideration paid to him as
            described above is paid to the Employer by the Company on the basis
            of his being an independent contractor and on the basis of there
            being no employee-employer relationship with regard to this matter;
            if such a relationship existed, it would significantly reduce the
            amount of the Consideration the Company would be paying to the
            Contractor.

    13.3    Based on the above, the parties agree that if, in the future, a
            judicial body determines that notwithstanding the provisions of this
            agreement, there is an employee-employer relationship between the
            parties (or with one of the companies in the Ituran Group,
            hereinafter: "ITURAN"), an alternative arrangement will apply
            between the parties whereby 40% of the Consideration received by the
            Contractor from the Company in accordance with this agreement will
            be considered an indexed loan, at an annual interest rate of 5%, and
            given to the Employer and the Contractor by the Company
            (hereinafter: "THE LOAN"), and the remaining balance of 60% will be
            considered as wages for labor, along with the additional conditions
            usually paid to a Company employee.

    13.4    The Loan and its proceeds will be viewed as being immediately
            payable the day on which the Company or Ituran is first requested to
            recognize the existence of an employee-employer relationship

                                       9


            between the Contractor and the Company and/or Ituran. In such a
            case, the Contractor will be required to repay to the Company,
            immediately upon its first written request, the Loan and its
            proceeds less the sum of all the payments owed to the Contractor as
            severance pay and additional social benefits, according to a final
            court ruling.

    13.5    Without derogating from the above, if for any reason whatsoever, the
            tax and/or National Insurance Institute and/or health and/or any
            other authorities demand the payment of any tax provisions
            whatsoever from the Company resulting from the Company's contractual
            arrangement pursuant to this agreement with the Employer and the
            Contractor, the Employer and the Contractor undertake to indemnify
            the Company for any such payment, immediately upon the Company's
            first written request.

    13.6    Mr. Izzy Sheratzky will be a personal guarantor for the fulfillment
            of the Contractor's and the Employer's obligations pursuant to this
            section.

14. GENERAL

    14.1    This agreement is an individual and special labor agreement between
            the Company, and the Employer and the Contractor, and it fully
            regulates all of the terms of the Contractor's employment by the
            Company. The Employer and the Contractor undertake to keep the
            contents of this agreement completely confidential.

    14.2    Any promise, obligation, undertaking, declaration, representation or
            the like that were given or made on behalf of the Company and/or its
            shareholders prior to the signing of this agreement - if

                                       10


            any such were made - are hereby null and void, unless and to the
            extent that they are expressly included in this agreement.

    14.3    If any provision whatsoever of this agreement is revoked by any
            court whatsoever, or is declared to be invalid for any reason
            whatsoever, the other provisions of this agreement shall remain in
            effect.

    14.4    The parties' addresses are as specified in the preamble to this
            agreement. Any notice sent by one party to another via registered
            mail will be considered to have been received by the addressee at
            the end of 72 hours from the time of its receipt by the post office
            for delivery, and if it is hand delivered - at the time of actual
            delivery. If any party changes its address, he shall notify the
            other parties in writing.

    14.5    The parties are signing this agreement after reviewing it carefully,
            and they declare that they are aware of the substance of the
            obligations they are taking upon themselves and according thereto,
            and of their meanings.



            AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES:

(Signature)                                   (Stamp and signature)
------------------------                      --------------------------
THE CONTRACTOR                                THE COMPANY

(Stamp and signature)
------------------------
THE EMPLOYER


                                       11


I the undersigned Izzy Sheratzky, ID Number 007495443, of 14 Dulchin Street, Tel
Aviv, do hereby guarantee to the Company, through a personal guarantee, the
Employer's and the Contractor's undertakings as stated in Paragraph 13 above.

(Signature)
------------------------
Izzy Sheratzky










                                       12




            ADDENDUM TO THE AGREEMENT WITH AN INDEPENDENT CONTRACTOR,
                             DATED SEPTEMBER 5, 2002

                MADE AND EXECUTED IN TEL AVIV ON OCTOBER 28, 2002

BETWEEN:     ITURAN LOCATION AND CONTROL, LTD.
             Of:  3 Hashikma Street
             Azor
             (hereinafter: "THE COMPANY")
                                                       PARTY OF THE FIRST PART;

AND          MR. NIR SHERATZKY
             ID No. 02925187-7
             Of:  13 Moshe Perlok Street
             Tel Aviv
             (hereinafter: "THE CONTRACTOR")
                                                       PARTY OF THE SECOND PART;

AND          A. SHERATZKY HOLDINGS LTD.
             Private Company No. 51-3230268
             Of:  14 Dulchin Street, Tel Aviv
             (hereinafter: "THE EMPLOYER")
                                                       PARTY OF THE THIRD PART;


WHEREAS:     On September 5, 2002, the parties signed an independent contractor
             agreement (hereinafter: "THE AGREEMENT"), pursuant to which, inter
             alia, the cost of the Contractor's employment will remain as is
             without change, as it was prior to the signing of the Agreement
             (hereinafter, "THE COST");

AND WHEREAS: The parties wish to add to the Agreement provisions
             protecting the Company against cases in which it is required to
             make additional payments to any party whatsoever and as a result of
             which the Cost increases, through the receipt of

                                       13


             indemnification from the Contractor as described below;


          THEREFORE THE PARTIES HAVE AGREED AND STIPULATED AS FOLLOWS:

1.  The preamble to this agreement constitutes an integral part thereof.

2.  The provisions of the agreement shall remain in effect, unless and to the
    extent they are expressly amended in this Addendum.

3.  The Contractor undertakes vis a vis the Company that in any event wherein
    the Company is required to pay to the tax authorities, or to other
    authorities, any tax provisions or other payments whatsoever, as a result of
    the payment of which the Cost increases, and if such additional payments
    derive from the signing of the Agreement and from the Contractor's change
    from the status of an employee to that of an independent contractor
    (including pursuant to the manner in which the Consideration is paid), the
    Contractor will indemnify the Company for the sums for which the Company is
    liable (if it is liable) immediately upon its first written request.

4.  Upon receiving the request for payment of the tax provisions as stated
    above, the Company shall notify the Contractor immediately and will transfer
    to him all of the material relevant to the request. The Contractor will
    undertake, at his responsibility and at his expense, the proceedings with
    the tax authorities, and the Company may not reach a compromise with the tax
    authorities without the Contractor's advance written consent.

5.  The Employer will be a guarantor of the Contractor's obligation pursuant to
    this addendum.

6.  The Contractor and the Employer hereby authorize the Company to offset any
    amount with which it is charged by the tax authorities, and which the
    Contractor has not had reduced or cancelled as stated in Paragraph 4 above,
    from

                                       14


    the Consideration owed to them pursuant to the agreement, to the extent that
    the amount of the debt is not paid within 7 days from the date of the
    request.










                                       15




        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURE:


(Signature)                                   (Stamp and signature)
------------------------                      --------------------------
THE CONTRACTOR                                THE COMPANY

(Stamp and signature)
------------------------
THE EMPLOYER











                                       16



ITURAN
CAR COMMUNICATION & LOCATION

                        ITURAN LOCATION AND CONTROL LTD.
                        --------------------------------
                                  "THE COMPANY"

                                     MINUTES

 FROM A SPECIAL GENERAL MEETING THAT TOOK PLACE AT THE COMPANY'S OFFICES
ON 2.24.04 AT 3:30PM

IN ATTENDANCE: SHAREHOLDERS LISTED IN ATTACHMENT A OF THESE MINUTES.
ELECTED CHAIRMAN: ADV. GUY AHARONOV.

ON THE AGENDA:

1.  Discussing and making a decision on adding an annual bonus to the terms of
    employment of the company's co-CEOs as of 2004. The inspection committee and
    the directorate indicated in their arguments that so far the two co-CEOs
    have not received any monetary bonus in accordance with the company's
    operations and that their terms of employment have not been changed over the
    past four years. If was further indicated that awarding bonuses to CEOs as
    percentage of the company's profits is customary among public companies in
    general and among subsidiary companies of the group in particular, as part
    of an encouragement plan for the co-CEOs and strengthening the connection
    between the company's operations and the compensation that they are given.
    In addition, it was indicated that the salary of the co-CEOs of the company
    is significantly lower that the salary of the CEOs of the subsidiary
    companies.

There is a quorum and the meeting started.

IT WAS DECIDED WITH A MAJORITY OF VOTES ACCORDING TO A QUORUM VOTING AS STATED
IN ATTACHMENT A OF THESE MINUTES:

After the approval of the inspection committee and the company's directorate, it
was decided to approve a change in the employment terms of the company's co-CEOs
so that each one of the co-CEOs (Eyal and Nir Sheratzky) would be entitled to a
1% (one percent) annual bonus from the company's profits before taxes plus the
company's share in the profits (or losses) of included companies, based on its
consolidated and inspected financial reports that are executed according to
customary accounting rules on 12/31 of each calendar year in which he is
employed (or any relative part of it, respectively) as of 2004.

IN FAVOR - 3,477,079 SHARES (75.69%); AGAINST - 1,097,594 SHARES (23.9%);
ABSTAIN - 19,193 SHARES (0.41%). TOTAL NUMBER OF PARTICIPANTS AND VOTES -
4,593,866 SHARES.

WITHOUT ANY ADDITIONAL SUBJECTS ON THE AGENDA, THE MEETING HAS ENDED.

[Signature]
Adv. Guy Aharonov, Chairman
                                                                    Minutes 1164

  3 Hashikma Street, Azor Industrial Area, 58001. Mailing address:
                        P.O. Box 11473 Azor 58001 Israel.
                           Telephone: +972-3-5571314;
                               Fax: +972-3-5571393





[Attachment A, which contains the shareholders in attendance in the meeting has
been omitted]











                                                                   EXHIBIT 10.25







                         INDIVIDUAL EMPLOYMENT AGREEMENT


                  Made and Executed on the 1st of August, 1995




Between:     Moked Ituran Partnership (1995)

             Of 3 Hashikma Street

             Azor

             (hereinafter: "the Partnership")


and          Mr. Jacob Suet

             Of:

             (hereinafter: "the Employee")


Whereas      The Employee began to work for the Partnership on August 1, 1995;


And whereas  The parties have come to an agreement regarding the Employee's
             terms of employment as an employee of the Partnership.




          THE PARTIES HAVE THEREFORE STIPULATED AND AGREED AS FOLLOWS:


Beginning on August 1, 1995, the Employee will be employed pursuant to the terms
set out in this Agreement.



      1.   Salary

        A.   The Employee's salary, for a full time position of 9.0 hours gross
             total per day, plus a 30 minute lunch break at the Employee's
             expense, five days a week, for a total of 187 hours net per month,
             will be NIS 13,000 gross salary per month, as of the salary for
             the month of August, which is to be paid on September 1, 1995
             (hereinafter: "the Salary").

        B.   The said Salary will be updated on the date of the payment with a
             Cost of Living supplement at a rate of 80% of the increase in the
             Consumer Price Index. The base index will the index for the month
             of June (122.7), as  published on July 15, 1995.

             The new index shall be the CPI as it is known at the time that
             the salary is updated.

             The above-mentioned update includes the entire COL supplement as
             may be paid from time to time to all salaried workers in the
             economy, as well


                                       1




             as all of the national and/or company-based salary supplements,
             and the Employee hereby waives any such supplement.



      2.   In addition to the said Salary, the Employee will be entitled to
           the following terms:

        A.   Payment for overtime hours, if the Employee works such hours beyond
             the regular work day (of 9 hours total - on a monthly basis), will
             be at rates fixed by the Hours of Work and Rest Law. The
             calculation will be based on the Salary as described in Section
             1(A) above.

        B.   An annual vacation of 22 workdays per year, with this right being
             cumulative up to a maximum of 3 years' accumulation.

        C.   Paid sick leave of 22 days per year, upon presentation of
             documentation of illness, with this right being cumulative over the
             Employee's entire period of the employment with the company. This
             right may not be redeemed and is intended to be used in actuality
             only in the event of illness.

        D.   Thirteen days of paid recuperation leave per year, to be paid once
             a year, without any right to accumulation, at the rates established
             by the company's management from time to time.

        E.   Paid leave for Jewish holidays and Israel Independence Day when
             these do not fall on the Sabbath (up to a total of 9 days per
             year).

        F.   Managers' insurance, based on his Salary, as described in section
             1(A) above, at the rate of:

             -    8-1/3%, pursuant to the Partnership's standard managers'
                  insurance terms. The provision will be at the expense of
                  the Partnership's obligation to pay severance pay pursuant
                  to Section 14 of the Severance Pay Law, on demand.

             -    5% of the Salary will be transferred for benefits. An
                  additional 5% of the Employee's said Salary will, at the
                  same time, be deducted for benefits.

             In addition, the Partnership will insure the Employee at its
             discretion and for sums it shall determine from time to time, to
             cover disability and loss of ability to work at a rate of 2.5%.

        G.   The Partnership's contribution in an Academic's Continuing
             Education Fund, where the employer's provision will be 7.5% of the
             Salary, and the Employee's provision will be 2.5% of the Salary.

        H.   Salary supplement benefits during active reserve duty.

        I.   Reimbursement of the gross sums paid for monthly car insurance
             premiums, at the Partnership's standard rates as they may be from
             time to time.


                                       2



      3.

        A.   The Employee hereby undertakes to be loyal to the Partnership; to
             comply with the Partnership's procedures and the instructions given
             by his superiors; to keep confidential any professional, commercial
             or business information he has received regarding the Partnership's
             affairs; and not to exploit or use any such information or transfer
             it to any person.

        B.   The Employee undertakes not to work for any competing entity or
             association, for a period of 18 months following the termination of
             the employment relationship between himself and the Partnership,
             and to continue to safeguard the confidentiality any professional,
             commercial or business information regarding the Partnership's
             affairs that he has received.

        C.   The Employee agrees that any invention and/or patent that he
             invents during the course of and/or as a result of his employment
             will be considered to be a service invention owned by the employer,
             for which the Employee is entitled to compensation as the
             Partnership may determine from time to time.


      4.   The Employee hereby agrees that during the time of his employment
           with the Partnership, he will not be permitted to engage in any
           other work.


      5.   The Employee hereby agrees that the Partnership will be entitled to
           deduct from his Salary any tax and/or payment that is imposed on
           employees pursuant to any law, and that the Employer Matching Tax
           and Health Tax paid to the National Insurance Institute will also be
           deducted, even if it is paid to a different entity.


      6.


        A.   The Employee hereby affirms that the terms of his employment
             pursuant to this Agreement are personal and confidential, and he
             undertakes to maintain their confidentiality.

        B.   The Employee hereby declares that he is free to enter into this
             Agreement and that he has no obligations to any person or entity
             whatsoever that may negatively effect his undertakings pursuant to
             this Agreement, whether as an employee or as an independent
             contractor. The parties hereby agree that the Employee's
             undertakings pursuant to this Agreement will apply so long as the
             Employee is employed by the Partnership pursuant to this Agreement.

        C.   The Employee will have a trial period of two months from the
             beginning of the employment period. The provisions of Section



                                       3



             7 below shall apply only upon the conclusion of the two-month
             trial period.

             However, if during such period, the Partnership shall cease its
             operations for any reason whatsoever, the Employee will be
             entitled to three months prior notice.


      7.

        A.   The Partnership may, at any time, bring this Agreement to a
             conclusion, and to discontinue the employer-employee relationship
             with the Employee, provided the Partnership gives the Employee
             written notice three months in advance. If notice is given to the
             Employee before nine months have elapsed from the signing of the
             Agreement, the notification period shall be supplemented such that
             the cumulative period of employment will be 12 months from the date
             of the Agreement.

             If the Employee commits a fundamental breach of this Agreement,
             the Partnership may terminate this Agreement and terminate the
             employee-employer relationship, upon giving written notice thirty
             days in advance.

        B.   The Employee may terminate this Agreement and discontinue the
             employee-employer relationship with the Partnership, provided he
             has given the company written notice of such three months in
             advance during the first year of activity and three months in
             advance from the second year and onwards.

        C.   Once the employment relationship as described in Section 7(A) above
             has been terminated, the company shall pay the Employee severance
             pay pursuant to his dismissal, in accordance with any relevant law
             and according to the Salary described in Section 1(A), less the
             redemption values of the managers' insurance policies that have
             accrued in the Employee's name, which will be released to the
             Employee by the company upon the termination of the
             employee-employer relationship, subject to the provisions of
             Section 8 below. The Partnership will also release the funds that
             have accrued in the Continuing Education Fund and will conduct a
             final accounting for the Employee.

        D.   Once the employee-employer relationship has been terminated as
             described in Section 7(B) above, then, if the conditions set forth
             in the section below have been met, the Partnership shall act in
             accordance with the provisions of Section 7(C) above.


      8.   The parties agree that the Employee will not be entitled to severance
           pay or to the release of the employer's share of the managers'
           insurance policies in cases in which the dismissal was caused by a
           fundamental breach of this Agreement, including a breach of trust
           and/or disclosure of professional and/or business secrets and/or the
           commission of other serious disciplinary offenses.



                                       4




      9.   In the event the Agreement is terminated and the employee-employer
           relationship is discontinued for any reason whatsoever, the Employee
           must transfer his position to his replacement or to his supervisor in
           an appropriate manner and return to the company, upon the termination
           of his employment, any material, equipment, tools or documents given
           to him or which he has received in connection with his work.





        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES






(- signature -)                                   (- signature -)
---------------                                   ---------------
THE PARTNERSHIP                                      THE EMPLOYEE




                                       5





                 APPENDIX TO THE INDIVIDUAL EMPLOYMENT AGREEMENT


The parties hereby stipulate and agree that:



        1.   As a result of the Employee's employment in a position that
             requires a special degree of personal trust, the Employee's salary
             shall be, as of December 26, 1995, 15,000 gross, on a global basis.
             (This sum includes a supplement for overtime hours that the
             Employee may work, and the Employee will not be paid an additional
             payment for hours he may work beyond 9 hours per day), as of the
             salary for January 1996, which is paid on February 1, 1996.



        2.   Section 2(A) of the Individual Employment Agreement, made and
             executed on the August 1, 1995, is hereby nullified.



        3.   The other provisions of the Individual Employment Agreement, made
             and executed on the August 1, 1995, will continue to apply without
             change.







        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES




(Stamp and signature:)

Moked Ituran Partnership (1995)

3 Hashikma Azor)                                                  (Signature)
----------------                                                  -----------
THE PARTNERSHIP                                                  THE EMPLOYEE




Date of signature: January 14, 1996







                                                                   EXHIBIT 10.26

                         INDIVIDUAL EMPLOYMENT AGREEMENT

                  Made and Executed on the 20th of August, 1995


Between:     Moked Ituran Partnership (1995)

             3 Hashikma Street

             Azor

             (hereinafter: "the Partnership")




and          Mr. Harel Broida, ID Number 024287195

             24 Szold Street

             Ra'anana

             (hereinafter: "the Employee")




Whereas       The Employee began to work for the partnership on August 20, 1995;



And whereas   The parties have come to an agreement regarding the
              Employee's terms of employment as an employee of the Partnership.




          THE PARTIES HAVE THEREFORE STIPULATED AND AGREED AS FOLLOWS:


Beginning on August 20, 1995, the Employee will be employed pursuant to the
terms set out in this Agreement.


1.     Salary

       A.     The Employee's salary, for a full time position of 9.0 hours gross
              total per day, plus a 30 minute lunch break at the Employee's
              expense, five days a week, for a total of 187 hours net per month,
              will be NIS 8,000 gross salary per month, as of the salary for the
              month of August, which is to be paid on September 1, 1995
              (hereinafter: "the Salary").

       B.     The said Salary will be updated on the date of the payment with a
              Cost of Living supplement at a rate of 80% of the increase in the
              Consumer Price Index. The



                                       1


              base index will the index for the month of July, as published on
              August 15, 1995.

              The new index shall be the CPI as it is known at the time that the
              salary is updated.

              The above-mentioned update includes the entire COL supplement as
              may be paid from time to time to all salaried workers in the
              economy, as well as all of the national and/or company-based
              salary supplements, and the Employee hereby waives any such
              supplement.

2.     In addition to the said Salary, the Employee will be entitled to the
       following terms:

       A.     Payment for overtime hours, if the Employee works such hours
              beyond the regular work day (of 9 hours total - on a monthly
              basis), will be at rates fixed by the Hours of Work and Rest Law.
              The calculation will be based on the Salary as described in
              section 1(A) above.

       B.     An annual vacation of 22 workdays per year, with this right being
              cumulative up to a maximum of 3 years' accumulation.

       C.     Paid sick leave of 22 days per year, upon presentation of
              documentation of illness, with this right being cumulative over
              the Employee's entire period of the employment with the company.
              This right may not be redeemed and is intended to be used in
              actuality only in the event of illness.

       D.     Thirteen days of paid recuperation leave per year, to be paid once
              a year, without any right to accumulation, at the rates
              established by the company's management from time to time.

       E.     Paid leave for Jewish holidays and Israel Independence Day when
              these do not fall on the Sabbath (up to a total of 9 days per
              year).

       F.     Managers' insurance, based on his Salary, as described in section
              1(A) above, at the rate of:

              -      8-1/3%, pursuant to the Partnership's standard managers'
                     insurance terms. The provision will be at the expense of
                     the Partnership's obligation to pay severance pay pursuant
                     to Section 14 of the Severance Pay Law, on demand.

              -      5% of the Salary will be transferred for benefits. An
                     additional 5% of the Employee's said Salary will, at the
                     same time, be deducted for benefits.



                                       2


              -      2.5% disability insurance as part of the managers'
                     insurance policy.

       G.     The Partnership's contribution into the Kinneret Continuing
              Education Fund, where the employer's provision will be 7.5% of the
              Salary, and the Employee's provision will be 2.5% of the Salary.

       H.     Salary supplement benefits during active reserve duty.

       I.     Reimbursement of the gross sums paid for monthly car insurance
              premiums, at the Partnership's standard rates as they may be from
              time to time.


3.

       A.     The Employee hereby undertakes to be loyal to the Partnership; to
              comply with the Partnership's procedures and the instructions
              given by his superiors; to keep confidential any professional,
              commercial or business information he has received regarding the
              Partnership's affairs; and not to exploit or use any such
              information or transfer it to any person.

       B.     The Employee undertakes not to work for any competing entity or
              association, for a period of 18 months following the termination
              of the employment relationship between himself and the
              Partnership, and to continue to safeguard the confidentiality any
              professional, commercial or business information regarding the
              Partnership's affairs that he has received.

       C.     The Employee agrees that any invention and/or patent that he
              invents during the course of and/or as a result of his employment
              will be considered to be a service invention owned by the
              employer, for which the Employee is entitled to compensation as
              the Partnership may determine from time to time.


4.     The Employee hereby agrees that during the time of his employment with
       the Partnership, he will not be permitted to engage in any other work.



5.     The Employee hereby agrees that the Partnership will be entitled to
       deduct from his Salary any tax and/or payment that is imposed on
       employees pursuant to any law, and that the Employer Matching Tax and
       Health Tax paid to the National Insurance Institute will also be
       deducted, even if it is paid to a different entity.



                                       3


6.

       A.     The Employee hereby affirms that the terms of his employment
              pursuant to this Agreement are personal and confidential, and he
              undertakes to maintain their confidentiality.

       B.     The Employee hereby declares that he is free to enter into this
              Agreement and that he has no obligations to any person or entity
              whatsoever that may negatively effect his undertakings pursuant to
              this Agreement, whether as an employee or as an independent
              contractor. The parties hereby agree that the Employee's
              undertakings pursuant to this Agreement will apply so long as the
              Employee is employed by the Partnership pursuant to this
              Agreement.

       C.     The Employee will have a trial period of two months from the
              beginning of the employment period. The provisions of Section 7
              below shall apply only upon the conclusion of the two-month trial
              period.

              However, if during such period, the Partnership shall cease its
              operations for any reason whatsoever, the Employee will be
              entitled to three months prior notice.


7.

       A.     The Partnership may, at any time, bring this Agreement to a
              conclusion, and to discontinue the employer-employee relationship
              with the Employee, provided the Partnership gives the Employee
              written notice three months in advance. If notice is given to the
              Employee before nine months have elapsed from the signing of the
              Agreement, the notification period shall be supplemented such that
              the cumulative period of employment will be 12 months from the
              date of the Agreement.

              If the Employee commits a fundamental breach of this Agreement,
              the Partnership may terminate this Agreement and terminate the
              employee-employer relationship, upon giving written notice thirty
              days in advance.

       B.     The Employee may terminate this Agreement and discontinue the
              employee-employer relationship with the Partnership, provided he
              has given the company written notice of such six months in advance
              during the first year of activity and three months in advance from
              the second year and onwards.

       C.     Once the employment relationship as described in Section 7(A)
              above has been terminated, the company shall pay the Employee
              severance pay pursuant to his



                                       4


              dismissal, in accordance with any relevant law and according to
              the Salary described in Section 1(A), less the redemption values
              of the managers' insurance policies that have accrued in the
              Employee's name, which will be released to the Employee by the
              company upon the termination of the employee-employer
              relationship, subject to the provisions of Section 8 below. The
              Partnership will also release the funds that have accrued in the
              Continuing Education Fund and will conduct a final accounting for
              the Employee.

       D.     Once the employee-employer relationship has been terminated as
              described in Section 7(B) above, then, if the conditions set forth
              in the section below have been met, the Partnership shall act in
              accordance with the provisions of Section 7(C) above.


8.     The parties agree that the Employee will not be entitled to severance pay
       or to the release of the employer's share of the managers' insurance
       policies in cases in which the dismissal was caused by a fundamental
       breach of this Agreement, including a breach of trust and/or disclosure
       of professional and/or business secrets and/or the commission of other
       serious disciplinary offenses.

9.     In the event the Agreement is terminated and the employee-employer
       relationship is discontinued for any reason whatsoever, the Employee must
       transfer his position to his replacement or to his supervisor in an
       appropriate manner and return to the company, upon the termination of his
       employment, any material, equipment, tools or documents given to him or
       which he has received in connection with his work.

10.    In addition to the above provisions, the Employee will be entitled to
       reimbursement of tuition for a course given by IBM for professional
       retraining for academics in software engineering, in the amount of NIS
       7,600. The Employee will return the above-mentioned reimbursement if he
       does not actually work at for the company for at least 12 months.





        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES





(Stamp and signature:)

Moked Ituran Partnership (1995)

3 Hashikma Azor)                                               (Signature)
----------------                                               -----------

THE PARTNERSHIP                                               THE EMPLOYEE




                                       5


                 APPENDIX TO THE INDIVIDUAL EMPLOYMENT CONTRACT


Moked Ituran Partnership (1995) and

Harel Broida, ID Number 024287195



Hereby stipulate and agree that:



     1)   As a result of the Employee's employment in a position that requires a
          special degree of personal trust, the Employee's salary shall be, as
          of February 26, 1996, 10,700 gross, on a global basis. (This amount
          includes a supplement for overtime hours that the Employee may work,
          and the Employee will not be paid additional payment for hours he may
          work beyond 9 hours per day), as of the salary for March 1996, which
          is paid on April 1, 1996.

     2)   Section 2(A) of the Individual Employment Contract, made and executed
          on the August 20, 1995, is hereby nullified.

     3)   The other provisions of the Individual Employment Contract, made and
          executed on the August 20, 1995, will continue to apply without
          change.







        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES





(Stamp and signature:)

Moked Ituran Partnership (1995)

3 Hashikma Azor)                                               (Signature)
----------------                                               -----------

THE PARTNERSHIP                                               THE EMPLOYEE




Date of signature:
                   -------------




                                        1








                                                                   EXHIBIT 10.27


                         INDIVIDUAL EMPLOYMENT CONTRACT


                   Made and Executed on the 15th of July, 1998



Between:    Moked Ituran Partnership (1995)

            3 Hashikma Street

            Azor

            (hereinafter: "the Partnership")


and         Mr. Shlomo Kaminsky

            46 Barkan Street

            Shomron

            (hereinafter: "the Employee")






Whereas     The Employee began to work for the Partnership on July 19, 1998;



And whereas The parties have come to an agreement regarding the
            Employee's terms of employment as an employee of the
            Partnership.



          THE PARTIES HAVE THEREFORE STIPULATED AND AGREED AS FOLLOWS:
          -----------------------------------------------------------


Beginning on July 19, 1998, the Employee will be employed pursuant to the terms
set out in this agreement.



1.       SALARY



         A.       The Employee's salary for a full time position will be NIS
                  24,000 gross per month, as of the salary for the month of
                  July, paid on August 1, 1998 (hereinafter: "the Salary").

         B.       The said Salary will be updated on the date of the payment
                  with a Cost of Living supplement at a rate of 80% of the
                  increase in the Consumer Price Index. The base index will



         the index for the month of June, as published on July 15, 1998.

         The new index shall be the CPI as it is known at the time that the
         salary is updated.

         The above-mentioned update includes the entire COL supplement as may be
         paid from time to time to all salaried workers in the economy, as well
         as all of the national and/or company-based salary supplements, and the
         Employee hereby waives any such supplement.



2.       COMPANY CAR



         2.1 The Company shall provide you with a car and will cover the
             expenses for its maintenance and operation subject to any
             relevant law. The type of the car and the size of its engine
             shall be determined by the company. You will pay the tax
             required for the income credited to you due to your full-time
             use of the company car and this tax will be deducted from your
             salary.

         2.2 You are asked to maintain the good condition of the car and to
             use it for a reasonable amount of driving, subject to the
             company's car guidelines and to the company's instructions, as
             such may be from time to time.

         2.3 You must return the car at any time the Company asks and in
             any event upon the conclusion of the employee-employer
             relationship.



3.       In addition to the said Salary, the Employee will be entitled to the
         following terms:

         A.  An annual vacation of 5 workdays per year, with this right being
             cumulative up to a maximum of 3 years' accumulation.

         B.  22 paid sick days per year, upon presentation of documentation of
             illness, with this right being cumulative over the entire period of
             the Employee's employment at the company. This right may not be
             redeemed and is intended to be used in actuality only in the event
             of illness.

         C.  Thirteen days of paid recuperation per year, to be paid one time
             per year, without any right to accumulation, at the rates
             established by the company's management from time to time.

         D.  Paid leave on Jewish holidays and Independence Day which do not
             fall on the Sabbath (up to a total of 9 days per year).


         E.  Managers' insurance, based on his Salary as described in Section 1A
             above, at the rate of:

             -  8 1/3% (eight and one-third percent) pursuant to the
                Partnership's standard managers' insurance terms. The provision
                will be at the expense of the Partnership's obligation to pay
                severance pay pursuant to Section 14 of the Severance Pay Law,
                on demand.

             -  5% of the Salary will be transferred for benefits. An additional
                5% of the Employee's said salary will, at the same time, be
                deducted for benefits.

             -  2.5% disability insurance in the context of the managers'
                insurance policy.

         F.  The Partnership's contribution into the ________ Continuing
             Education Fund, where the employer's provision will be 7.5% of the
             Salary, and the Employee's provision will be 2.5% of the Salary.

         G.  Salary supplement benefits during active reserve duty.



4.

         A.  The Employee agrees that the Partnership will refer him for work at
             the Ituran Location and Control Company Ltd. (hereinafter: "the
             Company"), in the context of his employment at the Partnership.

         B.  The Employee hereby undertakes to be loyal to the Partnership; to
             comply with the Partnership's procedures and the instructions given
             by his superiors; to keep confidential any professional, commercial
             or business information he has received regarding the Partnership's
             affairs; and not to exploit or use any such information or transfer
             it to any person.

         C.  The Employee undertakes not to work for any competing entity or
             association, for a period of 18 months following the termination of
             the employment relationship between himself and the Partnership,
             and to continue to safeguard the confidentiality any professional,
             commercial or business information regarding the Partnership's
             affairs that he has received.

         H.  The Employee agrees that any invention and/or patent that he
             invents during the course of and/or as a result of his


             employment will be considered to be a service invention owned by
             the employer, for which the Employee is entitled to compensation as
             the Partnership may determine from time to time.

5.       The Employee hereby agrees that during the time of his employment at
         the Partnership, he will not be permitted to engage in any other work.



6.       The Employee agrees that the Partnership will be entitled to deduct
         from his Salary any tax and/or payment which is imposed on employees
         pursuant to any law, and that Health Tax or any other tax which may
         replace the Health Tax, which is paid to the National Insurance
         Institute will also be deducted, even if it is paid to a different
         entity.



7.

         A.  The Employee hereby confirms that the terms of his employment
             pursuant to this agreement are personal and confidential, and he
             undertakes to maintain their confidentiality.

         B.  The Employee hereby declares that he is free to enter into this
             agreement and that he has no obligations, to any person or entity
             whatsoever, that impact negatively upon his undertakings pursuant
             to this agreement, whether as an employee or as an independent
             contractor. The parties agree that the Employee undertakings
             pursuant to this agreement will apply so long as the Employee is
             employed by the Partnership pursuant to this agreement.



8.       The Company may terminate your employment immediately, without prior
         notice and without your having any right to severance pay, in the event
         of a breach of trust, disclosure of professional/business secrets, or
         the commission of a criminal offense connected to your employment which
         involves your dishonor or personal moral blame.

         A.  The Employee may terminate this agreement, and discontinue the
             employee-employer relationship with the Partnership, provided that
             he has given the Company written notice of such three months in
             advance.

         B.  Once the employment relationship has been terminated as described
             in Section 7A above, the Company shall pay the Employee severance
             pay as a result of the dismissal, pursuant to any relevant law, and
             in accordance with the Salary described in Section 1A, less the
             full redemption values of the managers' insurance policies that
             have accumulated in the Employee's


             name, which policies shall be released to the Employee by the
             Company upon the conclusion of the employee-employer relationship.
             This will be subject to the provisions of Section 8 below and [the
             Company] will conduct a final accounting for the Employee.



9.       In the event that the agreement is terminated and the employee-employer
         relationship is terminated, for any reason whatsoever, the Employee
         must transfer his position to his replacement or to his supervisor in
         an appropriate manner, and return to the Company, upon the termination
         of his employment, any material, equipment, tools or documents given to
         him or which he has received in connection with his work.


        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES
        ----------------------------------------------------------------



_____________                                            (Signature)
                                                         -----------

The Partnership                                          Employee








                                                                   EXHIBIT 10.28

                          CONSULTING SERVICES AGREEMENT

            MADE AND EXECUTED IN TEL AVIV ON THE 25TH OF MARCH, 1998



BETWEEN:         Ituran Location and Control, Ltd.

                 Private Co. 51-193664-3

                 Of:  3 Hashikma Street, Azor Industrial Zone

                 (hereinafter:  "THE COMPANY")

                                                                THE FIRST PARTY;

AND BETWEEN:     Yehuda Kahane

                 Identity No. 0519199

                 Of:  119 Bar Kochba Street, Herzliya

                 (hereinafter:  "THE CONSULTANT")

                                                               THE SECOND PARTY;


WHEREAS:         The Company is interested in hiring the Consultant to provide
                 ongoing financial consulting, organization, training and
                 execution of the Company's financial activities; consulting as
                 regards investment through various financial instruments; rate
                 protection, and management of the Company's investment
                 portfolios and everything this shall entail (hereinafter, "THE
                 FINANCIAL SERVICES");

AND WHEREAS:     The Consultant has stated that he has the knowledge, experience
                 and ability to provide the Company with the Financial Services
                 it has requested, either personally or through a financial
                 company he controls;

AND WHEREAS:     The parties wish to standardize the relationship between them
                 through this agreement;




     THEREFORE THE PARTIES HAVE DECLARED, AGREED AND STIPULATED AS FOLLOWS:

1.     PREAMBLE

       1.1    The preamble to this Agreement and the declarations of the Parties
              contained therein shall constitute integral part of this
              Agreement.

       1.2    The headings contained in this Agreement are for convenience only,
              and shall have no interpretive purpose whatsoever regarding this
              Agreement.





2.     THE CONSULTANT'S DECLARATIONS AND UNDERTAKINGS

       The Consultant does hereby declare and undertake as follows:

       2.1    That there is no legal or other obstacle that would prevent him
              from signing this Agreement and fulfilling his obligations
              accordingly;

       2.2    That he has the knowledge, ability and skills needed to fulfill
              the position in accordance with the provisions of this Agreement;

       2.3    That he undertakes to fulfill his position skillfully, expertly,
              dutifully, faithfully and honestly, and to act to the best of his
              ability to safeguard and advance the Company's economic interests;

       2.4    To act faithfully and with integrity towards the Company;

       2.5    That during the Agreement period, he shall act within the
              framework of the procedures and arrangements as defined by the
              Company from time to time, and shall report to the Company, in
              accordance with the procedures and provisions that shall be
              defined from time to time, regarding his activity and any other
              information involving his job and its performance, as well as any
              other information he learns concerning the Company and its
              business;

       2.6    That he will provide the Consulting Services to the best of his
              ability, in a manner that is professional and efficient, with the
              proper dedication and diligence.

       2.7    That the parties have no intention of establishing or conducting
              an employee-employer relationship between the Company and the
              Consultant, and that any Services that are provided shall be done
              so as independent services against the presentation of a tax
              invoice; and that all of the sums stated in this Agreement and any
              undertakings the parties shall take upon themselves as part of the
              Consulting Services are based on the correctness of the
              assumptions regarding the nature of the legal relationship
              established in this Agreement.


3.     EMPLOYMENT OF THE CONSULTANT

       3.1    It is hereby agreed between the Parties that the Company is hiring
              the Consultant's services for the purpose of providing the
              Financial Services, and all this as an independent consultant
              (hereinafter, "THE POSITION").

       3.2    In exchange for his services, the Company shall pay the Consultant
              a monthly consulting fee in the amount of NIS 4,000 linked to the
              Consumer Price Index published on February 15, 1998, that is, the
              CPI for January 1998, plus VAT as required by law against the
              receipt of a tax invoice (hereinafter, "THE CONSULTING FEE"). The
              Consulting Fee shall be paid to the Consultant by the 10th of each
              Gregorian month for the preceding month, against a tax invoice to
              be presented to the Company by the Consultant not later than 10
              days from the date of payment.



                                       2


4.     THE EMPLOYMENT PERIOD

       4.1    The employment period shall be 2 (two) years, beginning from the
              date on which this Agreement is signed (hereinafter, "THE
              EMPLOYMENT PERIOD"). At the end of the two-year period the
              Agreement period shall be renewed automatically for an additional
              two years, and so on, subject to the contents of Section 4.2 below
              (each additional employment period shall be called, hereinafter,
              "THE EXTENDED EMPLOYMENT PERIOD").

       4.2    The Company and the Consultant may (each one separately) terminate
              this Agreement via advance written notification to be sent to the
              other party at least 180 days prior to the end of the Employment
              Period or the Extended Employment Period, as relevant. To remove
              all doubt, the right to terminate this Agreement shall apply to
              each party, as stated, only at the end of the first two years,
              such that in any event, the Agreement period shall not end before
              two years from the date on which this Agreement is signed.


5.     THE COMPANY'S DECLARATIONS

       The Company hereby declares as follows:

       5.1    That the decision to contract with the Consultant through this
              Agreement was legally accepted and approved by the appropriate
              bodies, in accordance with the relevant Company documents;

       5.2    That there is no restriction, prohibition or obstacle, either
              under law or according to this document, that would apply to the
              contractual arrangements set forth in this Agreement;

       5.3    That it has no objection if the Consulting Services are provided
              by a company controlled by the Consultant, at the Consultant's
              discretion.


6.     RELATIONSHIPS BETWEEN THE PARTIES REGARDING THE PROVISION OF THE
       CONSULTING SERVICES

       Regarding the provision of the Consulting Services, it is hereby
       explicitly agreed and stated that:

       6.1    There shall be no employee-employer relationship between the
              Company and the Consultant, rather the relationship will only be
              that of a contractor and client, and any right the Company may
              have to supervise and/or audit and/or give instructions to the
              Consultant are merely a means for ensuring the performance of the
              Consultant's undertaking according to this Agreement, and shall in
              no way be construed as creating an employee-employer relationship
              between the Company and the Consultant;

       6.2    It is further agreed and declared that the Consultant does not
              have, nor shall he have, any employee rights in the Company in any
              manner and form whatsoever; and that the Consultant shall not be
              entitled to payment and/or compensation and/or benefits from the
              Company in connection with performing his undertakings according
              to this Agreement and/or any instructions given in this regard
              and/or any instructions given to him and/or any connection with
              the conclusion of this Agreement between the parties and/or
              termination of the provision of the Consulting Services



                                       3


              according to this Agreement for any reason whatsoever, unless
              stated otherwise in this Agreement.

       6.3    The Consultant hereby explicitly undertakes that he shall be
              prohibited and barred from claiming with any body whatsoever,
              including a court and/or competent tribunal, that an
              employee-employer relationship applies and/or did apply between
              himself and the Company, during the entire service provision
              period.

       6.4    To remove all doubt, the Consultant undertakes to ensure than any
              tax, fee or any type of mandatory payment that applies to the
              services provided to the Company under the terms of this
              Agreement, shall be paid by them regularly and continually, at
              their appointed time.


7.     ENDORSEMENT OF RIGHTS

       It is hereby explicitly agreed that the Parties shall not be entitled to
       transfer their rights and/or undertakings under this Agreement, either
       entirely or partially, to any other and/or others, without obtaining the
       express written consent, in advance, from the other Party. It is hereby
       clarified that this section shall not derogate from the Consultant's
       right to provide the Company with the Financial Services through a
       company under his control, provided that the Consultant's undertakings in
       accordance with this Agreement shall apply to the said company.


8.     GENERAL

       8.1    Stamp Tax on this Agreement, if applicable, shall apply to both
              parties equally.

       8.2    This Agreement nullifies all prior agreements, undertakings and
              understandings between the Parties with regard to the matters set
              forth therein, and it shall take precedence over any of the said
              agreements, undertakings and understandings.

       8.3    This Agreement shall constitute everything that is agreed between
              the Parties on the matters set forth therein, and it cannot be
              amended or changed except via a written document signed by the
              Parties.

       8.4    If it should be determined that any of the provisions contained in
              this Agreement cannot be enforced and/or are invalid for any
              reason whatsoever, this shall not jeopardize and/or invalidate the
              remaining provisions of this Agreement.

       8.5    Any waiver, extension, concession, silence, omission or delay by
              any party to this Agreement regarding the existence or
              non-existence, either total or partial, of any of the Parties'
              undertakings according to this Agreement, shall not be considered
              as a waiver by that Party in favor of the other of any of his
              rights, or a waiver or obstacle with regard to any other case.

       8.6    The Parties hereby agree irrevocably that with regard to this
              Agreement and/or that which derives therefrom, the sole and
              exclusive legal authority



                                       4


              shall only be the courts and/or authorized tribunals of the city
              of Tel Aviv-Jaffa.

       8.7    So long as neither party informs the other party in writing
              otherwise, the addresses of the Parties for the purpose of this
              Agreement shall be as specified in the Preamble to this Agreement,
              and any notification sent in accordance with this Agreement shall
              be viewed as having been received by the other party on the day on
              which it has been sent if delivered to that address or if sent via
              facsimile; or, at the end of 4 (four) business days from the day
              it was sent via post - if sent via post.

       8.8    The Parties declare that they have read this Agreement carefully
              and have signed it of their own free will, with an understanding
              of its contents and the undertakings they have taken upon
              themselves and their meaning.




       AND IN EVIDENCE THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES:



                   [signed]                     [signed]

          -------------------------     -------------------------
                 The Company                  The Consultant







                                       5




                 ADDENDUM TO THE CONSULTING SERVICES AGREEMENT
          MADE AND EXECUTED IN TEL AVIV ON THE      OF        , 2003



                                    BETWEEN:

                        Ituran Location and Control, Ltd.

                             Public Co. 52-004381-1

                           Of: 3 Hashikma Street, Azor

                          (hereinafter: "THE COMPANY")

                                                                THE FIRST PARTY;

                                  AND BETWEEN:

                                  Yehuda Kahane

                              Identity No. 0519199

                       Of: 119 Bar Kochba Street, Herzliya

                         (hereinafter: "THE CONSULTANT")



                                                               THE SECOND PARTY;



WHEREAS:       On March 25, 1998 the parties signed an agreement for the
               provision of Consulting Services (hereinafter, "the Agreement"),
               which set forth the conditions under which the Consultant would
               provide financial consulting services (as defined in the
               Agreement) to the Company and would receive Compensation in
               exchange for the said Services;

AND WHEREAS:   The Parties wish to increase the level of the Compensation
               to which the Consultant would be entitled from the Company for
               the Financial Services, while the monthly consulting hours given
               by the Consultant to the Company would increase concomitantly;

AND WHEREAS:   The changes in the terms of the Agreement were approved by the
               Auditing Committee, the Board of Directors and the Company's
               general meeting;




     THEREFORE THE PARTIES HAVE DECLARED, AGREED AND STIPULATED AS FOLLOWS:


1.    The Preamble to this Addendum constitutes an integral part thereof.

2.    The provisions of the Agreement shall continue to remain in force, unless
      and to the extent that they have been explicitly amended in this
      Addendum.

3.    The terms used in this Addendum shall have the same meaning as intended
      in the Agreement.

4.    It is hereby agreed between the Parties that as of June 23, 2003, the
      Compensation paid by the Company to the Consultant shall be increased to a



                                      6


      monthly figure of NIS 15,000 (fifteen thousand) linked to the CPI
      published at the time this Addendum was signed, in addition to VAT as
      required by law.

5.    It is hereby agreed between the Parties that the Consultant shall provide
      the Company with the Financial Services at a scope of 15 hours per month.





      AND IN EVIDENCE THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES:



      [signed and stamped]                   [signed "Y. Kahane" and stamped]

      Ituran Location and Control, Ltd.      Ituran Location and Control, Ltd.
      ---------------------------------      ---------------------------------
                 The Company                            Yehuda Kahane







                                                                   EXHIBIT 10.29

                                    AGREEMENT

                 MADE AND EXECUTED ON THE 30TH OF DECEMBER, 2002



BETWEEN:      ITURAN LOCATION AND CONTROL LTD., PRIVATE COMPANY 52-004381-1

              3A HASHIKMA ST.

              INDUSTRIAL AREA, AZUR

              (HEREINAFTER: "ITURAN")

                                                                 THE FIRST PARTY

AND BETWEEN:  EDDY KAFRY

              I.D. 50888627

              10 HASAKNAI ST., HOD HASHARON

              (HEREINAFTER: "KAFRY")

                                                                THE SECOND PARTY

AND BETWEEN:  AVRI FRANKO

              I.D. 56036374

              20 HATIZMORET ST., RISHON LEZION

              (HEREINAFTER: "FRANKO")

                                                                 THE THIRD PARTY

AND BETWEEN:  ROMAN STERNBERG

              I.D. 01450553

              14 LESHEM ST., RISHON LEZION

              (HEREINAFTER: "STERNBERG")

                                                                THE FOURTH PARTY

AND BETWEEN:  TELEMATICS WIRELESS LTD.

             PRIVATE COMPANY 51-238387-8

             26 HASHOFTIM ST., HOLON

             (HEREINAFTER: THE "COMPANY")

                                                                 THE FIFTH PARTY



WHEREAS:      On November 14th 1999, an agreement was signed by the Parties, in
              which the rights of the Parties in the Company and between
              themselves were set out, inter alia, (the "Initial Agreement") and
              two written addendums were drawn up (on November 24th, 1999 and on
              April 9th,





              2000), (the addendums and the Initial Agreement shall hereinafter
              be termed the "Agreement");

AND WHEREAS:  Employment agreements have been signed between the Company and
              Kafry, Franko and Sternberg (hereinafter: the "Employment
              Agreements");

AND WHEREAS:  Ituran wishes to give Kafry, Franko and Sternberg (the
              "Directors") shares in Ituran as set out below in this agreement,
              against receipt of the holdings of the Directors in the Company,
              and the Directors agree to this,

AND WHEREAS:  The Parties wish to change and amend the Agreement and the
              Employment Agreements and regulate the relationship between them
              resulting from said shares;



   IT HAS THEREFORE BEEN PROVIDED, DECLARED, AND AGREED BETWEEN THE PARTIES AS
                                    FOLLOWS:



1.     THE PREAMBLE AND HEADINGS

       1.1.   The Preamble to this agreement constitutes an inseparable part
              thereof.

       1.2.   The section headings are for convenience only, and shall not be
              used for interpretation in any manner.

       1.3.   The provisions of this agreement shall override the provisions of
              the Agreement, of the Employment Agreements and of any other
              document or oral representation.



2.     DECLARATIONS OF THE PARTIES


       2.1.   DECLARATIONS BY ITURAN

              Ituran hereby declares vis-a-vis the Directors as follows:

              2.1.1. The allocation of shares and of the option to purchase
                     Ituran shares to the Directors, as set out in this
                     agreement, is subject to the approval of the Board of
                     Directors of Ituran, the Stock Exchange, and the Securities
                     Authority.

              2.1.2. Excluding the foregoing in sub-Section 2.1.1 above, no
                     impediment exists, either in law or by contract, to
                     allocation of the shares and of the option to purchase
                     Ituran shares, to the Directors, as specified below.


                                       2


              2.1.3. The shares of Ituran to be allocated to the Directors and
                     the shares that shall result from the exercise of the
                     option as defined below, shall be free of any lien,
                     attachment, mortgage, or third party right of any sort and
                     shall grant the holders therein with all the rights to
                     which the holders of stock options/shares in Ituran are
                     entitled.


       2.2.   DECLARATIONS BY THE DIRECTORS

              The Directors hereby declare vis-a-vis Ituran as follows:

              2.2.1. The total of the shares of the Company owned by the
                     Directors is 465,574 shares of common stock bearing a
                     nominal value of 1 NIS each (hereinafter: the "Transferred
                     Shares of the Company"), and these comprise the entire
                     holdings of the Directors in the Company.

              2.2.2. No impediment exists, either in law or by contract, to
                     transfer the Transferred Shares of the Company to Ituran.

              2.2.3. The Transferred Shares of the Company are held and
                     registered, at the time this agreement is signed, with the
                     Mizrahi Hameuhad Bank Ltd. Trust Company (the "Trustee"),
                     and are free of any lien, attachment, mortgage, or third
                     party rights of any sort, and shall grant Ituran, after
                     being transferred, with all the rights to which the
                     shareholders in the Company are entitled.

              2.2.4. The Directors shall instruct the Trustee to register the
                     Transferred Shares to the name of Ituran, at the request of
                     Ituran as set out in Section 3.1 below.



3.     EXCHANGE OF SHARES

       3.1.   The Directors shall sign a share transfer bill of the Transferred
              Shares of the Company, in respect of their entire holdings in the
              Company, to Ituran, no later than thirty days after the signing of
              this agreement. It is clarified that the holdings of the Directors
              are held by the Trustee, and therefore the Directors undertake to
              ensure that the Trustee will sign any document required for
              transfer of the shares to Ituran. The Trustee shall sign the
              documents only on the date the shares of Ituran are allocated to
              the name of the Directors or to the name of a trustee on their
              behalf.



                                       3


       3.2.   The documents of the transfer of the shares of the Directors in
              the Company, including the documents which shall be signed by the
              Mizrahi Bank Trust Company which will enable the transfer of the
              shares of the Directors in the Company to Ituran, shall be held in
              trusteeship by Attorney Ze'ev Weiss, who shall transfer them to
              Ituran on the date the shares in Ituran shall be allocated to the
              Directors. On the date the shares in Ituran are allocated to the
              Directors, Attorney Weiss shall transfer all of the documents
              which enable the transfer of the shares of the Company, as stated,
              to Ituran, and Ituran shall be entitled to transfer the
              Transferred Shares of the Company on its name.

       3.3.   Subject to receiving the approval of all the bodies mentioned in
              sub-Section 2.2.1. above, Ituran shall allocate 152,365 shares(1)
              of common stock in Ituran, bearing a nominal value of 1 NIS each,
              having equal rights to all issued shares of Ituran and comprising,
              as of the date this agreement is signed, 2.5% of the issued and
              paid up capital of Ituran, to the Directors, at the meeting at
              which the documents of transfer of the Transferred Shares of the
              Company from the Directors to the name of Ituran, shall be
              received. It shall be clearly understood that allocation of new
              shares to any person after the signing of this agreement shall
              reduce the proportion of the Directors in Ituran stock, as well as
              the proportion of all the other holders of shares/options in
              Ituran.

       3.4.   The Parties agree that if on the trading days beginning on 1
              December, 2003 and concluding on 1 February, 2004, the value of
              Ituran should be a total of less than USD 52 million, according to
              the average daily dollar value of the share of Ituran at the Tel
              Aviv Stock Exchange (according to the publications of the Tel Aviv
              Stock Exchange), then Ituran shall allocate additional shares
              numbering 76,182 shares(2) bearing a nominal value of NIS 1 each,
              comprising 1.25% of the issued and paid up capital of Ituran, to
              the Directors, while receiving no further consideration beyond the
              Transferred Shares of the Company as above (the "Additional
              Amount"). It shall be clarified that the Additional Amount shall
              be subject to every legal limitation applicable at that time.
              Ituran shall apply for the approval of the bodies stated in
              sub-Section 2.2.1. above, regarding the Additional Amount as well.
              The provisions of sub-Section 3.3. above shall apply, mutatis
              mutandis, to the Additional Amount as well.

       3.5.   It shall be clarified that according to the Securities
              Regulations, the shares and the Additional Amount allocated to the
              Directors shall be completely restricted for three months, and
              subsequently and for a period of one year each of the Directors
              shall be entitled to sell no more than 1% of the issued and paid
              up capital of Ituran per quarter. At the end of said year, no
              further restriction shall apply to the sale of Ituran stock.

       3.6.   The Additional Amount shall be allocated to the Directors without
              consideration.

---------------------
(1) According to the following division: Eddy Kafry - 60,947 shares. Avri Franko
and Roman Sternberg - 45,709 shares each.
(2) According to the following division: Eddy Kafry - 30,472 shares. Avri Franko
and Roman Sternberg - 22,855 shares each.


                                       4


       3.7.   At the date of the signing of this agreement, the allocation of
              the shares and of the Additional Amount shall be subject to the
              provisions of Section 102 of the Income Tax Ordinance, with all
              the implications of that fact and the shares will be allocated to
              the name of a trustee.

       3.8.   The Company shall bear all costs connected to the legal advice
              that the Directors shall receive concerning this agreement, as
              well as the costs the Trust Company shall incur in connection with
              the restriction placed on the allocated shares - should there be
              such costs.

       3.9.   Deleted intentionally.

       3.10.  Beginning on the date of the allocation of the shares to the
              Directors, and so long as the Directors remain office holders in
              the Company or in Ituran, the Directors shall be entitled to
              appoint one observer on their behalf, to the Board of Directors of
              Ituran.


4.     TAXATION

       4.1.   The Directors alone shall pay any tax that should result from
              receiving the shares and the Additional Amount (should it be
              received), as well as from the transfer or sale therein.

5.     WAIVER OF THE RIGHTS OF THE DIRECTORS AS SHAREHOLDERS IN THE COMPANY AND
       OF RIGHTS DURING ISSUE OF STOCK

       5.1.   Concurrently with the transfer of the Transferred Shares of the
              Company to Ituran, as stated in this agreement above, the
              Directors shall waive any right whatsoever to receive
              shares/options in the Company, insofar as they exist, and these
              shall become void at that time. To avoid doubt, it is clarified
              that the options to receive management shares in the Company which
              have been given the Directors will also become void on the date
              shares of Ituran are allocated, as set out in this agreement.

       5.2.   Upon allocation of the shares of Ituran to the Directors as set
              out in this agreement, the Directors hereby waive any right
              whatsoever granted to them by both the Agreement and their
              Employment Agreements, concerning their holding of Company shares.
              The Directors shall sign any document that shall be required in
              order to amend the articles of the Company, so that they will
              convey what is stated in this Section.

       5.3.   Notwithstanding the above, the Directors shall continue to serve
              as directors on the Board of Directors of the Company, so long as
              they continue to serve as office holders in the Company.
              Subsequently, the board of directors may terminate their service
              by a resolution passed by a regular majority.

       5.4.   So long as the Directors continue to serve in the Company as
              office holders and for six months subsequently (if they should be
              dismissed from the



                                       5


              Company), the Directors shall be entitled to have shares/stock
              options which shall be equivalent to 7.5% of the issued and paid
              up capital of the Company, allocated to them without
              consideration, as part of a prospectus to issue shares of the
              Company to the public (if there should be such a prospectus). The
              stock issue according to this Section shall be carried out subject
              to such conditions and in such a manner as shall be agreed upon
              with the underwriters of the stock issue. The exercise price shall
              be one NIS and other arrangements (such as the period of vesting)
              shall be as specified in said prospectus by the Board of Directors
              of the Company.

       5.5.   So long as the Directors continue to serve in the Company as
              office holders and for six months subsequently (if they should be
              dismissed from the Company), the Directors shall be entitled to
              have shares/stock options which shall be equivalent to 3.8% of the
              issued and paid up capital of the Company allocated to them
              without consideration, as part of a prospectus to issue shares of
              a subsidiary of the Company which is making use of the
              intellectual property of the Company, to the public (if there
              should be such a prospectus). The stock issue according to this
              Section shall be carried out subject to such conditions and in
              such a manner as shall be agreed upon with the underwriters of the
              stock issue. The exercise price shall be one NIS and other
              arrangements (such as the period of vesting) shall be as specified
              in said prospectus by the Board of Directors of the Company. It
              shall be clearly understood, that such a stock issue shall be
              subject to the control of the issued company remaining in the
              hands of the Company, and for this purpose the Directors agree to
              sign a voting agreement insofar as one shall be required in order
              to keep control as stated.


       5.6.   Sections 6 and 7 of the Agreement are hereby voided.


6.     CHANGES IN THE TERMS OF EMPLOYMENT OF THE DIRECTORS

       6.1.   The Employment Agreement of the Directors at the Company shall be
              extended by five years, i.e. until 31 December, 2007 (the
              "Determining Date") on the terms specified in the Employment
              Agreements insofar as they were not expressly changed in this
              agreement. After that date, the Board of Directors of the Company
              shall be entitled to decide whether or not to extend the period of
              employment or terminate it on a specific date

       6.2.   If the Company should cease to act as a going concern for any
              reason whatsoever, the Directors will be employed by Ituran until
              the Determining Date on the same terms at similar status, in a
              separate division that shall be set up in Ituran and which shall
              manage the activity of the Company. If no such position shall be
              found for any one of the Directors, that Director shall be
              entitled to resign from the Company as if dismissed, with all the
              implications of such a resignation.

       6.3.   In lieu of the bonus to which the Directors are entitled pursuant
              to the Employment Agreements, the Directors shall be entitled to a
              single annual bonus at the end of each year beginning in 2003,
              equivalent to 3% (three



                                       6


              percent) of the operating profit without capitalizations, one time
              expenses, and allocations (the "Bonus"), the Bonus shall not be
              considered a salary for the purposes of social deductions or the
              accrual of any rights whatsoever. Accordingly, any other bonus the
              Directors had been entitled to according to their Employment
              Agreement (insofar as they were entitled to such a bonus), shall
              be revoked.

       6.4.   The Directors hereby waive the grossing up of the value of the use
              of the vehicle provided them by the Company, and shall pay any tax
              that shall result from receiving said vehicle.


7.     MISCELLANEOUS

       7.1.   No change to this agreement shall be valid unless set out in
              writing and signed by both parties.

       7.2.   Failure to implement any right whatsoever provided by this
              agreement or by law, shall not be considered a waiver and the
              other party shall gain no claim of delay.

       7.3.   This agreement revokes all prior or contradictory agreements
              between the Parties on each subject dealt with herein.

       7.4.   No party is entitled to transfer his rights or obligations
              pursuant to this agreement in any manner, in whole or in part
              unless obtaining the consent of the other party.

       7.5.   The provisions of this agreement reflect and comprise all that was
              agreed between the parties, and revoke previous agreements and/or
              promises and/or representations, if made, with regard to this
              transaction.

       7.6.   No changes to this agreement and/or its appendices shall be valid
              in the least, unless made in writing and signed by all the
              Parties.


8.     NOTIFICATIONS

       Notifications to any of the Parties concerning this agreement shall be
       sent to the addresses of the Parties as specified in the preamble to this
       agreement. All notifications shall be sent either by registered mail or
       by messenger or by facsimile machine. Such notification shall be
       considered to be received within three business days of the day it was
       sent, if sent by registered mail, on the day of delivery if delivered by
       messenger, and if sent by facsimile machine, on the same day, so long as
       confirmation of its receipt in its entirety was received from the party
       to which it was sent.


        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES:



                                       7


     /s/ Eddy Kafry              /s/ Avri Franko            /s/ Roman Sternberg
    -------------------        -------------------          -------------------
         Eddy Kafry                Avri Franko                Roman Sternberg





          [Signature and Stamp]                [Signature and Stamp]

      -----------------------------       -------------------------------
        Telematics Wireless Ltd.          Ituran Location and Control Ltd




                                        8






                                                                   EXHIBIT 10.30


                           UNPROTECTED LEASE AGREEMENT

                 Made and executed on the 7th of February, 2002



                                     Between



                 MOFARI LTD. Private Company Number 51-1406282-1

                         By its director Menahem Rozler

                 To be referred to hereinafter as "the Landlord"

                                                                THE FIRST PARTY

                                       and





        ITURAN LOCATION AND CONTROL LTD. Public Company Number 520043811

                  To be referred to hereinafter as "the Tenant"

                                                                THE SECOND PARTY



DEFINITIONS: In this agreement, the following terms shall have the meaning
             indicated alongside them:

"The Leased Premises"     An area of approximately 2614 square meters gross, in
                          which are included, pursuant to the parties'
                          agreement, an addition for public areas, on the ground
                          and Basement A and Basement B floors, located in the
                          building belonging to the Landlord in the new
                          industrial park in Azor, known as Parcel 87 in Bloc
                          6010, and outlined in red in the diagrams that are
                          attached as Appendices A, B, C and D and which
                          constitute an integral part of the contract
                          (hereinafter: "the Diagrams.")

"The Law"                 The Tenancy Protection Law (Integrated Version)
                          5732 -1972.

"The Lease Period"        The Lease Period indicated in Section 4 of this
                          agreement.

"The Parties"             The Landlord and the Tenant together.





PREAMBLE

Whereas:          The Landlord declares that it is leasing from the Israel Lands
                  Administration the parcel on which it built the building in
                  which the




                  Leased Premises are located, outlined in red in the Diagrams
                  attached hereto as an integral part of this agreement;

And whereas:      The Landlord wishes to lease the Leased Premises to the Tenant
                  through a tenancy which is not protected by the Law, for the
                  period and under the conditions set out in this agreement;

And whereas:      The Parties hereby declare that on August 20, 1968, there was
                  no resident entitled to possession of the Leased Premises
                  and/or that the Leased Premises were vacated by any resident
                  who was entitled to possess them after August 8, 1968;

And whereas:      The parties declare that the Leased Premises is hereby leased
                  to the Tenant without the Tenant having paid any key money or
                  other consideration (other than the rental payments,
                  maintenance payments, expenses, etc., as set out in this
                  agreement) for the leasing of the Leased Premises;

And whereas       The parties wish to arrange the terms of the leasing of the
                  Leased Premises to the Tenant, all pursuant to and in
                  accordance with the terms of this agreement and with what is
                  set out therein;




  IT IS THEREFORE DECLARED, AGREED AND PROVIDED BETWEEN THE PARTIES AS FOLLOWS:

1.   The preamble to this agreement, along with the attached appendices,
     constitute an integral part thereof and the parties' declarations included
     in the preamble bind them to the same degree as do the conditions included
     in the body of the agreement.

     WAIVER OF A CLAIM OF NON-SUITABILITY

2.   The Tenant hereby declares that it has examined the Leased Premises and
     that it confirms that it received the Leased Premises in good condition,
     that the Leased Premises are suitable for its purposes, that the Landlord
     did not give the Tenant any description of the Leased Premises and/or
     declaration regarding the quality of the Leased Premises and/or the
     characteristics of the Leased Premises and that the Tenant is entering into
     this lease agreement on the basis of its examination and its impressions
     and that it hereby expressly waives, in advance, any claim of
     non-suitability.

     THE LEASE - ITS PERIOD AND ITS PURPOSE

3.   The Landlord hereby leases the Leased Premises to the Tenant and the Tenant
     hereby leases the Leased Premises from the Landlord, for the period and
     under the conditions indicated in this agreement.


                                        2


4.

     a.   The period of the lease is for 72 months beginning on April 1, 2002,
          and will conclude on March 31, 2008 (hereinafter: "the LEASE PERIOD").

     b.   The Tenant is hereby given an option right to extend the Lease Period
          for one period of an additional 48 months, beginning on April 1, 2008
          and concluding on March 31, 2012 (hereinafter: "the OPTION PERIOD").
          All of the provisions of this agreement other than the provisions
          regarding the Rental Payments and the Maintenance Expenses and except
          for the right to use an additional option, shall apply, mutatis
          mutandi, to the Option Period. The right to exercise the
          above-mentioned option is given to the Tenant subject to the Tenant
          carrying out in full and on time all of the provisions of this
          agreement during the period until the beginning of the exercise of the
          option, and subject to the Tenant having notified the Landlord in
          writing at least 180 days prior to the beginning of the Option Period
          that the Tenant wishes to extend the Lease Period for the entire
          Option Period.

5.   The parties agree that purpose of the lease is the use of the Leased
     Premises only, as offices, service centers, laboratories and storage areas.
     The Tenant undertakes not to use the Leased Premises for any purpose other
     than the purpose indicated above.

6.   A breach of the provisions of Section 5 above will be considered to be a
     fundamental breach of this agreement.

     THE CONSIDERATION

7.

     a.   In consideration for the leasing of the Leased Premises, the Tenant
          undertakes to pay the following to the Landlord:

          (1)  The shekel amount equivalent to 9.41, nine dollars and forty-one
               cents, per month with the addition of VAT, for every square
               meter, gross, of the Leased Premises, as indicated in the above
               definition of the Leased Premises, as monthly rental payments
               (hereinafter: "rental payments.")

          (2)  An additional shekel amount equivalent to $4 per month (four
               United States Dollars) with the addition of VAT, for every square
               meter of the Leased Premises, as described in the definition of
               the Leased Premises, (hereinafter: "the Maintenance Expenses"),
               which shall be paid for the maintenance of the air-conditioning
               systems, computerized smoke detection, elevators, cleaning of the
               public areas, sanitary plumbing in the public bathrooms, and for
               municipal property taxes, not including water. The payment for
               the use of water will be paid by the Tenant, and will be imposed
               on it in addition to the above-mentioned amount in accordance
               with its actual consumption, at the rate at which the Landlord is
               charged by the Azor Local Council. If the municipal property
               taxes (arnona) increase on a real basis beyond the increase in
               the consumer's price index, the part of the payment that is for
               the property tax, which is included in the Maintenance Expenses,
               shall be increased at the rate of

                                       3


               the real increase of the municipal property taxes. The Landlord
               will issue a confirmation to the Tenant regarding the
               above-mentioned increase in the property taxes.

          (3)  During the Option Period and from the time at which it begins,
               the Rental Payments and the Maintenance Expenses will increase at
               the rate of 10%.

          (4)  The Rental Payments and the Maintenance Expenses (subject to the
               above provisions regarding the municipal property taxes) will be
               linked to the representative dollar exchange rate as such is
               published by the Bank of Israel, all as set out below, and will
               be referred to hereinafter as the "RENTAL PAYMENTS." That is,
               wherever the phrase "Rental Payments" is used in this agreement,
               the reference is to the Rental Payments and the Maintenance
               Expenses.

          (5)  The Rental Payment amounts indicated in this agreement in dollars
               will be multiplied by the representative exchange rate of the
               American dollar as it is known at the time of the actual payment.

     b.   (Cancelled).

     c.

          (1)  On April 1, 2002, the Tenant will pay to the Landlord an amount
               covering four months of rental and maintenance. Deposits that
               were deposited with the Landlord pursuant to previous lease
               agreements with the Tenant and/or related companies will be set
               off against the above-mentioned payment. Beginning with the
               fourth month and onwards, i.e. on July 1, 2002, the Rental
               Payments will be paid to the Landlord every three months, in
               advance.

          (2)  Rental Payments in the amount of one month of rental, out of the
               amount indicated in 7c(1), will be used as security to guarantee
               the Tenant's obligations. This amount will be reimbursed to the
               Tenant, linked to the dollar's representative exchange rate,
               without interest, after the conclusion of the Lease Period and/or
               of the Option, on condition that the Tenant has fulfilled all of
               its obligations pursuant to this agreement.

     d.   The Tenant will also pay to the Landlord, in addition to the Rental
          Payments and the Maintenance Expenses, VAT at the rate applicable by
          law on the day of the payment - against the issuance of a tax invoice.
          The VAT amount will be paid to the Landlord at the times set for the
          payment of the Rental Payments and the Maintenance Expenses as
          indicated in this agreement, with a check dated tow days prior to date
          established by law for the payment of the VAT for the particular
          receipt.

     e.   A breach of the provisions of Section 7, including all of its
          sub-sections, will be considered to be a fundamental breach of this
          agreement.


                                        4


     THE  TENANT'S OBLIGATIONS

8.   The Tenant hereby undertakes the following vis-a-vis the Landlord:

     a.   To use the Leased Premises only for the purpose of the tenancy and not
          for any other purpose and/or goal whatsoever.

     b.   Not to transfer all or some its rights pursuant to this agreement, in
          any manner or form, either with or without consideration, to another
          or to others, and not to rent out all or part of the Leased Premises
          to another or to others, and not to allow and/or permit another or
          others to use the Leased Premises or any part thereof - except that
          the Tenant may allow and/or permit the Tenant's employees, to use the
          Leased Premises for the purpose of their work with the Tenant.

          Notwithstanding the above, the Landlord will not refuse to give its
          consent to the Tenant to give over for use, or to rent out, part of
          the Leased Premises to a sub-tenant, so long as the Tenant continues
          to be responsible to the Landlord for the fulfillment of all of its
          obligations pursuant to this agreement, including vacating the Leased
          Premises by the sub-tenant at the dates established pursuant to this
          agreement. The Landlord may refuse to give such consent for reasonable
          cause.

     c.   Notwithstanding the above, it is agreed that the Tenant may allow its
          parent companies, subsidiaries or related companies to use the Leased
          Premises, on condition that such companies sign, as a condition for
          the granting of such permission, a declaration that they know that
          they are only authorized parties in the Leased Premises, and that they
          undertake to carry out the provisions of this agreement.

          In any event, the Tenant will be responsible for vacating the Leased
          Premises by the above-mentioned companies at the end of the Lease
          Period and/or of the Option Period.

     d.   To pay the agreed Rental Payments and the Maintenance Expenses in a
          timely fashion, including VAT.

     e.

          (1)  To pay, in an orderly and ongoing fashion, and at the time
               requested, the bills for electricity relating to the Leased
               Premises, at the rate of 34 agurot per kilowatt hour, with the
               addition of VAT, linked to changes in the Electricity Company's
               rates beginning on January 1, 2002, as such bills are submitted
               by the Landlord.

               If, in any month whatsoever, it turns out that the calculation of
               the amount that the Landlord is required to pay to the
               Electricity Company indicates that the price per kilowatt hour is
               higher than 34 agurot (with the addition of VAT), without such
               excess having any connection to the increase in the Electricity

                                       5


               Company's rates, the Tenant will pay the above-mentioned price
               differential to the Landlord after the Landlord presents the
               appropriate details to the Tenant. The Tenant will not in any
               event pay less than 34 agurot per kilowatt hour.

               The Tenant also undertakes to pay for the water for the Leased
               Premises, as such payments may be requested from time to time by
               the Azor Regional Council or by the Landlord, as well as business
               tax and any other tax and/or charge and/or payments which are
               imposed on the Leased Premises and regarding which it has not
               been agreed that they will be imposed on the Landlord.

          (2)  Property tax and any tax, charge, and the like, which are, by
               their nature, imposed on the owners of a property, as opposed to
               on the possessors thereof, if any such are imposed, shall be
               imposed on the Landlord and the Landlord shall pay them.

          (3)  The Tenant will also pay for the air-conditioning provided to it,
               on the basis of the hours in which the air-conditioning is
               operated in the Leased Premises and in accordance with the
               account that shall be prepared according to the air-conditioning
               operation hours meter, which shall be submitted to the Tenant by
               the Landlord. The payment shall be calculated in the following
               manner: the amount of tons of cooling, as established by the
               Landlord's air-conditioning engineer, multiplied by the number of
               hours of usage per month, as established by the above-mentioned
               meter, multiplied by 34 agurot multiplied by 1.5 kilowatt hours
               per ton of cooling, multiplied by 0.8, with the addition of VAT.
               The above-mentioned amount of 34 agurot, shall be linked to
               changes in the Electricity Company's rates, beginning on January
               1, 2002, and linked to that which is described in sub-section
               e(1) above.

     f.   To preserve the Leased Premises, its walls, floors, doors, electrical
          systems and other installations belonging to the Leased Premises in
          good condition and in good repair and not to break and/or destroy the
          above-mentioned, and to use the Leased Premises in a cautious and
          reasonable manner, to return the Leased Premises to the Landlord in
          good condition and in good repair as it received them, except for wear
          and tear resulting from normal and reasonable use, and empty of any
          person and/or property belonging to the Tenant, and free of any debts
          and/or payments that the Tenant is required to pay pursuant to this
          agreement.

     g.

          (1)  Not to change the structure of the Leased Premises in any manner
               whatsoever, and not to make any changes in the Leased Premises
               and in the Leased Premises' systems and not to carry out any
               renovation work or any changes, without receiving the Landlord's
               advance written consent.

          (2)  This is on condition that - without derogating from the
               generality of the prohibition set out in sub-Section g(1) above -
               any addition and/or installation and/or improvement and/or change
               and/or repair made in the Leased Premises by the Tenant, even
               with the Landlord's written consent, will be considered to be the
               Landlord's property (without the Landlord being liable for any
               payment for such) and will be transferred to the Landlord's
               possession without the Tenant having any right whatsoever to
               request compensation and/or any payment for them, unless the
               Landlord requests that they be removed.

                                       6


          (3)  Notwithstanding the above, the Landlord may request from the
               Tenant that it remove any change and/or improvement and/or
               addition and/or installation that has been carried out without
               receiving the Landlord's permission, and request the restoration
               of the Leased Premises either completely or partially to their
               original condition, either during the Lease Period or after its
               conclusion. If the Landlord has given its consent to the changes
               and/or improvements and/or additions, the Landlord may request
               their removal and the restoration of the Leased Premises to their
               original condition at the end of the tenancy.

               If the Tenant does not restore the Leased Premises to their
               original condition at the Landlord's request, as described above,
               the time that the Landlord is required to wait until it receives
               the Leased Premises back in its possession in their original
               condition shall be considered to be a delay in the returning of
               the Leased Premises to its possession.

               If the Landlord requires that which is described above, the
               Tenant undertakes to do as required, at its expense and
               responsibility, in a professional and appropriate manner, within
               the time established by the Landlord, in coordination with and
               under the supervision of the Landlord. If the Tenant does not
               respond to such requests, the Landlord may carry them out itself
               and charge the Tenant with all of the Landlord's expenses and
               damages. Even if the Landlord does not carry out the above, the
               Tenant will be required to pay to the Landlord all of the
               Landlord's damages and expenses as are required for the execution
               of that which is described above, if the Landlord had asked that
               the Tenant carry out what is described above and the Tenant has
               not carried out the request within 7 days from the time of the
               request.

     h.   The Tenant will act carefully in the Leased Premises and it undertakes
          to repair, at its expense and close to the time of their discovery,
          all damages and/or faults that are caused to the Leased Premises for
          any reason whatsoever, except for damages and/or faults in those
          systems that are shared with the other units in the building and in
          the water pipes in the walls of the Leased Premises. The above
          limitations regarding the Tenant's obligation to repair are
          conditioned on the damages and/or faults not being caused by the
          Tenant and/or by its employees and/or by its invitees and/or by
          persons connected to the Tenant in any manner whatsoever. The landlord
          shall be liable for Damages and/or breakdowns in the systems that are
          shared with the other units in the building and in the water pipes in
          the walls of the Leased Premises.

     i.   It is agreed that the repairs to the Leased Premises' electrical
          system which begins at the electrical board belonging to the Leased
          Premises, will be carried out by the Tenant and at its expense. The
          Tenant will replace the lamps in the Leased Premises with new lamps.
          The Landlord shall be liable for repairs to the public electrical
          systems. The obligation to repair the damages and/or the breakdowns
          which is described above applies as well to the carpeting in the
          Leased Premises - the Tenant will be required to repair them and/or
          replace them, at the Landlord's request and to its satisfaction.

          Repair of the Leased Premises as described in Sections h and i above
          will be carried out under the Landlord's supervision and control. If
          the Tenant does not carry out repairs in the Leased Premises within 14


                                       7


          days from the date on which it is requested in writing to carry them
          out, the Landlord may but is not required to carry out the repairs
          itself or through its representatives, and to charge the Tenant with
          all the expenses of the repairs and with all that is involved in the
          execution of the repairs, even if the Landlord decides in actuality
          not to carry out the repairs or part of them.

          Notwithstanding the above, it is agreed that the Landlord's employees
          will in all events repair the water system upon coordination with the
          Tenant, to the extent such is possible. The Tenant will, immediately
          upon the Landlord's request, pay those repair and work expenses for
          which - pursuant to the provisions of this agreement - the Tenant is
          liable.

     j.   The Tenant undertakes to notify the Landlord of any occurrence of
          damage or breakdown in the Leased Premises, immediately upon its
          discovery.

     k.   The Tenant undertakes, at the conclusion of the lease or of the Option
          Period, whichever is relevant, to ensure that the Leased Premises that
          were given to the Tenant in good condition are restored to the
          condition they were in on the day they were received, subject to wear
          and tear resulting from normal and reasonable use. The Tenant is
          required to paint the Leased Premises and its walls in a good and
          professional manner, to the Landlord's satisfaction, within 7 days
          prior to the conclusion of the tenancy or of the option.

     l.   It is agreed that the Landlord or anyone whom the Landlord appoints
          may visit the Leased Premises during ordinary work hours and after
          giving notice, in order to examine the Leased Premises in order to
          ascertain the fulfillment of this agreement.

     m.   The Tenant will allow the Landlord or its representative to have
          access to the electricity, telephone, water, air-conditioning, sewage,
          etc. pipes, for the sake of handling, repairs, modifications and the
          like, or for performing anything which is required to carry out the
          above-mentioned in the pipes that pass and/or are installed and/or are
          located and/or which will be installed in the Leased Premises.

          Nothing in the above shall constitute a determination that the
          Landlord is obligated to make the above-mentioned repairs or
          modifications. The Tenant declares that it is aware that the Leased
          Premises has a 1 phase, 40 ampere electrical system.

     n.   The Tenant undertakes to carry out all the provisions of this
          agreement, including to continue to make all the rental payments in a
          timely fashion, even if the Tenant's use of the Leased Premises has
          been cancelled or transferred, either partially or completely, for any
          reason whatsoever, on condition that such cancellation was not caused
          by a breach of the contract by the Landlord and/or as a result of a
          force majeure, such that the Leased Premises could not longer serve
          their purpose.

                                       8


     o.   The Tenant undertakes to keep the Leased Premises and its environs and
          any other place which serves the Tenant in the context of this lease
          agreement clean, and not to place any vehicles, tools, containers,
          articles, pieces of scrap and other chattels outside of the Leased
          Premises and not to cause any annoyance to persons who are visiting or
          are located in the building in which the Leased Premises are located,
          and to be liable to the government and municipal institutions and
          authorities for the payment of any fines whatsoever that are the
          result of the non-fulfillment of the provisions of this section.

     p.   The Tenant undertakes to take care, by itself and at its expense, of
          obtaining the licenses required for using the Leased Premises and to
          act in accordance with the laws, regulations and rules, and to bear
          the cost of all fines and payments that are imposed, if such are
          imposed, in connection with the use of the Leased Premises; and not to
          interfere with the other persons or entities who have the right to use
          the other parts of the building in which the Leased Premises are
          located, including the common property. The Landlord confirms that to
          the best of its knowledge, there is nothing to prevent the use of the
          Leased Premises for the purpose of the tenancy.

     q.   The parties agree that in the event that the Tenant vacates the Leased
          Premises prior to the end of the Lease Period, without the Landlord's
          written consent, it will be required to pay to the Landlord the full
          rental payments through the end of the Lease Period and/or the end of
          the Option Period, whichever is relevant, and all of the Tenant's
          obligations will continue to apply until the end of the Lease Period
          or the Option Period, as stated in this agreement.

          The above will not apply in the event that the contract is properly
          cancelled by the Tenant due to the Landlord's breach thereof and/or
          due to force majeure, such that the Leased Premises can no longer be
          used for its purpose.

     r.   The Tenant hereby declares that:

          (1)  The Landlord will not be responsible in any manner whatsoever for
               the Tenant obtaining and/or continuing to obtain an appropriate
               license from the competent authorities for the operation of the
               business which it wishes to operate in the Leased Premises
               (hereinafter: "the BUSINESS LICENSE"), and that the Landlord is
               not responsible for the Leased Premises being appropriate for the
               operation of such business.

          (2)  Any liability, handling, preparations and expenses connected to
               the obtaining of the Business License will be imposed on the
               Tenant only, and the liability, handling, expenses, preparation
               and execution connected to the fulfillment of any request from a
               competent authority as a condition for the obtaining of the
               Business License will also be imposed on the Tenant alone and
               shall be its responsibility.

                                       9


     s.   The Tenant declares that the Landlord has notified it that no vehicle
          whose total weight exceeds 4 tons may go on the ramp. The Tenant
          undertakes to ensure that the above-mentioned prohibition is observed
          both by the Tenant and by its employees and by anyone connected to the
          Tenant, either directly or indirectly.

     t.   [Crossed - out] [Stamp and signature in the margins.]

     u.   A breach of the provisions of Section 8, including of any of its
          sub-sections, will be considered to be a fundamental breach of this
          agreement.

     v.   The Tenant declares that it has been clarified to him that the tenancy
          does not include the provision of a parking space for a vehicle,
          unless otherwise indicated in this contract.

BREACHES

9.

     a.   The parties provide and agree that any breach of the provisions of
          Sections: 5,7,8,10,15, 19, 24, 25, 33, and 34 of this agreement will
          constitute a fundamental breach and will entitle the Landlord, in
          addition to any other remedy granted to it either by agreement or by
          any relevant law, to cancel this agreement without warning, and the
          Tenant will be required to vacate the Leased Premises immediately.

     b.   The Tenant hereby declares that it is aware that if it does not pay,
          in full and in a timely fashion, the Rental Payments and the
          Maintenance Expenses - including the additions and the linkage - all
          as set out in Section 7 above and/or, inter alia, the other payments
          for which it is liable pursuant to this contract, and/or if it
          breaches the provisions of Section 25a below, the Landlord may, with
          written warning given 14 days in advance, disconnect the supply of
          electricity to the Leased Premises. The Tenant will not have any
          grounds for complaint whatsoever against the Landlord in connection
          with such disconnection and/or for any direct and/or indirect damage
          which is caused to the Tenant, if any such damage is caused, as a
          result of the disconnection.

VACATING AND SECURITIES

10.  Upon the conclusion of the tenancy, whether as a result of the completion
     of the tenancy or of the option, whichever is relevant, and whether as a
     result of the early cancellation of this agreement as stated in Section 9
     above, or whether this agreement comes to its conclusion for any purpose
     whatsoever, the Tenant hereby undertakes to

                                       10


     vacate the Leased Premises and to return them to the Landlord in the same
     condition in which the Tenant received them, in good repair, clean,
     painted, plastered, and orderly, with the carpets and/or floorings replaced
     or repaired if necessary as the Landlord has requested, with the Leased
     Premises being free of any person or article, and free of any debts and
     payments which are imposed on the Tenant pursuant to this agreement, and
     the Tenant undertakes to carry out all of its obligations pursuant to this
     agreement. Any breach of the provisions of this section shall be considered
     to be a fundamental breach of this agreement.



11.

     a.   If the Tenant does not carry out that which is described in Section 10
          above and/or does not restore the Leased Premises to its prior
          condition as the Landlord has requested and/or does not carry out the
          rest of the provisions of this agreement, the time that the Landlord
          is required to wait until it receives possession of the Leased
          Premises in accordance with the provisions of this agreement will be
          considered to be a delay in the return of the Leased Premises to the
          Landlord's possession.

     b.

          (1)  in addition the other provisions of the agreement, the amounts
               deposited with the Landlord as provided in Section 7c(2) above
               will also serve to guarantee the fulfillment of the Tenant's
               obligations that are imposed on him pursuant to this agreement.

          (2)  If the Tenant breaches any of the provisions of this agreement,
               and after the Landlord has given it a period of 7 days in which
               to fulfill its obligations, as shall be set out in a written
               notice sent to the Tenant, and the Tenant has not repaired the
               breach, the Landlord may foreclose on the funds or on part of
               them - whichever is relevant.

     c.   The transfer of the funds to the Landlord and/or collection of the
          amount thereof or of part of them will not grant any rights whatsoever
          to the Tenant in the Leased Premises, nor will it prevent and/or delay
          a legal suit for vacating the Leased Premises and/or for the execution
          of a judgment that may be given, nor will it prevent the Landlord from
          taking any legal action and/or asking for any relief granted to it by
          any relevant law and/or pursuant to this agreement.

12.  It is hereby expressly agreed by the parties that if the Tenant does not
     vacate the Leased Premises at the end of the Lease Period and/or
     immediately upon the Landlord's request made as a result of the
     cancellation of the agreement in accordance with Section 9 above, the
     Landlord or anyone acting on its behalf may, in addition to receiving any
     other relief granted to them pursuant to this agreement and/or pursuant to
     any relevant law, enter into the Leased Premises and take possession of it,
     even without obtaining the Tenant's consent, and change the locks, cut off
     the flow of electricity and the water, and take the Tenant's possessions
     out of the Leased Premises and store them in any place they see fit. The
     Landlord and/or its

                                       11


     representative will not be responsible for any damage which could be caused
     to the Tenant as a result of the Landlord having received possession as
     stated and/or from the transfer of the Tenant's possessions and their
     storage. Any expenses in connection with the storage of the possessions and
     their transport will be imposed on the Tenant only.

13.

     a.   Additionally, and without derogating from the other provisions of this
          agreement, the parties agree that if the Tenant does not vacate the
          Leased Premises and transfer the possession thereof to the Landlord
          immediately upon the conclusion of the tenancy relationship between
          them pursuant to this agreement, an amount equal to $1.30 per square
          meter, gross, will be paid to the Landlord, linked as provided in
          Section 7 above, for each additional day in which the Tenant remains
          in the Leased Premises, or delays the return of the possession thereof
          to the Landlord beyond the date of the conclusion of the tenancy
          relation between them pursuant to the provisions of this agreement.
          Upon the occurrence of what has been described in this section, the
          above-mentioned amount will constitute agreed usage fees in replace of
          the Rental Payments indicated in Section 7a(1) above.

          The parties hereby declare that the above-mentioned amount was
          established through their mutual consent, after making careful and
          exact consideration, as the amount of usage fees that have been agreed
          and estimated in advance, and the Tenant declares that it will be
          prohibited from making claims and/or objections regarding the size of
          this amount.

     b.   Nothing in sub-Section a above will detract from the Landlord's
          rights, in the event of a breach, to take any action or any measures
          against the Tenant pursuant to any relevant law and/or the provisions
          of this agreement.

SALE OF THE LEASED PREMISES

14.  The parties expressly agree that the Landlord has the right to transfer and
     to sell the Leased Premises to whomever it sees fit, subject to the
     continuation of this lease agreement until its conclusion and to the
     preservation of the Tenant's rights pursuant to it, without it being
     required to obtain the Tenant's consent.

     The Tenant hereby declares that it has and will have no claims and/or
     arguments regarding such transfer and that the Landlord may carry out such
     a transfer without consulting the Tenant or obtaining its consent.



                                       12


INSURANCE

15.

     a.   The Landlord will insure the building of the Leased Premises (not
          including the contents of the Leased Premises or the Tenant's
          equipment) with comprehensive insurance, and third party liability for
          the public areas, in insurance amounts that the Landlord shall
          determine. All expenses and premiums, of all kinds, relating to the
          above-mentioned insurance will be imposed, in proportion to the Leased
          Premises' relative share of the building, on the Tenant only, and will
          be paid by the Tenant immediately upon the Landlord's request. The
          Landlord will present the Tenant with a confirmation of the amount of
          the premium and of the expenses.

     b.   The Landlord hereby declares that it will ensure that the insurance
          policy will include a waiver of the right of indemnification against
          the Tenant.

     c.   The Tenant is required, at its own expense, and throughout the entire
          Lease and Option Period, to insure, through an insurance company known
          in Israel, the contents of the Leased Premises, including the pole,
          the electronic equipment and the generator on the building roof, which
          shall be referred to together hereinafter as "the equipment and the
          pole," and the Tenant will also arrange third party insurance for the
          Leased Premises, the equipment and the pole, with limitations of
          liability such as are standard in the Tenant's business. Nothing in
          the purchase of the insurance as described in this sub-section will
          serve to derogate from the Tenant's liability, as described in
          sub-Section e below, beyond the insurance amounts indicated in the
          insurance policies.

     d.   The Tenant will, by the time of the tenancy's commencement, present
          the insurance policy or a confirmation from the insurance company to
          the Landlord, regarding the arranging of the above-mentioned
          insurance.

     e.   The Tenant alone will be responsible for any damage that it and/or its
          employees and/or its agents and/or its invitees and/or those acting on
          its behalf and/or for it may cause during the Lease Period to any
          person and/or property while they are in the Leased Premises,
          including while entering and/or exiting it, and for the equipment,
          inventory and installations attached to the Leased Premises. The
          Tenant undertakes to indemnify the Landlord for any damage and/or
          financial expense which the Landlord suffer or incurs as a result of
          any suit or claim which is brought, if any such is brought, against
          the Landlord in connection with events and/or damages within the area
          of the Tenant's liability. The Tenant undertakes to do all that it can
          do to have the Landlord eliminated as a Defendant in any legal
          proceeding regarding damages such as are described in this
          sub-section.

     f.   If the Tenant does not, immediately upon the Landlord's request, pay
          the amounts of the insurance premiums, as stated above, the Tenant
          will be required to return to the Landlord any amount which it has
          paid, with the addition of increments for linkage to the dollar as
          described in Section 7 above, and with the addition of interest such
          as is charged in Bank Hapoalim with regard to exceptional overdrafts
          in current loan accounts. The calculations will be carried out at the
          time of the Landlord's request for payment and by the time of the
          actual payment.


                                       13



     g.   Any breach of the provisions of Section 15, including any breach of
          any of its sub-sections, will be considered to be a fundamental breach
          of this agreement.

CONTINUATION OF CONSTRUCTION

16.

     a.   The Tenant declares that it agrees that the Landlord, at its exclusive
          discretion, may continue to construct the building in which the Leased
          Premises and its systems are located, and that the Tenant may not
          object to such construction so long as the construction does not cause
          a change in the structure of the Leased Premises.

     b.   The Landlord undertakes to allow the Tenant, during such construction,
          free access to the entry to the Leased Premises. The Landlord will
          take all necessary measures, in accordance with its discretion, to
          limit to the extent possible, disturbances which could be caused to
          the Tenant as a result of the construction.

INSTALLATION OF THE TELEPHONE

17.  The Tenant may order and install telephones in the Leased Premises, and the
     Tenant alone will be responsible for the expenses involved in such. Upon
     the conclusion of the contract for any reason whatsoever, the Tenant may
     take possession of the telephones after paying for any debts for them.

     To remove doubt, it is noted that the Landlord will not be obligated to
     supply the Tenant with a telephone line to the Leased Premises, but to
     carry out any necessary preparation in order for it to be possible to
     install a telephone line in the Leased Premises. The Landlord confirms that
     there is an infrastructure in the building that enables the installation of
     __ telephone lines in the Leased Premises.

MISCELLANEOUS

18.

     a.   Without derogating from any other right granted to the Landlord, the
          Landlord may pay off any payment which the Tenant is obligated to pay
          and which the Tenant has not paid in a timely fashion, and to request
          reimbursement of such payment, with the inclusion of interest at the
          rate which is used in Bank Hapoalim at that time for exceptional
          overdrafts in current loan accounts.

                                       14


     b.   Any invoice, receipt or other written confirmation regarding the
          payment of any of the payments that the Tenant is required to pay off,
          which sets out the date of issuance, the amount and the nature of the
          payment that has been paid off, will be deemed as notice and
          confirmation of the payment of the amount at the time indicated on
          such receipt or confirmation, and of the Tenant's obligation to
          reimburse the Landlord for said amount immediately.

19.

     a.   The Tenant undertakes not to hang or place any signs and/or other
          marks on the building in which the Leased Premises are located and/or
          in any other part of the Leased Premises and/or the courtyard. Signs
          in the building in which the Leased Premises are located will be
          uniform and will be supplied by the Landlord. The Tenant will pay the
          Landlord immediately upon its request for the Tenant's proportionate
          share of any expenses for the preparation and assembly of the signs,
          at cost plus the addition of 10% for general expenses.

     b.   Notwithstanding the provisions of sub-Section a above, the Tenant may,
          with written approval from the Landlord, replace the sign at the
          entrance to the Leased Premises on the ground floor, at the Tenant's
          expense. The measurements of the new sign will not exceed those of the
          existing sign. The Tenant must present a plan with the measurements of
          the new sign before the new sign is installed. The Tenant may install
          the new sign only after receiving the Landlord's written approval for
          the plan. The Tenant will bear any expense and/or payment required by
          the authorities for installation of the above-mentioned sign. Upon
          conclusion of the lease agreement, the Tenant is required to remove
          the sign at its expense and to restore the Leased Premises to the
          condition they were in before any sign whatsoever was placed in them.
          Any breach of the provisions of this section will be considered to be
          a fundamental breach of this contract.

20.  Additionally and without derogating from the generality of the above, the
     parties agree that if an asset receiver and/or executor and/or liquidator
     or temporary or permanent trustee is appointed for the Tenant, and such
     order is not cancelled within forty days from its issuance, it shall be
     considered to be a fundamental breach of this agreement and the provisions
     of Sections 9 and 10 above will apply in such case. However, nothing in the
     above derogates from the Landlord's remaining rights according to this
     agreement and/or according to any law.

21.  Any debt resulting from and/or created pursuant to this agreement will be,
     for the purpose of any laws and/or regulations applied and/or used in
     Israel, deemed to be a fixed debt that may be demanded, and the time of
     payment for which is the time established in this agreement.

22.  The Tenant will be liable for the expenses for stamp tax for this
     agreement.



                                       15


23.  The parties agree that if the parties do not use their rights in accordance
     with the provisions of this agreement, then any delay and/or postponement
     and/or extension will not be considered to be a waiver or consent of any
     kind whatsoever by such party or to be a modification of a term of this
     agreement, and no such modification and/or waiver in this agreement will
     have any force unless it is made in writing and signed by both parties.

24.

     a.   The Tenant may not ask for electricity directly from the Electric
          Company and/or from any other party other than from the Landlord, and
          it may not ask the Electric Company to install a separate meter for
          the Tenant or to make payments directly to the Electric Company.

     b.   The Tenant will not have any claim or cause of action whatsoever
          against the Electric Company for the non-provision of electricity or
          disruption of electricity supply that is caused by anything connected
          to the Landlord.

     c.   Without derogating from the above, if the Tenant has installed any
          electronic or electric equipment whatsoever, it may not bring any
          claim or argument whatsoever to the Electric Company for the
          disruption of the electricity supply and/or for interference with its
          supply that is caused by anything connected to the Landlord.

     d.   The Tenant may not sue the Landlord on any ground whatsoever for the
          non-provision of electricity and/or for disruption of electricity
          supply that is caused by the Electric Company.

25.

     a.   The Tenant confirms that it is aware that the Tenant will not be
          permitted to make any use at all of the ramp section in front of the
          display windows, which is marked in red on the Diagram (Appendix C),
          and that the above-mentioned will serve for the parking of the
          vehicles belonging to a tenant and/or other tenants. Notwithstanding
          the above, the Tenant is hereby given the right to use the area in
          front of the left display window, which serves as the entry into the
          store-room, for the purpose of unloading and unloading.

     b.   The Tenant may install, at its expense, two rolling shades instead of
          the two existing display windows in the area marked with the color red
          on the Diagram. The Tenant undertakes that at the Landlord's request
          it will restore the section in which it has installed a rolling shade
          to its previous condition.

     c.   Any breach of the provisions of this section including any of its
          sub-sections will constitute a fundamental breach of this agreement.

                                       16


26.  The parties hereby repeat that they do not intend to create a protected
     tenancy relationship pursuant to the Law, and that it is a fundamental and
     basic condition of their contractual engagement that the Tenant will not be
     a protected Tenant pursuant to the Law, and that the various tenancy
     protection laws will not apply to the Tenant or to the lease, nor will any
     of the regulations that have been enacted and/or will in the future be
     enacted pursuant to these pieces of legislation.

27.  The parties hereby declare that on August 20, 1968, there was no resident
     entitled to possession and/or that the Leased Premises were vacated by any
     resident who was entitled to possess them after August 8, 1968, that the
     Tenant has not paid to the Landlord the any key money or other
     consideration for the Landlord's consent to lease the Leased Premises to
     the Tenant and that the Leased Premises are in a building that was built
     and completed after 1968 and that the parties have expressly provided and
     agreed that the Tenant will not be a protected tenant and will not have any
     right to the protection of the Law.

28.  The Tenant may not offset any financial debt of the Landlord's against any
     financial debt that the Tenant owes to the Landlord.

29.  All amounts fixed in dollars in this agreement will be paid in New Israeli
     Shekels, according to the representative exchange rate of the United States
     dollar, and VAT will be added to such amounts as required by law.

30.  Any notice sent by registered mail by one party to the other will be deemed
     to have arrived at the addressee within 48 hours after it was sent by
     registered mail or by any other manner which may be proven.

31.  The parties' addresses for the purpose of this agreement shall be those
     addresses that appear alongside their names at the beginning of the
     agreement. The Tenant's address will be, beginning on the date of the
     commencement of the tenancy, the address of the Leased Premises.

32.  The Tenant has erected on the roof of the building a 22-meter pole for an
     antenna and a base for electronic equipments, subject to having obtained
     the appropriate authorizations for such from the competent authorities and
     from a certified engineer. In addition, the Tenant has constructed on the
     roof of the Hatzabar Street stairway, a generator weighing not more than
     600 kilograms per square meter, subject to any construction restrictions.
     All the various payments, including insurance, for the maintenance of the
     above-mentioned pole, bases, and generators, will be borne by the Tenant.
     Upon the conclusion of the lease, the pole will remain on the roof of the
     building without the Tenant having any right to take it and it will become
     the Landlord's property without the Landlord being required to make any
     payment whatsoever to the Tenant for it.

                                       17


33.

     a.   The Landlord allows the Tenant to park up to three private vehicles
          along the wall of the Leased Premises in the area located in the
          basement of the building, which will be marked by the Landlord and
          outlined in red on the blueprint attached as Appendix B to the
          contract, subject to such parking not interfering at all with the
          movement of vehicles entering or exiting the basement parking lot.

     b.   The Tenant undertakes not to place a vehicle and/or to work and/or to
          use any other area in the basement or its surroundings, and not to
          interfere with the movement of vehicles entering or exiting the
          basement.

          Any breach of the provisions of this section, including of its
          sub-sections, will be considered to be a fundamental breach of this
          contract.

34.  The parties hereby waive and relinquish any demand and/or claim which
     either one of them had against the other prior to the beginning of the
     lease pursuant to this agreement which relates to the previous lease
     agreement. In this section, the term "the parties" refers as well to
     subsidiaries and affiliated companies. Notwithstanding the above, it is
     agreed that any such waiver by the Landlord is conditioned on the Tenant
     not committing a fundamental breach of this agreement during the term of
     the contract, as such is established in Section 4a above. In the event of a
     fundamental breach of this agreement by the Tenant during the period
     established in Section 4a above, which is not corrected by the Tenant
     within 10 days from the Landlord's written request, the Tenant will be
     required to pay to the Landlord, immediately upon its request, the debt for
     rental payments which the Tenant owes pursuant to the previous lease
     agreement for the ground floor, as stated on the invoice previously
     submitted to the Tenant in the amount of NIS 457,000, linked to the
     consumer price index as of the date of this agreement (hereinafter: "the
     PAST DEBT"). The parties hereby agree that the Tenant's consent to pay the
     above-mentioned debt in the event of such a breach is in the context of a
     compromise to which the parties have agreed, without the payment being
     considered to be an acknowledgement by the Tenant of the debt. In order to
     remove doubt, it is noted that so long as the Tenant does not commit a
     fundamental breach of this agreement during the period established in
     Section 4a above, the Landlord will not be entitled to receive payment for
     the Past Debt and the Tenant's signature of this agreement does not
     constitute an acknowledgement of the Past Debt. The Tenant hereby waives
     any claim of a statute of limitations even if at the time that the
     obligation to pay arises, the limitations period has expired, and it also
     waives any claim of laches and/or any other claim.




                AND IN WITNESS THEREOF, THE PARTIES HAVE SIGNED:


ITURAN LOCATION AND CONTROL
                                            [Stamp - Ituran Location and Control
[Stamp - Mofari Ltd. - and signature]       and signature)
-------------------------------------       ------------------------------------

The Landlord                                The Tenant





                                       18




             ADDENDUM TO THE LEASE AGREEMENT DATED FEBRUARY 7, 2002

                 MADE AND EXECUTED IN AZOR ON FEBRUARY 19, 2002



                                     BETWEEN



                 MOFARI LTD. PRIVATE COMPANY NUMBER 51-1406282-1

                         BY ITS DIRECTOR MENAHEM ROZLER

                 TO BE REFERRED TO HEREINAFTER AS "THE LANDLORD"

                                                               THE FIRST PARTY;

                                       AND





        ITURAN LOCATION AND CONTROL LTD. PUBLIC COMPANY NUMBER 520043811

                  TO BE REFERRED TO HEREINAFTER AS "THE TENANT"

                                                               THE SECOND PARTY;



WHEREAS:       On February 7, 2002 the parties signed an unprotected lease
               agreement for an area of 2,614 square meters in the building
               known as Parcel 87 in Bloc 6010 (hereinafter: "the Agreement");

AND WHEREAS:   The parties wish to amend the agreement in the manner provided
               below in this addendum;


                  THE PARTIES HAVE THEREFORE AGREED AS FOLLOWS:

     1.   The preamble to this agreement constitutes an integral part thereof.

     2.   The parties have agreed that notwithstanding the provisions of Section
          4 of the Agreement regarding the Lease Agreement, the Lease Period for
          the area of 234 square meters located on the second floor of the
          building, which, at the time of the signing of this agreement, was in
          the possession of Ituran Cellular Communications Ltd. (as described in
          Appendix D to the Agreement), shall be until January 31, 2003.

     3.   From February 1, 2003 until March 31, 2008, either party to this
          addendum may notify the other by a written notice given 90 days in
          advance of the conclusion of the lease agreement which is the subject
          of this addendum, and at the end of such 90 days, the Tenant will
          vacate the area which is the subject of this addendum.


                                       19





                AND IN WITNESS THEREOF, THE PARTIES HAVE SIGNED:


                                       (Stamp - Ituran Location and Control Ltd.
(Stamp - Mofari Ltd. - and signature)  signature)
-------------------------------------  -----------------------------------------

The Landlord                                         The Tenant





                                       20




        [Appendices A through D which include diagrams of the floor plans
                    of the leased property have been omitted]



                                       21









                                                                   EXHIBIT 10.31


                                 LEASE AGREEMENT
                                 ---------------

                  Made and Executed in Holon on the 13th of September, 1998


Between:          Tadiran, Ltd.

                  Of:  29 Hamerkava St., Holon

                  (hereinafter: the "LESSOR")

                                                                 THE FIRST PARTY
And Between:      Tadiran Telematics, Ltd.

                   Of:  26 Hashoftim St., Holon

                  (hereinafter: the "LESSEE")

                                                                THE SECOND PARTY


Whereas:          The Lessor is the owner and/or the owner of rights to be
                  registered as the exclusive registered owner of the property
                  known as part of Parcel 21 in Block 6781 in the industrial
                  area of Holon (formerly Block 6007 and Block 6008, Parcels
                  137 and 153).

And whereas:      The Lessee desires to lease from the Lessor part of the
                  aforesaid property (part of Building 48 having a total area of
                  1864 sq.m., including 36 sq.m. that are a proportional part of
                  the common areas in the building), whose borders are outlined
                  in red on the blueprints attached as Appendix "A" (that part
                  of the property and everything built upon it and installed
                  therein shall be termed hereinafter: the "Leased Premises")
                  and the Lessor agrees to lease the Leased Premises to the
                  Lessee under terms of unprotected tenancy;

And whereas:      The Parties desire to set out the terms of the lease and use
                  of the Leased Premises for the period and subject to the

                  provisions of this Agreement:


     THEREFORE THE PARTIES HAVE DECLARED, AGREED AND STIPULATED AS FOLLOWS:
     ----------------------------------------------------------------------


1.     The preamble to this Agreement and its Appendix constitute an
       integral part thereof.




2.     A)    The Lessor leases to the Lessee and the Lessee hereby leases
             from the Lessor the Leased Premises under terms of unprotected
             tenancy, pursuant to the provisions of this Agreement.

       B)    The Lease Period shall be from January 1st, 1997 to December 31st,
             1998 (hereinafter: the "First Lease Period") and it shall be
             extended automatically for three additional periods of two years
             each, and subsequently for a period of one year and eleven months
             (hereinafter: the "Extended Lease Periods"), unless the Lessee
             shall notify the Lessor of its desire to terminate the lease,
             notice to be given 6 months prior to the end of each Extended
             Lease Period (the First Lease Period and the Extended Lease
             Periods, provided no notice for terminating the lease has been
             received as stated above, shall be together termed hereinafter:
             the "Lease Period").

       C)    To remove any doubt, it is clarified that in any case the Lease
             Period pursuant to this Agreement shall not exceed 9 years and 11
             months.

       D)    Upon termination of the lease pursuant to this Agreement, the
             Lessee undertakes to vacate the Leased Premises and surrender
             possession thereof to the Lessor, empty of any person or object,
             being in good repair and fit for use except for reasonable wear and
             tear, all of which is subject to Section 5(B) below.

       E)    The purpose of the lease is: Any legal business within the scope of
             the Lessee's business.



3.     The Lessee explicitly declares:

       A)    That it knows that subsequent to the entering into force of the
             Tenant Protection Law (Various Provisions), 5728-1968 (hereinafter,
             the "Law"), and on the date of leasing the Leased Premises pursuant
             to this Agreement, no tenant was entitled to possession thereof
             pursuant to the Law.

       B)    That it has paid neither key money nor any other consideration that
             might be construed as key money upon entering the Leased Premises,
             nor shall it be entitled to key money or any other consideration
             upon vacating the Leased Premises.

       C)    That the Law shall not apply to the lease pursuant to this
             Agreement, that it is not a protected tenant, and that it waives a
             priori any right it may have as a protected tenant in the Leased
             Premises, should such a right apply thereto, as a result of a
             change in or amendment of the Law, or due to any law that may
             replace it.

       D)    That it waives, a priori, any right, should it have any such right,
             to bring suit against the Lessor:

             1)   For any payment whatsoever for registration or modification it
                  may carry out in the Leased Premises.





             2)   For payment of any sum  whatsoever  at the time it vacates the
                  Leased Premises and surrenders possession of the Leased
                  Premises to the Lessor.

             3)   For payment for investments or improvements in the Leased
                  Premises, or any other payment for any reason whatsoever,
                  unless expressly stipulated otherwise by the Parties.


4.     The Lessee hereby declares that it has seen the condition of the Leased
       Premises at the time this Agreement was signed, and agrees to accept it
       in this condition. The Lessee waives the right of choice due to damage,
       the right of choice due to evidence, and any other right of choice. The
       Lessee undertakes at its own expense and responsibility, to obtain any
       licenses that are required and shall be required - if any shall be
       required - from the municipality and other official authorities for using
       the Leased Premises, and it hereby releases the Lessor from all
       responsibility or financial expense of any kind in connection therewith.


5.     A)    The Lessee shall not be entitled to make any structural changes to
             the Leased Premises and/or to add outbuildings without obtaining
             written permission in advance from the Lessor. However, it shall be
             permitted to make internal changes from time to time at its own
             expense and responsibility, provided these changes shall not be
             construed in any manner as key money. It is hereby agreed between
             the parties regarding structural changes to the Leased Premises -
             the parties shall agree in advance with regard to the manner in
             which the changes are to be carried out, the payment and the rights
             to the said changes.

       B)    Any internal changes made by the Lessee to the Leased Premises
             shall remain at the end of the Lease Period, or it shall dismantle
             them at its own expense and return the Leased Premises to its
             original state, all in accordance with the requests of the Lessor
             provided the Lessor's requests shall be reasonable and acceptable.


6.     A)    The Lessee shall be responsible for repairing, at its own expense,
             any damage or fault discovered in the Leased Premises, including
             reasonable wear and tear, during the Lease Period as a result of
             its own use or use by anyone on its behalf, or as a result of use
             by visitors invited to the Leased Premises by the Lessee.

       B)    If the Lessee does not repair any damage or fault it is obligated
             to repair under the terms of this Agreement within two weeks after
             it was discovered and/or occurred and/or made known to the Lessor -
             whichever is sooner - the Lessor shall have the right to perform
             the said repair at the expense of the Lessee, and the Lessee hereby
             undertakes to reimburse the Lessor for the amount it spent to
             repair any said damage and/or fault, within 30 days from the date
             the Lessor shall so request and against the presentation of a
             receipt.







7.     Without derogating from the Lessee's responsibility under the terms of
       this Agreement and/or any law, the Lessee will insure, at its own
       expense, the Leased Premises and its contents, and the liability it has
       in connection with the Leased Premises under the terms of this Agreement
       and according to any law, as specified below:

       A)    An "all risk" property insurance policy for the full value of the
             Leased Premises [to be renewed] from time to time during the Lease
             Period, including an extension for consequential damage due to loss
             of alternative rental fees.

       B)    Third party liability insurance in amounts that correspond with the
             expected risks.

       C)    Employer liability insurance, including an extension for the
             Lessor's liability in the event it is found to be liable for the
             Lessee's employees.

       D)    The policies shall include the following extensions:

             1)   Inclusion of the Lessor in the policy as an additional
                  insuree;

             2)   A cross-liability clause (third party liability and
                  employer liability);

             3)   A clause in which the insurer waives the right of
                  subrogation towards the Lessor;

             4)   A clause according to which the insurance shall be primary
                  insurance, and any other insurance held by the Lessor that
                  may cover certain risks - shall be supplementary insurance;

             5)   Income received in connection  with damage to the Leased
                  Premises shall be paid to the Lessor, or anyone who the
                  Lessor shall designate in writing to be paid;

             6)   A cancellation clause - 90 days' prior notification to the
                  Lessor.

       E)    The Lessee undertakes to ensure that the said insurance policies
             are in force throughout the entire Lease Period, and to present to
             the Lessor a copy of the policies it has taken out.

       F)    Should the Lessee not take out separate insurance policies in its
             own name, the Leased Premises shall be insured by the Lessor for
             the same sums and against the same risks with any insurance company
             the Lessor shall decide, and the Lessee shall absorb the cost of
             the premiums paid by the Lessor pursuant to the aforementioned
             insurance policies.


8.     The Lessee undertakes:

       Not to transfer to others the Leased Premises or any part thereof, nor
       its rights in the Leased Premises or any part thereof. Notwithstanding
       the above, the Lessee shall be entitled, subject to prior notification of
       the Lessor, to allow its subsidiary companies to use the Leased Premises
       without having any rights therein, and provided they comply with all of
       the provisions of this Agreement, mutatis mutandis. In any case, the
       Lessee shall be responsible and liable to the






       Lessor for compliance with the provisions of this Agreement by the
       said subsidiary companies.



9.     The rental fee for the Leased Premises to be paid by the Lessee to the
       Lessor during the Lease Period shall be as follows:

       A)    For the first year of the First Lease Period (that is, January 1,
             1997 to December 31, 1997) - USD 7.77 per month for each sq.m., and
             USD 5.05 for each sq. m. of outbuildings and portable structures
             (if any).

       B)    For the second year of the First Lease Period (that is, from
             January 1, 1998 to December 31, 1998), rental fees shall be updated
             as follows: The rental fee quoted in sub-Section (A) above will be
             multiplied by the dollar exchange rate on January 1, 1997 (NIS
             3.251) and will be linked to the Consumer Price Index such that the
             basic index will be the CPI published on January 1, 1997, i.e., the
             CPI for November 1996 (141 points), and the CPI for the purpose of
             updating the rental fee for January 1998 will be the CPI published
             on January 1, 1998, i.e., the CPI for November 1997 (153.6 points).
             The resulting sum will be translated on January 1, 1998 into US
             dollars. The dollar rate will remain fixed in dollars for that
             entire year, and will be paid at the US dollar representative on
             the day of payment.

       C)    For the first of the Extended Lease Periods (that is, from January
             1, 1999 to December 31, 2000) - the rental fee will be updated in
             the same manner as the rental fees described in sub-Section (B)
             above, where the CPI for the purpose of updating the rent will the
             CPI for November 1998 and November 1999 respectively, and the rent
             in shekels will be translated according to the representative rate
             on January 1 of each year.

       D)    At the end of the first of the Extended Lease Periods (that is, on
             December 31, 2000), rental fees will be updated for the second and
             third Extended Lease Periods on the basis of market prices. If the
             parties cannot reach an agreement with regard to the rental fee,
             they will jointly apply for an assessment of the rental fee by a
             lands assessor who is acceptable to them, and all in accordance
             with market conditions at that time and based on the condition of
             the Leased Premises at the time the assessment is conducted.

       E)    At the end of the third Extended Lease Period (that is, on December
             31, 2004), rental fees will be updated once again for the final
             Extended Lease Periods, on the basis of market prices and using a
             mechanism identical to the one described above in sub-Section (D).

       F)    Rental fees shall be paid in New Israeli Shekels at the US dollar
             representative rate published on the day of actual payment, every
             six months in advance, by the 10th of the month in which payment is
             being made.


10.    The Lessee shall pay to the Lessor, throughout the entire Lease Period,
       Value Added Tax on the rental fee against a legally issued tax invoice,
       to be submitted by the Lessor.





       The tax sums shall be paid to the Lessor on the date on which the Lessor
       is obligated by law to pay the sums to the tax authorities.


11.    The Lessee undertakes to pay, throughout the entire Lease Period, all
       of the taxes and payments of any kind or type whatsoever pursuant to
       the Leased Premises, municipal tax (arnona) and any other tax or levy
       that apply to property owners and holders (except property tax), and
       payments for water usage, telephone, electricity, and the like.


12.    The Lessee undertakes to permit the Lessor to enter the Leased
       Premises at any reasonable time that may be decided in advance, in
       order to examine the condition of the Leased Premises and/or to make
       repairs and/or to show the Leased Premises to others.


13.    The Lessee, with 120 days advance notice in writing to the Lessor, may
       reduce the scope of the lease and return to the Lessor parts of the
       Leased Premises. The Lessee shall then be entitled to a corresponding
       reduction in rent, provided that the areas returned are adjacent to
       one another or contiguous such that they enable their lease to another
       party. It is hereby agreed that the Lessor shall not be entitled to
       lease, as stated, to a third party whose activities constitute
       competition and/or a conflict of interests with the Lessee's
       activities.


14.    The Lessor is entitled to transfer all of its rights under this
       contract to any other person and/or body without the need for the
       Lessee's consent, provided that the Lessee's rights under this
       Agreement are not compromised. It is hereby agreed that the Lessor
       shall not be permitted to transfer the rights as stated in this
       section to a third party whose activities constitute competition
       and/or a conflict of interests with the Lessee's activities.


15.    If the Lessee breaches or fails to comply with any of the conditions
       of this Agreement, or if it does not pay on time any of the sums it is
       obligated to pay in accordance with this Agreement, and this breach is
       not corrected within 30 days from the day it was requested, in
       writing, to do so by the Lessor, this Agreement shall be considered
       null and void. Without derogating from any of the Lessor's rights to
       any other relief or remedy, the Lessor shall have the right to
       immediately demand the eviction of the Lessee, and in any case the
       Lessor shall have the right to bring an action against the Lessee for
       any damage caused to the Leased Premises due to the aforementioned
       breach or non-compliance, or to effect all of the repairs and other
       actions to which the Lessee is obligated and to sue for the expenses
       it incurred from the Lessee, this without derogating from any of its
       other rights under this Agreement.


16.    A)    Upon the cancellation or termination of the lease for any reason
             whatsoever, the Lessee must vacate the Leased Premises and
             surrender it





             to the Lessor in the same reasonable and suitable condition in
             which it was given to the Lessee, empty and free of any person
             and object, except for reasonable wear and tear, and all this
             subject to the contents of Section 5(B) above.

       B)    If the Lessee does not comply with its undertakings according to
             sub-Section (A) above, it will have to pay to the Lessor, in
             addition to rent according to Section 9 above, a sum in New Israeli
             Shekels that is three times the daily rental fee for the Leased
             Premises for each day's delay in vacating the Leased Premises as
             fixed, estimated and pre-arranged damages, and this shall not
             jeopardize the Lessor's other rights according to this Agreement
             and/or any law. The damages shall be paid in New Israeli Shekels
             according to the representative rate published on the day of
             payment.


17.    The Lessee shall be entitled to hang and/or place signs or markings on
       the Leased Premises only in places that are approved for such by the
       recognized authority.


18.    A)    In the event that the Lessor intends to sell the Leased
             Premises, either during the Lease Period or at the end of the Lease
             Period, the Lessor shall grant the Lessee the "right of first
             refusal" to purchase the Leased Premises at the same terms offered
             by the Lessor to other candidates.

       B)    The Lessor shall inform the Lessee regarding details of the terms
             offered to the Lessor regarding any purchase of the Leased Premises
             as described above, and the Lessee shall inform the Lessor, within
             30 days of its receipt of the said information, whether or not it
             is willing to purchase the Leased Premises under the same terms.

       C)    If the Lessee advises the Lessor of its consent as outlined above,
             a sales contract shall be signed between the party that includes
             the said terms.


19.    It is hereby agreed between the parties that any extension or obstacle to
       the performance of any action at its appointed time by either party to
       this Agreement shall not be construed as a waiver of any rights of that
       party according this Agreement.


20.    This Agreement is subject to the approval of the bodies authorized to
       approve it for each of the parties, in the event such approval shall be
       required.


21.    The addresses of the parties are as stated in the preamble to this
       Agreement, and any notice sent by one party to the other to the said
       address shall be considered to have been received by the designated party
       within 72 hours of its receipt for delivery via registered mail, and if
       sent by messenger and/or facsimile - within 24 hours of its delivery.






        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES





       (- signed -)                                    (- signed -)
--------------------------------             -----------------------------

Tadiran Telematics, Ltd.                                 Tadiran
































         [Appendix A which includes the blueprint of the leased property
                               has been omitted]
























                          ADDENDUM TO A LEASE AGREEMENT
                          -----------------------------
                   MADE AND EXECUTED ON THE 29TH OF MAY, 2002
                                            ----         ----


Between             Rinat Yogev Real Estate, Ltd.

                    Private Co. 51-3225615

                    Of:  28 Bezalel St., Ramat Gan

                    (hereinafter:  "the Landlord")

                                                               THE FIRST PARTY;
And between:        Tadiran Telematics, Ltd.

                    Private Co. 51-238287-8

                    Of:  25 Hashoftim St., Holon

                    (hereinafter:  "The Tenant")

                                                              THE SECOND PARTY;


Whereas:            On September 18, 1998 a lease agreement was signed between
                    the Tenant and Tadiran Ltd. (hereinafter, "the Lease
                    Agreement"), according to which the Tenant was renting a
                    property known as part of Parcel 21 of Block 6781 in the
                    Holon Industrial Zone, with a built-up area of approximately
                    1,600 sq.m. (hereinafter, "the Leased Property");

And whereas:        On April 18, 2002 the Tenant purchased the Leased Property
                    from Tadiran Ltd., (through Koor Industries, Ltd.), and it
                    was agreed that upon the delivery of possession
                    (hereinafter, "the Determining Date"), all of the rights and
                    obligations of Tadiran Ltd. by virtue of the Lease Agreement
                    would be transferred to the Tenant;

And whereas:        The Lease Agreement expires on November 30, 2006
                    (hereinafter, "the Basic Lease Period");

And whereas:        The parties wish to set out the relationship between them
                    regarding all matters concerning the Lease Period and the
                    Lease Agreement beginning on the Determining Date and
                    therefrom;




        THEREFORE THE PARTIES HAVE DECLARED, AGREED AND STIPULATED AS FOLLOWS:

1.     The Lease Agreement and all of its provisions shall remain in effect
       without any change, unless and to the extent it is explicitly stated
       otherwise in this agreement. The Lease Agreement is attached to this
       agreement as APPENDIX A.

2.     In the Lease Agreement, wherever mention is made of Tadiran, Ltd., this
       shall be replaced with Yogev Real Estate, Ltd.

3.     The Basic Lease Period is hereby extended as follows:

       The Tenant is hereby given five options to extend the Lease Period, for
       two years each time, for a total of 10 additional years (that is, until
       November 30,







       2016). The Lease Agreement shall be renewed automatically for two
       years each time in accordance with the aforementioned options, unless
       the Tenant shall inform the Landlord otherwise by the end of the
       agreement via written notification 120 days prior to the end of the
       Lease Period.





        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES:



                  (stamped and signed)            (stamped and signed)

             Rinat Yogev Real Estate, Ltd.      Tadiran Telematics, Ltd.
             -----------------------------      ------------------------
             RINAT YOGEV REAL ESTATE, LTD.      TADIRAN TELEMATICS, LTD.





















                                                                   EXHIBIT 10.32


                                 LEASE AGREEMENT

                   MADE AND EXECUTED ON THE 29TH OF MAY, 2002


BETWEEN:            Rinat Yogev Real Estate, Ltd.
                    Private Co. 51-3225615
                    Of:  28 Bezalel St., Ramat Gan
                    (hereinafter:  "the Landlord")
                                                               THE FIRST PARTY;

AND BETWEEN:        Ituran Cellular Communication, Ltd.
                    Private Co. 51-2718925
                    Of:  3 Hashikma St., Azor Industrial Zone
                    (hereinafter:  "the Tenant")
                                                              THE SECOND PARTY;

WHEREAS:            On September 18, 1998 a lease agreement was signed between
                    the Tadiran Telematics, Ltd. and Tadiran Ltd. (hereinafter,
                    "the Basic Lease Agreement"), according to which the Tadiran
                    Telematics, Ltd. was renting a property known as part of
                    Parcel 21 of Block 6781 in the Holon Industrial Zone, with a
                    built-up area of approximately 1,600 sq.m. (hereinafter,
                    "the Telematics Property");

AND WHEREAS:        On April 18, 2002 the Landlord purchased the Telematics
                    Property from Tadiran Ltd., (through Koor Industries, Ltd.),
                    as well as an adjacent area of about 800 sq.m. in size
                    (hereinafter, "the Leased Property"), and it was agreed that
                    upon the delivery of possession all of the rights and
                    obligations of Tadiran Ltd. regarding the Telematics
                    Property and the Leased Property would be transferred to the
                    Landlord;

AND WHEREAS:        Beginning in February or thereabouts (hereinafter, "the
                    Determining Date") the Tenant is interested in renting the
                    Leased Property from the Landlord, and the Landlord is
                    interested in renting out the Leased Property in the manner
                    and circumstances set forth below;

AND WHEREAS:        The parties wish to set out the relationship between them
                    regarding all matters concerning the Lease Period beginning
                    on the Determining Date and therefrom;




       THEREFORE THE PARTIES HAVE DECLARED, AGREED AND STIPULATED AS FOLLOWS:

1.     The Lease Agreement and all of its provisions shall apply to the lease
       referred to in this Agreement, mutatis mutandis and with the changes
       explicitly set out in this Agreement. The Lease Agreement is attached
       hereto as APPENDIX A.

2.     In the Lease Agreement, wherever mention is made of Tadiran, Ltd., this
       shall be replaced with Rinat Yogev Real Estate, Ltd., and wherever
       mention is made of Tadiran Telematics Ltd., this shall be replaced with
       Ituran Cellular Communications, Ltd. The Lease Agreement shall apply to
       the Leased Property and the relationship between the parties.






3.     The Lease Period shall begin on the Determining Date, and extend for a
       period of two years. The Tenant is hereby given four options of two years
       each to extend the Lease Period. The Lease Agreement shall be renewed
       automatically for two years, each time in accordance with the
       aforementioned options, unless the Tenant informs the Landlord otherwise
       by the end of the agreement via written notification 120 days prior to
       the end of the Lease Period.

4.     The lease fee and all payments the Tenant is obligated to pay to the
       Landlord shall be the same as the lease fee and other payments that
       Tadiran Telematics Ltd. pays to the Landlord, and in proportion to the
       size of the Leased Property in relationship to the Telematics Property.

5.     The Leased Property shall be surrendered to the Tenant on the Determining
       Date "as is."





        AND IN WITNESS THEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES:



              (stamped and signed)            (stamped and signed)

        Rinat Yogev Real Estate, Ltd.    Ituran Cellular Communication, Ltd.
        -----------------------------    -----------------------------------
        RINAT YOGEV REAL ESTATE, LTD.         TADIRAN TELEMATICS, LTD.

























                                       2








                                                                   EXHIBIT 10.33



                                                                12 November 2000



                     Re: DEED OF UNDERTAKING AND INDEMNIFICATION
                         ---------------------------------------


Whereas             According to our request dated September 26, 2000
                    (hereinafter: our request), you were requested by us to
                    issue a deed of undertaking (hereinafter: the Deed of
                    Undertaking), under our full responsibility, to the benefit
                    of your New York branch (hereinafter: the New York branch),
                    to guarantee credit in the amount of US $3,000,000 with
                    added interest, and all, as stated in our request
                    (hereinafter, in whole or in part: "the credit"), which the
                    New York branch has placed or will place to the benefit of
                    our affiliated company: Ituran Locaizacao e Controle Ltd.
                    (Hereinafter, "the lender"). The Deed of Undertaking and our
                    request are hereby appended as Appendices A and B to this
                    document;


And whereas         The lender is a company associated according to the laws of
                    the State of Brazil, and its offices are registered in the
                    State of Brazil;


And whereas         According to the opinion that the New York branch received
                    from the lenders' Brazilian lawyers (hereinafter: the
                    opinion) and additional opinions, there are substantial
                    limitations concerning the provision and payment of the
                    credit as specified below;


And whereas         The lender's limitations related to the paying of the credit
                    as specified below, are liable to prevent the New York
                    branch from paying the credit, and it will therefore demand
                    that you realize the Deed of Undertaking,




         THEREFORE, WE HEREBY CERTIFY, DECLARE AND UNDERTAKE AS FOLLOWS:



The preamble and appendices to this Deed constitute an integral part thereof.

We hereby undertake to indemnify and compensate you immediately on being
requested to do so by you, for any expense and/or damage and/or loss of any type
or kind whatsoever, which may be caused you as a consequence of any demand that
will reach you to pay according to the Deed of Undertaking, and we undertake not
to present you, either directly or indirectly, with any suit and/or claim and/or
demand and/or complaint relating to payment according to the Deed of
Undertaking, as required by law.

Without derogating from the generality of the above, we hereby confirm, declare
and undertake as follows:

     A.  According to the opinion, and as you notified us pursuant to the law
         applicable to the provision of credit to the lender, certain legal







         problems and/or other problems may arise, of which we are presently
         unaware, with respect to the ability of the New York branch to receive
         payment for the credit from the lender.

     B.  We are aware that according to the opinion, the promissory note that is
         issued in relation to the credit is not enforceable in the State of
         Brazil.

     C.  We are aware that problems may arise in relation to the payment of
         credit owing to the foreign currency supervision laws prevalent in the
         State of Brazil.

In addition to that stated in Sections A-C above, you undertook in the Deed of
Undertaking produced at our request, to pay the New York branch any sum that you
will be requested to pay in the context of the Deed of Undertaking, immediately,
when requested to do so.

We hereby instruct you and irrevocably authorize you to charge any account we
have with you to the sum of any sum that you are asked to legally pay, that we
owe you according to this Deed of Undertaking and Indemnification, after
providing us with a written notice.

In order to remove any doubt, the provisions of this Deed of Undertaking and
Indemnification are intended to add rather than derogate from all the
obligations that we have undertaken towards you and all the authorizations that
were given you by us in a separate document.

The laws of the State of Israel will apply to this document, and the sole place
of jurisdiction has been determined as the competent court in Tel Aviv-Jaffa.



              AND IN WITNESS THEREOF WE HAVE AFFIXED OUR SIGNATURES




/s/ Illegible
-------------------------------------------
Ituran Location and Control Ltd.

P.C. 52-004381-1



Certification
-------------

I, the undersigned, Guy Aharonov, attorney for Ituran Location and Control Ltd.,
P.C. 52-004381-1 (Ituran), hereby certify that the Ituran company has signed
this document through the proxy of its signatories, Messrs. Izzy Shiratzky, I.D.
0749544 and Eli Kamer, I.D. 22366363, in accordance with Ituran's updated
certificates of association and the decisions made by Ituran according to law,
to sign this Deed and to appoint said signatories to sign this Deed of
Undertaking on its behalf, and that the signature of Ituran on this Deed is
binding in this matter.




Attorney's stamp and signature  /s/ Guy Aharonov
                                ----------------
                                Guy Aharonov, Legal Adviser
                                Ituran Location and Control Ltd.

                                       2





          REQUEST TO ISSUE A DEED OF UNDERTAKING TO AN OVERSEAS BRANCH



Name of Client: Ituran Location and Control Ltd.

Address: 3 Shikma St., Azur

ID/Company  No.: 520043811


To:

Bank Hapoalim Ltd., Nachalat Yitzhak Branch


        Re: Request to Issue a Deed of Undertaking to an Overseas Branch
            ------------------------------------------------------------


We request that you issue a Deed of Undertaking to your overseas branch,
according to the following details:

1.       Name of beneficiary: Bank Hapoalim Ltd. New York branch.

2.       Beneficiary's address: 1177 Avenue of the Americas, New York, NY
         10036-2790.

3.       Name of lender (the beneficiary's client): Teleran Holding Ltd.

4.       Amount of principal: US 3,000,000 (three million dollars)

5.       Interest at a rate of 1% will be added to the principal, over and
         above, the LIBOR rate, for _________ months, as determined by the bank,
         for which the lender will be debited for the principal (hereinafter:
         the interest);

         The sum of the principal plus interest, will hereinafter be called the
         amount of the undertaking.

6.       The undertaking will be in force until the end of business on 31
         December 2002 at the location of the beneficiary noted in Section 1
         above.

7.       The undertaking is issued in conjunction with guaranteeing the lender's
         debts and obligations towards the beneficiary.

8.       The undertaking issued by you will constitute an absolute undertaking
         without any condition, to pay the beneficiary noted in Section 1 above,
         the amount of the undertaking. Moreover, said undertaking will be an
         independent undertaking that will not depend on the relationships
         between us and the lender.

9.       All of the conditions of the Deed of Undertaking regarding the issue of
         bank guarantees (MS-16) will apply to our request, as of 13 May 1999.

10.      Our undertakings towards you will remain in force even if the payment
         to your overseas branch will not be requested or carried out by means
         of TELEX or SWIFT or WIRE.

26 September 2000                   /s/ Illegible
-----------------                   --------------------------------
Date                                Signature of requesting client
                                    Ituran Location and Control Ltd.


                                       3




Ituran Location and Control Ltd.

Legal Department



                                                              26 September, 2000


To Bank Hapoalim Ltd.                                         To: Mr. Yoram Oron

Nachalat Yitzhak Branch

Tel Aviv


Dear Sir,


Re: Request to Issue a Deed of Undertaking to an Overseas Branch
    ------------------------------------------------------------


As the legal adviser of Ituran Location and Control Ltd. (Hereinafter: "the
Company"), I am pleased to hereby certify that the request referred above, dated
26 September 2000, was signed by the Company's authorized signatories, and
obligates the company according to the company's founding documents and in
accordance with every law.




/s/ Guy Aharonov

Attorney Guy Aharonov, legal adviser

Ituran Location and Control Ltd.



                                       4






            APPENDIX A - REQUEST TO ISSUE A DEED OF UNDERTAKING TO AN
                                OVERSEAS BRANCH


Name of Client: Ituran Location and Control Ltd.

Address:

ID/Company No. 520043811



To:

Bank Hapoalim Ltd., Branch ________________



        Re: Request to Issue a Deed of Undertaking to an Overseas Branch
            ------------------------------------------------------------


We request that you issue a Deed of Undertaking to your overseas branch,
according to the following details:

1.       Name of beneficiary: Bank Hapoalim Ltd. New York branch.

2.       Beneficiary's address:

3.       Name of lender (the beneficiary's client):

4.       Amount of principal: US 3,000,000 (three million dollars)

5.       The amount of the principal plus interest, will hereinafter be called
         the amount of the undertaking.

6.       The undertaking will be in force until the end of business on March
         15, 2007 at the location of the beneficiary noted in Section 1 above.

7.       The undertaking is issued in conjunction with guaranteeing the lender's
         debts and obligations towards the beneficiary.

8.       The undertaking issued by you will constitute an absolute undertaking
         without any condition, to pay the beneficiary noted in Section 1 above,
         the amount of the undertaking. Moreover, said undertaking will be an
         independent undertaking that will not depend on the relationships
         between us and the lender.

9.       All of the conditions of the Deed of Undertaking regarding the issue of
         bank guarantees (MS-16) will apply to our request, as of _____________.

10.      Our undertakings towards you will remain in force even if the payment
         to your overseas branch will not be requested or carried out by means
         of TELEX or SWIFT or WIRE.



26 November 2002           /s/ Illegible
----------------           --------------------------------

Date                       Signature of requesting client

                           Ituran Location and Control Ltd.



                                       5





                                                                   EXHIBIT 10.34
                                    INDENTURE


              Made and executed on the 6th of August 2001, in Azor


WHEREAS THE UNDERSIGNED, ITURAN LOCATION AND CONTROL LTD. PRIVATE COMPANY NO.
52-004381-1 (HEREINAFTER - THE "PLEDGOR")


Has received and/or will be receiving, from time to time, from Bank Hapoalim Ltd
(hereinafter - the Bank), credit, documentary credit, various loans, overdrafts
in a liquid account, in a current account or in another account, letters of
indemnification and guarantees for the Pledgor or for others at the Pledgor's
request, clearance of documents, granting of extensions and various banking
easements and various other banking services (hereinafter, together and
separately- Banking Services) under conditions that have been and/or will be
agreed upon from time to time regarding each above-mentioned Banking Service;


WHEREAS ITURAN TECHNOLOGIES LTD., PRIVATE COMPANY NUMBER 51-281110-0
(HEREINAFTER: - THE GUARANTEED PARTY)


Has received and/or will receive, from time to time, from the Bank, Banking
Services with the Pledgor's guarantee; or may owe the Bank various amounts of
money in any manner whatsoever other than in connection with the provision of
the Banking Services;


It is therefore agreed that the Pledgor will insure the payment of the various
amounts of money that the Pledgor and/or the Guaranteed Party owe and/or will
owe to the Bank in connection with the provision of the Banking Services and/or
in connection with other debts which are not Banking Services and/or otherwise,
all in accordance with the following conditions:

NATURE OF THE INDENTURE


     1.   This Indenture is given to guarantee the full and exact payment of all
          of the amounts owed or which will be owed to the Bank by the Pledgor
          and/or by the Guaranteed Party in connection with the provision of the
          Banking Services to the Pledgor and/or to the Guaranteed Party and/or
          in connection with other obligations that are not Banking Services or
          in any other manner, whether they are owed by the Pledgor and/or by
          the Guaranteed Party alone and/or together with others, whether the
          Pledgor and/or the Guaranteed Party has undertaken such obligations
          and/or will undertake them in the future, either as a debtor and/or as
          a guarantor and/or as an endorser and/or otherwise, which are owed
          and/or which will be owed in the future, which are due to be paid
          prior to the realization of




          the securities to which this Indenture applies and/or afterward, which
          are owed definitively and/or conditionally, directly and/or
          indirectly: without any limitation as to amount, and along with all of
          the expenses and other payments that are owed or will be owed to the
          Bank by the Pledgor pursuant to and in connection with this Indenture
          (including as described in Sections 7 and 23 below). (All of the
          above-mentioned amounts, together and separately, will be referred to
          hereinafter as the "Secured Amounts").


PLEDGE AND FIXED LIEN


     2.   As security for the full and exact discharge of all of the Secured
          Amounts, the Pledgor hereby pledges in favor of the Bank and its
          replacements, through a fixed first degree lien and pledge, all of the
          assets and the income from the assets and their proceeds, as set out
          in the list attached hereto and marked "A" and which constitutes an
          integral part of this Indenture (hereinafter, together and separately:
          "the Pledged Assets").


     3.   The Pledged Assets will be referred to hereinafter as - "Pledged
          Property."


          The pledge and the lien that are created pursuant to this Indenture
          will apply to any right to compensation or indemnification which the
          Pledgor may have due to a loss of the Pledged Property, or due to its
          having been damaged or expropriated.


THE PLEDGOR'S DECLARATIONS


     4.   The Pledgor hereby declares as follows:

          a.   That the Pledged Property is neither pledged, under a lien nor
               attached in favor of others.

          b.   That the entirety of the Pledged Property is owned and held by
               the Pledgor exclusively or is held and/or controlled by the Bank;

          c.   That there is no limitation or condition by law or agreement that
               applies to the transfer of the Pledged Property or to its being
               pledged;

          d.   That the Pledgor is permitted to pledge the Pledged Property;

          e.   That no assignment of rights or any other activity that derogates
               from the value of the Pledged Property has taken place.


THE PLEDGOR'S UNDERTAKINGS


     5.   The Pledgor hereby undertakes as follows:



                                       2


          a.   To maintain the Pledged Property in accordance with the Bank's
               instructions only;

          b.   To use and to treat the Pledged Property with great care and to
               notify the Bank of any flaw or defect that occurs in it, and to
               repair any flaw or defect in the Pledged Property for any reason
               whatsoever, and to be responsible to the Bank for any incident of
               such a flaw or defect;

          c.   Not to sell, transfer, lease, rent or deliver the Pledged
               Property or any part thereof, not to allow another to use it in
               any manner whatsoever and not to allow another to take any of the
               above-mentioned actions, without the Bank having given its
               advance written consent for such;

          d.   To notify the Bank of any incident in which a lien is placed on
               the Pledged Property, to notify the attaching party immediately
               of the lien in favor of the Bank and to immediately, at its own
               expense and without delay, take any measure needed in order to
               remove the lien;

          e.   Not to pledge or place a lien on the Pledged Property in any form
               or manner with rights that are equal, senior or junior to those
               of the Bank, and not to assign any right whatsoever that the
               Pledgor has in the Pledged Property without obtaining the Bank's
               advance written consent;

          f.   To be responsible to the Bank for any flaw in the Pledgor's
               property right in the Pledged Property;

          g.   To pay, in a timely fashion and in accordance with any relevant
               law, all of the taxes and obligatory payments imposed on the
               Pledged Property and/or on income derived from it, and to produce
               to the Bank, at its request, all receipts for said payments. If
               the Pledgor does not make such payments in a timely fashion, the
               Bank may pay them at the Pledgor's expense and charge the Pledgor
               with their payment along with expenses and interest at the
               maximum rate. Such payments will be secured by this Indenture;

          h.   That no structural change will take place with regard to the
               Pledgor and no change whatsoever will take place in the
               controlling interests in the Pledgor without the Bank's advance
               written consent;

          i.   That it will not initiate any proceedings for the Secured Amounts
               that could impact upon the Bank's ability to realize this
               Indenture.


     6.   The Pledgor hereby undertakes to notify the Bank immediately:


          a.   Of any incident of a claim of any right whatsoever against a
               security given in favor of the Bank to which this Indenture
               applies, and/or of any execution of judgment proceedings or other
               realization measures regarding such a security;

          b.   Of any of the acts mentioned in Section 10 below;

          c.   Of a reduction of the value of any security whatsoever which the
               Pledgor has given and/or which it will give;



                                       3


          d.   Of any petition that is brought to liquidate the Pledgor's
               business or to have it be placed in receivership, and of any
               decision regarding a change in the Pledgor's structure or of any
               intention whatsoever of making such a change;

          e.   Of a change in address.


     INTEREST


     7.

          a.   The Bank may calculate interest on the Secured Amounts at the
               rate which is agreed and/or which will be agreed from time to
               time between the Bank and the Pledgor and/or the Guaranteed
               Party. In situations in which there is no agreement regarding the
               rate of interest, the Bank may fix the interest at a rate that
               will not exceed the maximum interest rate and notify the Pledgor
               and/or the Guaranteed Party of such. The Pledgor and/or the
               Guaranteed Party will be charged in accordance with such interest
               rate, and the Bank may add the interest amounts to the principal
               at the end of each month or at the end of any other period, as
               the Bank may determine.

          b.   In any event in which there is a delay in the payment of the
               Secured Amounts or of part of them, the Secured Amounts will bear
               arrears interest at the rate that has been agreed in the
               agreement for the provision of the Banking Services. If there is
               no determination regarding the arrears interest, the Secured
               Amounts will bear interest at the maximum rate.

          c.   In any event in which the Bank is granted the right to realize
               the securities given pursuant to this Indenture, the Bank may
               increase the interest rates on the Secured Amounts for a period
               beginning with the occurrence of such event and concluding on the
               date of the actual payment by the Pledgor, up to the maximum
               interest rate.


     TIMES FOR PAYMENT


     8.   The Pledgor hereby undertakes to pay to the Banks all of the Secured
          Amounts and any part of them, precisely and at the times for payment
          established and which will be established from time to time.

     9.

          a.   The Bank may refuse to accept an early payment of the Secured
               Amounts or any part of them before the time for their payment,
               and the Pledgor may not redeem the Pledged Property or a part
               thereof through the payment of the Secured Amounts and/or of any
               part of them unless otherwise agreed by the Pledgor and the Bank
               in the agreement for the provision of the Banking Services.



                                       4


               Neither the Pledgor and/or the Guaranteed Party or anyone whose
               rights may be impacted upon by the giving of this Indenture will
               have any right pursuant to Section 13(B) of the Pledge Law,
               5727-1967 or to the provision of any law which replaces it.


          b.   Subject to the provisions of any relevant law, if the Bank agrees
               to an early payment against the account of the Secured Amounts
               (without it being obligated to do such), the Pledgor will pay the
               fee for early payment as shall be agreed by the Pledgor and the
               Bank.

     10.  Without derogating from the generality of the provisions of this
          Indenture, the Bank may, in any of the events listed below, make the
          Secured Amounts immediately payable and charge any of the Pledgor's
          accounts at the Bank with the above-mentioned amount, and the Pledgor
          undertakes to pay all of the Secured Amounts and the Bank may take any
          measures it sees fit to collect the Secured Amounts and to realize the
          securities in any manner legally permissible, at the Pledgor's
          expense:

          a.   If the Pledgor breaches or does not fulfill any condition
               whatsoever of this Indenture, of if the Pledgor and/or the
               Guaranteed Party breaches any other undertakings given by the
               Pledgor and/or the Guaranteed Party to the Bank and/or which they
               will give to the Bank and such non-fulfillment and/or breach is
               not repaired by the Pledgor within 14 days from the date of the
               receipt of notice of such from the Bank, and/or if it turns out
               that any of the declarations made by the Pledgor in this
               Indenture and/or any other declaration made and/or which will be
               made to the Bank by the Pledgor in connection with the Secured
               Amounts is incorrect or inexact;

          b.   If the Pledgor and/or the Guaranteed Party make a decision
               regarding a change in the Pledgor's structure and/or that of the
               Guaranteed Party or regarding any intention making such a change,
               whether the Pledgor and/or Guaranteed Party will be an absorbing
               company or a transferring company or as a company that is being
               split, or of decisions regarding voluntary liquidation or if an
               order of liquidation has been issued against it or if a temporary
               liquidator or special manager is appointed for either of them or
               if the name of the Pledgor and/or the Guaranteed Party is deleted
               from any register whatsoever which is maintained by law or if it
               is to be erased, and the decision, order or erasure set out above
               has not been cancelled within thirty days;

          c.   If an asset receiver is appointed or an order of receivership is
               issued with respect to the property of the Pledgor and/or of the
               Guaranteed Party or with respect to part of it, and such
               appointment or order is not cancelled within sixty days;

          d.   If an attachment is imposed or any similar execution of judgment
               measure is taken against part of the property of the Pledgor
               and/or the Guaranteed Party, for an amount in excess of NIS
               200,000, and/or against any of the securities given or which will
               be given by the Pledgor and/or the Guaranteed Party;



                                       5


          e.   If it appears to the Bank, at its sole discretion, that there has
               been a change in control of the Pledgor and/or of the Guaranteed
               Party as opposed to the situation existing at the time of the
               signing of this Indenture;

          f.   If either the Pledgor and/or the Guaranteed Party have stopped
               paying off its debts and/or conducting its business;

          g.   If work and/or a significant part thereof has ceased at the
               Pledgor and/or at the Guaranteed Party for a period of two months
               or more;

          h.   If any event has taken place which could affect the Pledgor's
               and/or the Guaranteed Party's financial ability;

          i.   If the Pledgor and/or the Guaranteed Party has delayed the making
               of any payment whatsoever of the Secured Amounts by more than 14
               days;

          j.   Cancelled

          k.   If, at the Bank's discretion and in its sole estimation, there
               has been a deterioration in the values of the Pledged Assets, or
               in the Pledgor's and/or the Guaranteed Party's ability to pay.

          l.   In the event of the liquidation of the Pledgor and/or of the
               Guaranteed Party.

          m.   If the Pledgor and/or the Guaranteed Party is asked to make early
               payment of debts which the Pledgor and/or the Guaranteed Party
               owes and/or will owe to other creditors, in amounts exceeding NIS
               200,000.


THE BANK'S RIGHTS


     11.

          a.   The Bank has the right of possession, retention, offset and lien
               on all amounts, properties and rights - including securities,
               coins, gold, banknotes, documents for merchandise, insurance
               policies, notes, assignments of debts, deposits, securities and
               the consideration therefore, which are held or controlled by the
               Bank at any time, in favor of the Pledgor or on its behalf,
               including those which have been delivered for collection,
               security, custodianship or in another manner. The Bank may retain
               the above-mentioned assets until the full discharge of the
               Secured Amounts, or sell them and use all or part of the
               consideration to discharge the Secured Amounts. In the event that
               the amounts to be set-off were deposited in a currency other than
               that in which the Secured Amounts are determined, the Pledgor
               hereby gives the Bank advance instructions to sell the balance of
               the right in the other currency at a rate to be determined by the
               Bank or which the Bank can obtain for it at that time, and to
               credit the consideration from the sale, after deducting the
               obligatory expenses and fees, against the Secured Amounts.



                                       6


          b.   Without derogating from the Bank's right of retention as
               described in Section 11a above, the Bank may (but is not
               required) at any time:

               1.   Offset any of the Secured Amounts owed by the Pledgor
                    against amounts owed to the Pledgor by the Bank in any
                    account, either in Israeli or foreign currency, in any
                    manner or on any grounds whatsoever, even before the time
                    for the payment of the amounts owed by the Pledgor to the
                    Bank as stated, against which the offset will be carried
                    out, but in an offset carried out against deposits in a
                    savings plan, such deposits may not be offset prior to the
                    date on which the Pledgor is permitted to request early
                    payment of the deposits.

               2.   Purchase, for the Pledgor's account, any amount in foreign
                    currency that is required for the discharge of any of the
                    Secured Amounts or sell any foreign currency whatsoever
                    which the Bank holds in favor of the Pledgor and use the
                    consideration from the sale for the discharge of any of the
                    Secured Amounts.

               3.   To charge any account of the Pledgor's with any amount
                    whatsoever of the Secured Amounts. However, if the status of
                    any such account does not allow it to be charged by the Bank
                    for the purpose of the final payment of any amount
                    whatsoever, the Bank is permitted to not charge such
                    account, and if it does so, it may cancel any such charge
                    and treat any amount the charging of which was cancelled as
                    an amount that was not paid against the account of the
                    Secured Amounts, and may accordingly carry out any action
                    which it sees fit, pursuant to this Indenture.

               4.   In any event, the Bank may carry out an offset without any
                    prior notice. However, in the following cases, the Bank may
                    carry out an offset with prior notice that shall be given to
                    the Pledgor 10 (ten) days prior to the date on which the
                    set-off is carried out:

                    a.   If an offset is against amounts the payment of which is
                         not yet due.

                    b.   In the event of an offset against a regular fixed
                         deposit which, were it not for the offset, would have
                         been extended or renewed automatically, such that
                         rights or benefits would have derived to the Pledgor
                         therefrom.

                    c.   Notwithstanding the provisions of Section (4) above, if
                         the delay in carrying out the offset could damage the
                         Bank's situation or any of its rights whatsoever, the
                         offset will be carried out immediately.

          c.   The Pledgor hereby declares that it is aware that when the Bank
               uses its right of offset as described above prior to the payment
               due date of all or part of any of the Pledgor's deposits, the
               Pledgor's rights regarding or in connection with such deposit may
               be reduced (such as with regard to interest rates, linkage
               increments, currency exchange increments, rights to grants or
               loans, an exemption or reduction in income tax and withholding
               from source - if, pursuant to the terms of such deposit, the
               Pledgor had been given such rights.) The Pledgor



                                       7


               will bear all costs and payments imposed at that time by the Bank
               for the purpose of executing such action.

          d.   Any purchase or sale as described in Section 11 b. 2 above will
               be carried out at the Bank's standard rate, out of the amounts in
               Israeli or foreign currency, whichever is relevant, that the Bank
               holds in favor of the Pledgor, or which it receives from the
               realization of any securities whatsoever that have been given or
               which will be given to the Bank by the Pledgor.


          The term "the Bank's standard rate" shall mean, with regard to any
          purchase of foreign currency for the Pledgor's account, the highest
          rate for transfers and checks that the Bank would at that time use for
          the sale to its customers of the relevant foreign currency, with the
          addition of the exchange fee and any tax, charge, obligatory payment
          or other payments, etc., and with regard to any sale of a foreign
          currency from the Pledgor's account, the lowest rate for transfers and
          checks that the Bank would at that time use for the purchase from its
          customers the relevant foreign currency in exchange for Israeli
          currency, after deduction of the exchange fee and any tax, charge,
          obligatory payment or other payments, etc.

     12.  The Bank may, at any time, charge any account of the Pledgor for any
          amount owed or which will be owed by the Pledgor in any manner
          whatsoever, and credit any amount which is received from the Pledgor
          or on its behalf to whichever account it sees fit, and transfer any
          amount which is available to the benefit of the Pledgor to any account
          which the Bank sees fit.

     13.  The Pledgor confirms that it will trust the Bank's records and its
          accounts, and that they will be considered to be accurate and will
          serve as prima facie evidence of all of the specifics therein -
          regarding, inter alia, the calculation of the Secured Amounts; the
          details of the notes, guarantees and other securities; and any other
          matter relating to this Indenture.

     14.  Without derogating from the other provisions of this Indenture, any
          waiver, extension, easement, estoppel, or refraining from the taking
          of action (hereinafter: "a waiver") which is done or given by the Bank
          regarding a non-fulfillment or a partial fulfillment or an improper
          fulfillment of any of the Pledgor's undertakings pursuant to this
          Indenture, will not be deemed to be a waiver on the part of the Bank
          of any right whatsoever, unless it is by agreement which is limited to
          the particular circumstance in which it is given.



                                       8



     15.


          a.   In each one of the incidents described in Section 10 above, the
               Bank may use any measures it sees fit in order to collect the
               Secured Amounts and to realize any of its rights pursuant to this
               Indenture, including the realization of the Pledged Property in
               whole or in part, and it may use the compensation received for
               such realization for the discharge of the Secured Amounts,
               without the Bank being obligated to first realize any guarantees
               or other securities, if the Bank has any such guarantees or other
               securities;

          b.   In the event that the Bank chooses to realize the Pledged
               Property, a notice given three days in advance regarding the
               steps which the Bank intends to take will be considered to be
               notice given within a reasonable time for the purpose of Article
               19(b) of the Pledge Law, 5727-1967, or for the purpose of the
               provisions of any law which replaces it;

          c.   The Bank may - as the representative of the Pledgor, and for the
               purpose of this section the Pledgor irrevocably appoints the Bank
               as its representative - sell the Pledged Property and any part
               thereof through an auction or other sale, either by itself or
               through others, for cash or installment payments or otherwise,
               for a price and terms that shall be determined at the Bank's
               absolute discretion, and the Bank may also - by itself or through
               the court or through the Execution of Judgment Office, realize
               the Pledged Property or any other property, including - inter
               alia - through the appointment of an asset receiver or a managing
               asset receiver on behalf of the Bank, whose powers shall include,
               inter alia, permission to:

                    1.   Take the Pledged Property or a part thereof into his
                         possession.

                    2.   Manage the Pledgor's business or take part in its
                         management, as he sees fit.

                    3.   Sell or agree to the sale of the Pledged Property in
                         whole or in part, or transfer it or agree to its
                         transfer in any other manner, pursuant to terms that it
                         sees fit.

                    4.   Make any other arrangement regarding the Pledged
                         Property or any part thereof, as it sees fit.


          d.   All income received by the Receiver or the Receiver and the
               Manager from the Pledged Property, as well as any remuneration
               received by the Bank and/or by the Receiver or the Receiver and
               the Manager from the sale of the Pledged Property, or any part
               thereof, shall be credited in the following order:

                    1.   For removal of all expenses that have been and shall be
                         incurred relating to the collection of the Secured



                                       9


                         Amounts, including the expenses of the Receiver or the
                         Receiver and the Manager and his fee in such amount as
                         shall be determined by the Bank or approved by the
                         Court or the Executor's Office.

                    2.   For removal of Secured Amounts that shall reach the
                         Bank pursuant to the conditions of linkage, interest,
                         damages, commissions and expenses that are or shall be
                         due to the Bank in accordance with this Indenture.

                    3.   For removal of the Secured Amounts Fund.


     Or in any other order of crediting as shall be determined by the Bank.


     16.  In the event that, at the time of selling the Pledged Property, the
          date of payment for any or all of the Secured Amounts shall not yet
          have arrived, or the Secured Amounts or any thereof shall reach the
          Bank only conditionally, the Bank shall be entitled to collect from
          the sale such amount as is sufficient to cover the Secured Amounts,
          and the amount collected and not yet credited for removal of the said
          amounts in Section 15.D. above shall be Pledged to the Bank to ensure
          the Secured Amounts and shall be held by the Bank pending their
          removal.


NATURE OF THE SECURITIES

     17.  The securities that have been and/or shall be given to the Bank in
          accordance with this Indenture have a permanent character and shall
          remain valid until such point as the Bank shall confirm in writing
          that this Indenture is invalid.

     18.  If other securities or guarantees have been or shall be given to the
          Bank for the repayment of the Secured Amounts, all securities and
          guarantees shall be mutually independent.

     19.  If the Bank compromises or grants an extension or relief to the
          Pledgor and/or the Guaranteed Party, amends any of the undertakings of
          the Mortgager and/or the Guaranteed Party regarding the Secured
          Amounts, or releases or waives other securities or guarantees - these
          shall not change the nature of the securities to which this Indenture
          applies, and all the securities and undertakings of the Pledgor to
          which this Indenture applies shall remain fully valid.

     20.  The Bank is entitled to deposit the securities that have been or shall
          be delivered in accordance with this Indenture, or part thereof, with
          a guardian who shall be chosen by the Bank at its discretion, at the
          Pledgor's expense, and to replace this guardian from time to time; the
          Bank shall further be entitled to register any or all of the
          above-mentioned securities with any empowered authority in accordance
          with any law and/or with any public registry.




                                       10


RIGHT OF TRANSFER

     21.  The Bank is entitled at any time, at its discretion, and after
          providing written notice thereof to the Pledgor, and without requiring
          the consent of the Pledgor, to transfer, in full or in part, this
          Indenture and the rights in accordance therewith, including the
          securities, to a company from the Bank's group, and any recipient of
          the transfer shall also be entitled to transfer the above-mentioned
          rights to a company as stated, without requiring additional consent
          from the Mortgager. The transfer may be effected by endorsement in the
          margins or on the face of this Indenture, or by any other means as the
          Bank or the recipient of the transfer shall see fit.


NOTICE OF RESERVATION

     22.  The Pledgor undertakes to inform the Bank in writing of any
          reservation or objection it may have, if any, relating to any account,
          summary of account, authorization or notification of any kind it shall
          receive from the Bank, including the receipt of information by means
          of the automated information station. If the Mortgager does not
          express its reservation or objection within 21 days from the date of
          dispatch of the above-mentioned account, summary of account,
          authorization or notification, the Bank shall be entitled to consider
          this tantamount to confirmation of the veracity thereof.


EXPENSES

     23.  All expenses in relation to this Indenture (as detailed in the Bank's
          tariffs, as these shall apply from time to time), including the
          commission for the preparation of documents on account of credit and
          securities, stamp duty and registration of documents, expenses for the
          realization of the securities and the execution of collection
          procedures (including the Bank's attorneys' fees), insurance,
          security, maintenance and repair of the Pledged Property - shall be
          paid by the Pledgor to the Bank in accordance with its first request
          (unless these were actually paid by the Guaranteed Party, in the event
          that this Indenture is made to secure the liability of the Guaranteed
          Party), with the addition of maximum-rate interest from the date of
          request through full removal. Pending the removal thereof, all
          above-mentioned expenses, with the addition of interest, are secured
          by this Indenture. The Bank shall be entitled to debit the Pledgor
          Mortgager for the above-mentioned expenses and the interest thereon.


INTERPRETATIONS

     24.  In this Indenture - (A) The singular includes the plural, and vice
          versa; (B) The masculine includes the feminine, and vice versa; (C)
          "The Bank" means Bank Hapoalim Ltd., and any of the Bank's branches as
          existing on the date of this Indenture and/or as shall open in any
          place in the future, its transferees and alternates, and those acting
          with the Bank's authority; (D) "Maximum-rate interest" means: interest
          in the maximum rate customary in the Bank at that time, and from time
          to time, regarding deviations and



                                       11


          arrears in debit accounts or in checking accounts, according to the
          higher of the two; (E) "Structural Change" means, regarding the
          Pledgor, merger or division (as these terms are defined in Section E2
          of the Income Tax Ordinance or any legal provision coming in place
          thereof), and the transfer of assets in return for stocks, all whether
          as in accordance with the above-mentioned Section E2 or otherwise; (F)
          The headings of the sections are intended to serve solely as
          reference, and are not to be used in interpreting this Indenture; (G)
          The preamble to this Indenture constitutes an integral part thereof.


NOTICES AND WARNINGS

     25.  Any notice sent by the Bank by mail to the Pledgor in a registered or
          ordinary letter in accordance with the address stated above, or in
          accordance with the address of the Pledgor's registered office, or in
          accordance with another address as the Pledgor shall inform the Bank
          in writing, shall be considered as a legal notice received by the
          Pledgor within 72 hours from the time of dispatch of the letter
          including the notice. A written declaration by the Bank shall serve as
          evidence of the time of dispatch of the notice. Any notice granted to
          the Pledgor by any other means shall be considered to have been
          received at the time of its issue or the time of its publication.


SUBSTANTIVE LAW AND PLACE OF JURISDICTION

     26.  a. This Indenture shall be interpreted in accordance with the laws of
             the State of Israel.

          b. The sole place of jurisdiction for the purpose of this Indenture is
             established as the relevant court in Tel Aviv - Jaffa.



WITNESSED BY THE PLEDGOR'S SIGNATURE:



      [Signature and Stamp]
--------------------------------
ITURAN LOCATION AND CONTROL LTD.




                                       12





                                  APPENDIX "A"

BANK HAPOALIM LTD.

LIST OF PLEDGED ASSETS

BY: Ituran Location and Control Ltd.

TO THE ORDER OF BANK HAPOALIM LTD.


-------------------------------------------------------------------------------
Serial No.   Description
-------------------------------------------------------------------------------
1.          1,237,800 ordinary shares bearing the nominal value of NIS 1 each
            of the company Tadiran Telemetrics Ltd. (Hereinafter: the "Company")
-------------------------------------------------------------------------------
2.          All dividends that shall be paid and/or payable in respect of or
            according to all of said shares at any time whatsoever, from the
            date this deed of pledge is signed and thereafter.
-------------------------------------------------------------------------------
3.          All shares and stock (including all dividends that shall be paid
            and/or payable thereof or thereby)(Hereinafter: the "Other Shares")
            and all rights and the monies and the property that shall accrue or
            be issued in respect of said shares and/or in respect of and/or
            according to them, as bonuses, benefits, preferential rights, or
            otherwise.
-------------------------------------------------------------------------------
4.          All rights in the Company and with regard to it, that the law and/or
            the memorandum and/or the articles of the Company vest and shall
            vest with the Pledgor, in lieu of and in respect of said Shares
            and/or the Other Shares.
-------------------------------------------------------------------------------







                                       13




                                                                    Date: 8/6/01
Dear Sir or Madam,

Bank Hapoalim Ltd.


We wish to inform you hereby, that at the meeting of the Board of Directors of
the company Ituran Location and Control Ltd. (Hereinafter: the "Company"), which
was held in AZOR on 8/6/01 it was resolved as follows:

     1.   That the Company shall sign a deed of pledge of shares, formulated as
          attached, to pledge 1,237,800 ordinary shares bearing the nominal
          value of NIS 1 each of the company Tadiran Telematics Ltd.
          (Hereinafter: the "Shares") in favor of Bank Hapoalim Ltd., this being
          to guarantee all the debts and obligations of the Company and/or of
          the company Tadiran Telematics Ltd., to Bank Hapoalim Ltd. in any
          manner whatsoever and without limit on the total sum thereof.

     2.   We are aware and we agree that the Shares shall be deposited at the
          company Poalim Trusteeship Services Ltd..

     3.   To empower the Messrs. IZZY SHARETZKY AND KAMAR ELI to sign said deed
          of pledge, as well as all other documents necessary in your opinion in
          order to carry out the aforementioned, in the name of the Company,

     4.   To notify Bank Hapoalim Ltd. of the aforementioned resolutions.

     We certify that the aforementioned resolutions have been adopted in
     accordance with the memorandum and the articles of the Company, and have
     been registered in the protocol register of the Company.


                                            Respectfully yours,

                                                   [signed]
                                        -------------------------------
                                        Chair of the Board of Directors




                                       14



     I, the undersigned, EYAL SHARETZKY, attorney of the aforementioned Company,
     do certify hereby, that the foregoing is a faithful copy of the original
     protocol, which was registered in the protocol register of the Company,
     that the meeting of the Board of Directors of the Company was duly convened
     and that the aforementioned resolutions were duly adopted, according to the
     articles of the Company. In addition, I do certify that the combination of
     signatures set out in the aforementioned resolution [sic. -trans.] shall
     bind the Company.

                                                EYAL SHARETZKY, ATTORNEY-AT-LAW
                                                [signature & stamp]
                                                -----------------------------
                                                Attorney






                                       15





                                A G R E E M E N T

                MADE AND EXECUTED IN TEL AVIV ON AUGUST 6TH, 2001

B E T W E E N:       ITURAN LOCATION AND CONTROL LTD.
                     (Hereinafter to be termed - the "PLEDGOR")
                                                                THE FIRST PARTY;


AND BETWEEN:         BANK HAPOALIM LTD.
                     (Hereinafter -  the "BANK")
                                                               THE SECOND PARTY;

AND BETWEEN:         POALIM TRUSTEESHIP SERVICES LTD.
                     (HEREINAFTER -  THE "TRUST COMPANY")
                                                                THE THIRD PARTY;

W H E R E A S:          The Pledgor has received and/or will receive credit
                        and/or loans and/or will guarantee the payment of the
                        debts of the company Ituran Location and Control Ltd.
                        (Hereinafter, jointly and/or severally: the "CREDIT");

A N D   W H E R E A S:  The Pledgor declares that it is the owner and possessor
                        of 1,237,600 ordinary shares, bearing the nominal value
                        of NIS 1 each of the company Tadiran Telemetrics Ltd.
                        (Hereinafter: the "COMPANY")( Hereinafter: the
                        "SHARES");

A N D   W H E R E A S:  In order to guarantee the Credit, the Pledgor has
                        pledged and/or will pledge the Shares by a fixed charge
                        without limitation by sum, to the Bank and has signed
                        and/or will sign any Indenture including all of the
                        schedules thereof (Hereinafter: the "INDENTURE");

A N D   W H E R E A S:  The Trust Company has agreed to accept the Shares into
                        its possession, and act on behalf of the Bank and the
                        Pledgor, as set out in this Agreement;


IT IS THEREFORE AGREED AND PROVIDED AS FOLLOWS:-

     1.   The Preamble to this Contract constitutes an inseparable part thereof.

     2.   With the assent of the Parties, the Pledgor hereby transfers the
          certificate of the Shares to the possession of the Trust Company and
          deposits it therein, as trustee for the purpose of protecting the
          rights of the Bank pursuant to the Indenture.



                                       16


     3.   The Shares and the benefits in respect of the Shares shall be
          available for the use, to the credit and to the order of the Bank.

          In this Agreement the term "BENEFITS" shall have the following
          meaning: All proceeds and rights stemming from the Shares, including
          the collection of dividends and of benefit shares or acquisition of
          new shares, should rights be allotted.

     4.   Should the Bank apply to the Trust Company and declare that the
          Pledgor had not met one or more of its obligations vis-a-vis the Bank,
          then either the Trust Company shall register the Shares [and the]
          Benefits to the Bank, in whole or in part, or to whoever the Bank
          shall request, or the Trust Company shall sell the Shares and the
          Benefits, in whole or in part, at a price and on reasonable terms
          according to the market at that time, and shall transfer the proceeds
          to the Bank in order to repay the Credit, all as the Bank shall order.
          The Trust Company shall be free of any responsibility to check the
          appropriateness of the request of the Bank.

     5.   So long as the Credit has not been repaid and/or so long as any debts
          or obligations of the Pledgor vis-a-vis the Bank, in respect of the
          Credit, remain, the Pledgor and the Trust Company shall not be
          entitled to change or to void the terms of this document unless the
          consent of the Bank shall be obtained thereof.

     6.   Once the Bank shall notify the Trust Company, in writing, that the
          Credit has been fully paid up, or that it has no interest in the
          Shares, the Trust Company shall be allowed to return the Shares to the
          Pledgor.

     7.   Subject to any confirmation given by the Bank to the Trust Company,
          monies, benefit shares or any other right that may reach the
          possession of the Trust Company as holder of the Shares, shall be
          transferred by it to the Bank, and shall be charged by it on account
          of paying off the interest on the Credit.

     8.   The Bank and the Trust Company shall not be held responsible in any
          manner or form vis-a-vis the Pledgor for any action or inaction of
          theirs or of either of them concerning the Shares and/or the rights
          stemming from and/or connected to them, and/or a change in the value
          therein for any reason whatsoever.

     9.   Any tax applicable to the Shares as well as fees and expenses that may
          result from the custody and care thereof, and the trusteeship fee of
          NIS 5,000 (FIVE THOUSAND New Israeli Shekels) per year or any part
          thereof (Hereinafter: the "Trust Company Fee") shall be paid by the
          Pledgor. The Trust Company Fee shall be linked to the Consumer Price
          Index. The linkage shall be calculated based on the Index published in
          the month 7/15/01.



                                       17


          The Trust Company Fee is an annual fee. The Trust Company Fee shall be
          paid by the Pledgor each year in advance. To avoid doubt, it is stated
          that the Trust Company Fee is separate from the costs of the Bank,
          should there be any, the Bank and/or the Trust Company shall be
          entitled to debit the account of the Pledgor and/or account 641/507860
          at the Bank to pay off the costs and the fees set out in this section
          above.

     10.  This Agreement shall neither derogate from, nor void, nor change the
          rights of the Bank pursuant to the documents and/or the other
          guarantees signed by the Pledgor and/or given by it in favor of the
          Bank, and these shall remain fully valid until final payment of all
          the Credit to the Bank.

     11.  Any notice that shall be sent by the Bank to the Pledgor by registered
          or regular mail according to the address specified in the preamble to
          this Agreement and/or any other address provided by the Pledgor or
          which shall be provided by it to the Bank in writing, shall be
          considered a lawful notice received by the Pledgor 48 hours after the
          time the letter containing said notice was sent.

                       IN WITNESS WHEREOF, we have signed:




       [SIGNATURE AND STAMP]
         ---------------------------------    ------------------------------
          ITURAN LOCATION AND CONTROL LTD.          BANK HAPOALIM LTD.


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

                        POALIM TRUSTEESHIP SERVICES LTD.


I HEREBY GIVE AN IRREVOCABLE ORDER TO DEBIT MY ACCOUNT AT BANK HAPOALIM LTD.,
YITZHAK SADEH BRANCH, NO. 641/507860 IN RESPECT OF THE TAXES, THE FEES AND THE
EXPENSES SET OUT IN SECTION 9 ABOVE.


                                           [SIGNATURE AND STAMP]
                                      --------------------------------
                                      ITURAN LOCATION AND CONTROL LTD.




                                       18



                                                            Date
Dear Sir or Madam,

Bank Hapoalim Ltd.


    RE: 1,237,800 ORDINARY SHARES BEARING THE NOMINAL VALUE OF NIS 1 EACH OF
       THE COMPANY TADIRAN TELEMETRICS LTD., OWNED BY ITURAN LOCATION AND
                              CONTROL LTD. (ITURAN)

Acting as the attorney of the company Tadiran Telemetrics Ltd., and at your
request, I hereby certify the following to you:

     1.   The 1,237,800 shares under discussion are owned by Ituran, duly issued
          from capital duly registered, and their value has been paid up to the
          Company in full.

     2.   The pledged Shares and rights, have not been otherwise mortgaged,
          assigned, attached or pledged in any manner whatsoever to any third
          party whatsoever, they are owned by the Pledgor exclusively, whereas
          no third party whatsoever has any right whatsoever therein.

     3.   Subject to the articles of the Company, no limitation whatsoever under
          law applies to the transfer of the pledged Shares and rights.




                                            Respectfully yours,


                                               EYAL SHARETZKY, ATTORNEY-AT-LAW
                                                      [signature & stamp]
                                               --------------------------------
                                                           Attorney




                                       19




                                                              Date
Dear Sir or Madam,

Tadiran Telematics Ltd.


     1.   We wish to inform you that we have pledged and assigned by pledging
          all of the monies to which we are or may be entitled from you as a
          dividend, should you distribute dividends to your shareholders, to
          Bank Hapoalim Ltd., Branch 641, the address being NAHALAT YITZHAK ST.
          TEL AVIV (Hereinafter: "Bank Hapoalim"), according to the Assignment
          of Obligations Law, 5729 - 1969.

     2.   Accordingly, you must pay all of the aforementioned monies to Bank
          Hapoalim, and we hereby give you an irrevocable order to transfer all
          of the aforementioned monies to Bank Hapoalim alone.

     3.   Payment shall be carried out by crediting account number 507860 at the
          aforementioned branch, so long as Bank Hapoalim has not given you
          other instructions. In such a case you shall act according to the
          instructions of Bank Hapoalim.

                                               Respectfully yours,




                                               ITURAN LOCATION AND CONTROL LTD.
                                                     [signature & stamp]
                                               --------------------------------
                                               Ituran Location and Control Ltd.

Dear Sir or Madam,

Bank Hapoalim Ltd.
Branch
       -----------------------



We confirm receipt of the aforementioned notice and we shall act as instructed
therein.

                                                 Edi Kafry  [name & signature]
Date
     -------------                              -------------------------------

                                                     Tadiran Telematics Ltd.



                                       20





Ministry of Justice
Registrar of Companies
POB 28178
Jerusalem 91281
                       PARTICULARS OF MORTGAGES AND LIENS
             (Section 178 of the Companies Ordinance (New Version), 5743 - 1983)

--------------------------------------------------------------------------------
NAME OF THE BORROWER COMPANY            COMPANY NO.                     CODE
--------------------------------------------------------------------------------
ITURAN LOCATION AND CONTROL LTD.              SERIAL NO.  CONTROL       81
                                                          NUMERAL
--------------------------------------------------------------------------------
                                       52     004381      1
--------------------------------------------------------------------------------
THE GUARANTEED      THE GUARANTEED    CURRENCY     CURRENCY TYPE    DATE CREATED
SUM IN WORDS        SUM               CODE

NOT LIMITED BY      NIS  | AG.|
SUM
--------------------------------------------------------------------------------
CODE                             DESCRIPTION OF DOCUMENT        STAMP TAX
--------------------------------------------------------------------------------
                                 INDENTURE
--------------------------------------------------------------------------------
PARTICULARS OF CREDITORS

--------------------------------------------------------------------------------
IDENTITY NO.                     PARTICULARS OF CREDITOR        SUM OF LOAN
52-000011-8                      BANK HAPOALIM LTD.
--------------------------------------------------------------------------------
PARTICULARS OF THE PLEDGED ASSETS


1,237,800 ordinary shares bearing the nominal value of NIS 1 each of the company
Tadiran Telemetrics Ltd., including all rights of any type and sort whatsoever,
to which the Pledgor may be entitled in respect of these shares.



SPECIAL TERMS
--------------------------------------------------------------------------------
SHOULD A LIMITATION ON         YES        DATE OF RESOLUTION       DATE OF ISSUE
CREATING AN ADDITIONAL                                             OF SERIES
PLEDGE EXIST, SPECIFY "Y"
--------------------------------------------------------------------------------

ON REGISTERING A NOTE AS SPECIFIED IN REGULATION 12(B) OF THE COMPANIES
REGULATIONS (REPORTING, PARTICULARS OF REGISTRATION AND FORMS), 5760- 1999
                                       NO
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
NOTE REGARDING THE PROHIBITION OR LIMITATION ON CREATING OTHER PLEDGES AND
SPECIAL TERMS

THE PLEDGING COMPANY HAS UNDERTAKEN TO REFRAIN FROM TRANSFERRING
AND/OR PLEDGING THE PLEDGED PROPERTY AND ASSETS OR ANY PART THEREIN TO OTHERS
WITHOUT THE CONSENT OF THE PLEDGED PARTY.
--------------------------------------------------------------------------------



                                       21




I HEREBY DECLARE THAT THE DETAILS SET OUT IN THIS FORM ARE TRUE AND COMPLETE AND
THAT I AM AN OFFICE HOLDER OF THE COMPANY AS SPECIFIED IN SECTION 39 OF THE LAW.

Sharetzky Izzy        0749544       Chairperson of the Board  8/6/01   [signed]
                                              and CEO
----------------   ---------------  -------------------       ------   ---------
NAME OF SIGNATORY  IDENTITY NUMBER  POSITION AT COMPANY        DATE    SIGNATURE








                                                                   EXHIBIT 10.35
                                    INDENTURE

MADE AND EXECUTED ON THE          DAY OF THE MONTH OF                     , 2002

WHEREAS THE UNDERSIGNED, ITURAN LOCATION AND CONTROL LTD., 52-004381-1
(HEREINAFTER - THE PLEDGER)

Has received and/or is due to receive from time to time from Bank Hapoalim Ltd.
(hereinafter - the Bank) credit, documentary credit, various loans, overdrafts
in a current account, a debitory return account or another account, a letter of
indemnification and any guarantees for the Pledger or for others in accordance
with the Pledger's request, deduction of certificates, provision of extensions
and various banking leniencies and miscellaneous other banking services
(hereinafter, jointly and severally - Banking Services), on such conditions as
has been and/or shall be agreed from time to time regarding each above-mentioned
Banking Service;

THEREFORE, it is agreed that the Pledger shall insure the repayment of the
various amounts of money that the Pledger owes and/or shall owe to the Bank in
connection with the provision of the Banking Services, and/or in connection with
other debits that do not constitute Banking Services, and/or otherwise, all in
accordance with the following conditions:

SUBSTANCE OF THE INDENTURE

1.   This indenture is made to ensure full and precise payment of all amounts
     that are and shall be due to the Bank from the Pledger in connection with
     the provision of Banking Services to the Pledger by the Bank, and/or in
     connection with other charges that are not Banking Services, or otherwise,
     whether these are due from the Pledger alone and/or together with others,
     whether the Pledger has undertaken thereto and/or shall undertake thereto
     in the future, by way of a debtor and/or by way of a guarantor and/or by
     way of an endorser and/or otherwise, that are and/or shall be due in the
     future, due for payment prior to the realization of the securities to which
     this indenture applies and/or thereafter, due




     absolutely and/or conditionally, due directly and/or indirectly, WITHOUT
     RESTRICTION IN AMOUNT, with the addition of interest, commissions,
     miscellaneous expenses, including expenses for realization, attorneys fees,
     insurance fees, stamp duty and other payments in accordance with this
     Indenture, and with the addition of linkage increments of any type as are
     and shall be due from the Pledger to the Bank in any manner and way on
     account of linked capital and interest and on account of any other linked
     amount (all the above-mentioned amounts shall be referred to hereinafter
     jointly and severally as - the Guaranteed Sums).

THE LIEN

2.   By way of security for the full and precise settlement of the Guaranteed
     Sums, the Pledger hereby liens in favor of the Bank and its alternates, by
     way of a first degree floating lien, the assets and their proceeds (the
     Floating Lien Assets):

     A.   All assets, moneys, property and rights of any type, without
          exception, held by the Pledger now and that shall be held by him at
          any time in any manner and way;

     B.   All current assets, without exception, held by the Pledger now and
          that shall be held by him at any time, in any manner and way; current
          assets refer to all assets, moneys, property and rights of any type,
          excluding land, buildings and fixed equipment;

     C.   All fixed assets, without exception, held by the Pledger now and that
          shall be held by him at any time, in any manner and way; these assets
          include, inter alia, land, buildings and fixed equipment;

     D.   All securities and other documents owned by the Pledger and/or that
          the Pledger is entitled to order to be sold, which are held and that
          shall, from time to time, be held by the Bank and/or by others in the
          Bank's favor and/or the rights on account thereof;

     E.   All rights to land and/or all contractual rights in accordance with
          agreements between the Pledger and the Israel Lands Administration
          and/or the Israel Development Authority and/or the Jewish National
          Fund



     and/or others existent now and/or that shall be existent in the future at
     any time.

3.   By way of additional security for the full and precise settlement of all
     the Guaranteed Sums, the Pledger hereby liens in favor of the Bank and its
     alternates, byway of a first degree lien, its reputation as it is today and
     as it shall be at any time (together, jointly and severally - the Liened
     Assets).

4.   By way of additional security for the full and precise settlement of all
     the Guaranteed Sums, the Pledger hereby mortgages and liens in the Bank's
     favor all securities, documents and certificates of others which the
     Pledger has or shall, from time to time, deliver to the Bank, whether for
     collect, for deposit and/or otherwise (hereinafter - the Liened Documents),
     and, on their delivery, they are and shall be considered to be mortgaged
     and liened to the Bank by way of a fixed first degree mortgage and lien in
     accordance with the conditions of this Indenture, and the provisions
     thereof shall apply, mutatis mutandis, to their lien and mortgage. The Bank
     shall be exempt from taking any action regarding the Liened Documents and
     shall not be liable for any damage caused in connection therewith, and the
     Pledger undertakes to indemnify the Bank in any case in which the Bank is
     sued by others on account of such damage. The Pledger hereby waives in
     advance any claims of limitation relating to the Liened Documents.

5.   The Floating Lien Assets, the Mortgaged Assets and the Liened Documents
     shall hereinafter be referred to as the Liened Property.

The lien and mortgage created in accordance with this Indenture shall apply to
any right to compensation or indemnification enjoyed by the Pledger due to the
loss of the Liened Property, damage thereto or the expiry thereof.

PLEDGER'S DECLARATIONS

6.   The Pledger hereby declares as follows:

     A.   That the Liened Property are not liened, mortgaged or attached in
          favor of others, with the exception of liens as detailed in the
          extract of the Registry of Companies as attached, and excluding: (I) A
          floating first degree lien as



          stated in para. 2 above; (II) lien on moneys due and/or which shall be
          due to the Pledger from a bank clearinghouse; (III) a specific first
          degree lien on 95 ordinary shares with a nominal value of NIS 1 each
          (95%) in Ituran Cellular Communications Ltd., held by the Pledger and
          a subsidiary thereof, and all the rights accruing from these shares;
          (IV) a specific first degree loan on 70,862 ordinary shares with a
          nominal value of NIS 1 each of the Pledger held by Ituran Cellular
          Communications Ltd., which liens were recorded in favor of Bank Leumi
          LeIsrael Ltd.;

     B.   That the Liened Property in their entirety are in the ownership and
          exclusive possession of the Pledger and/or in the possession and/or
          control of the Bank;

     C.   That there is no restriction or condition or agreement applying to the
          transfer or lien of the Liened Property;

     D.   That it is entitled to lien the Liened Property;

     E.   That no endorsement of a right or any other action has been executed
          that derogates from the value of the Liened Property.


PLEDGER'S UNDERTAKINGS

7.   The Pledger hereby undertakes as follows:

     A.   To hold the Liened Property solely in accordance with the instructions
          of the Bank;

     B.   To use and attend to the Liened Property with exceptional caution, and
          to notify the Bank of any instance of ruin, damage, defect or fault
          occurring therein, and to repair any ruin, damage, defect or fault
          emerging in the Liened Property on account of use and/or for any other
          reason, and to be liable vis-a-vis the Bank for any cause of ruin,
          damage, defect and/or fault as above;

     C.   To enable the Bank's representative to audit and examine the state of
          the Liened Property in their place of location at any time;

     D.   Cancelled.



     E.   Cancelled.

     F.   Not to sell, transfer, let, rent or deliver the Liened Assets and the
          Liened Documents, or any part thereof, not to permit another to use
          them in any manner and not to permit another to perform any of the
          above-mentioned actions without the prior written consent of the Bank
          thereto;

     G.   Not to sell, transfer, let, rent or deliver, not to remove from its
          possession, not to relinquish or waive, in full or in part, any asset,
          suit or right held by the Pledger or which shall, from time to time,
          be held, unless this relates to a transaction relating to the Floating
          Lien Assets or to assets not permanently liened to the Bank during the
          regular course of the Pledger's business and in return for full
          remuneration, or the lien of an asset undertaken in order to ensure
          credit/a financial undertaking serving to finance the acquisition of
          the asset, without the prior written consent of the Bank;

     H.   To inform the Bank immediately in any case of the imposition of an
          attachment in excess of NIS 200,000 on the Liened Property, to inform
          the attaching party immediately of the lien in the Bank's favor, and
          to take immediately and at its own expense all steps to remove the
          attachment;

     I.   Not to lien and not to mortgage in any way or manner the Liened
          Property in equal, prior or subsequent rights to the rights of the
          Bank, and not to endorse any right held by the Pledger in the Liened
          Property without obtaining the prior written consent of the Bank
          thereto, with the exception of: (I) A floating first degree lien as
          stated in para. 2 above; (II) lien on monies due and/or which shall be
          due to the Pledger from a bank clearinghouse; (III) a specific first
          degree lien on 95 ordinary shares with a nominal value of NIS 1 each
          (95%) in Ituran Cellular Communications Ltd., held by the Pledger and
          a subsidiary thereof, and all the rights accruing from these shares;
          (IV) a specific first degree loan on 70,862 ordinary shares with a
          nominal value of NIS 1 each of the Pledger held by Ituran Cellular
          Communications Ltd., which liens were recorded in favor of Bank Leumi
          LeIsrael Ltd.;



     J.   To be liable vis-a-vis the Bank for any defect in the right of
          possession of the Pledger in the Liened Property and for the
          verification, validity and authenticity of all signatures,
          endorsements and details in the certificates, documents and securities
          delivered and/or that shall be delivered to the Bank by way of
          security;

     K.   To pay promptly in accordance with any law all the taxes and
          compulsory payments imposed on the Liened Property and/or on the
          income accruing therefrom, and to furnish the Bank, upon request, with
          all receipts for the said payments. If the Pledger failed to make the
          said payments promptly, the Bank shall be entitled to pay them at the
          Pledger's expense and to charge him for the payment thereof, with the
          addition of expenses and interest at the maximum rate. These payments
          are guaranteed by this indenture;

     L.   To maintain proper account ledgers and to permit the Bank or a
          representative on its behalf to examine the ledgers at any time. The
          Pledger undertakes to assist the Bank or its representatives and to
          furnish them, upon first request, with any balance sheet, financial
          statement, ledger booklet, card and/or file, film, books,
          documentation and other documents, as well as any information as it
          shall be requested, including explanations regarding the financial and
          operating state of the Pledger and/or its business;

     K.   Not to lend to holders of shares in the Pledger and not to pay to the
          holders of shares in the Pledger existing or future loans for so long
          as the Pledger has not paid to the Bank the payments due on account of
          the Guaranteed Sums, without the prior written consent of the Bank.

     L.   That no structural change shall occur regarding the Pledger, and no
          change in the control of the Pledger, without the prior written
          consent of the Bank;

     M.   Not to take any steps on account of the Guaranteed Sums impairing the
          ability of the Bank to realize this Indenture.

8.   The Pledger undertakes to inform the Bank immediately:



     A.   In any case of suit for any right on any security in the Bank's favor
          to which this indenture applies and/or any execution procedure and/or
          other steps to actualize the security as stated, provided that the
          amount of the suit/execution procedures/other steps are to be taken
          with regard to an amount in excess of at least NIS 200,000, and
          excluding suits accruing from the course of the Pledger's ordinary
          business;

     B.   Of any of the actions mentioned in para. 18 below;

     C.   Of the reduction of the value of any security given and/or which shall
          be given thereby;

     D.   Of any request filed for the liquidation of the Pledger's business
          and/or for the receivership thereof, and of any decision relating to a
          change in the structure of the Pledger or any intention so to do;

     E.   Of a change of address.

INSURANCE

9.   The Pledger hereby undertakes to maintain all the Liened Property at any
     time guaranteed at their full value against the usual risks as the Bank
     shall present from time to time, with insurance companies and on such
     conditions to which the Bank shall consent, and to transfer to the Bank,
     within the limit of the Guaranteed Sums, the rights accruing from the
     certificates of insurance in accordance with the formula approved by the
     Bank, to pay all the insurance fees promptly and to deliver to the Bank all
     the insurance certificates and receipts on account of the payment of the
     insurance fees.

10.  Without derogating from the above, and in addition thereto, the Pledger
     hereby undertakes to issue the following instructions to the insurance
     company through which it insures the Liened Property:

     A.   The irrevocable stipulation of the Bank as the beneficiary in
          accordance with the insurance contract (the insurance policy), and an
          instruction to include the Bank in the body of the insurance contract,
          without the Bank's being liable for payment of any premiums;



     B.   Payment of insurance benefits directly to the Bank for the Liened
          Property at any time that the insurance company shall be liable to
          payment of these benefits in accordance with the insurance company, or
          in accordance with any law.

     C.   Furnishing a copy of the insurance contract to the bank after its
          inclusion as a beneficiary as stated above.

          All the above without the need for any additional authorization on
          behalf of the Pledger and/or those acting on its behalf and/or in its
          place.

          It is hereby agreed by the Pledger that the Bank shall be entitled to
          forward a copy of the insurance contract furnished by the Pledger, as
          stated above, to any professional entity (including such entity that
          is external to the Bank) at the Bank's discretion, for the purpose of
          inspecting the insurance contract and the provisions included therein.

          The Pledger declares that it waives the Bank's obligation of
          confidentiality toward it (if any), and undertakes not to make any
          claim, request and/or suit vis-a-vis the Bank and/or any person on its
          behalf in any matter relating to the forwarding of the insurance
          contract to a professional entity and the inspection thereof as stated
          above.

          The Pledger further undertakes to furnish the Bank with authorization
          from the insurance company and with an undertaking on its behalf not
          to offset any amount from the insurance benefits paid to the Bank on
          account of the Liened Property, with the exception of the balance of
          the insurance premium not yet paid on account of the insurance of the
          Liened Property for the current insurance year only, and, if the
          insurance policy also applies to other assets, in addition to the
          Liened Property, the authorization shall include the consent of the
          insurance company to attribute the premium payments received in
          connection with Liened Property, and to act in accordance with the
          above instructions and to inform the Bank in any case of the
          cancellation or expiry of the insurance contract, at least 30 (thirty)
          days prior to the said cancellation or expiry - this notwithstanding
          and despite any other provision in the Insurance



          Contract Law, 5741-1981, and notification as stated shall constitute a
          prior condition for the cancellation or expiry of the insurance
          contract.

11.  Without derogating from the Bank's rights in accordance with this
     indenture, including the Bank's rights in accordance with para. 18 below,
     in any of the cases stipulated below, the Bank shall be entitled, at its
     sole discretion, to insure the Liened Property in the Pledger's name or in
     the Bank's name and to charge the Pledger for expenses and insurance fees:

     A.   If the Liened Property is not insured by the Pledger to the Bank's
          satisfaction;

     B.   If the Pledger fails to furnish the Bank, within 10 days from the
          signing of this indenture, with insurance certificates on account of
          the Liened Property on conditions and for such period to the exclusive
          satisfaction of the Bank;

     C.   If, 30 days prior to the expiry of the validity of insurance in the
          Liened Property, the Pledger fails to furnish the Bank with insurance
          certificates for the Liened Property on conditions and for such period
          to the exclusive satisfaction of the Bank;

     D.   If the Bank requests the execution of additions, deletions and/or
          amendments of any kind in the insurance contract, and these, or any
          thereof, are not implemented within 10 days from the date of request
          to the full satisfaction of the Bank.

          In the event that the insurance is executed by the Bank as stated
          above, the Bank shall not be liable for any defect or fault that shall
          emerge in connection with the insurance. Amounts paid as expenses and
          as insurance fees as stated above are guaranteed in this indenture.

12.  With regard to the insurance of the Liened Property, the Pledger hereby
     appoints the Bank as its sole representative and grants it exclusive rights
     to pursue, in the Pledger's name, negotiations, to submit claims, to agree
     to arrangements, to compromise, to waive, to receive monies from the
     insurance companies and to credit these to the settlement of the Guaranteed
     Sums. The above-mentioned power of attorney is irrevocable since the rights
     of the Bank and of a third party are dependent thereon.



     The Pledger shall not have any claims regarding the arrangements, waivers
     and compromises reached by the Bank with the insurance companies.

13.  All of the Pledger's rights accruing from the insurance of the Liened
     Property, including rights in accordance with the Property Tax and
     Compensations Fund Law, 5721-1961, as this shall apply at any time, and in
     accordance with any other law, whether these rights were transferred to the
     Bank as stated or not, are hereby liened to the Bank by way of a permanent
     first degree lien and mortgage.

14.  The Pledger hereby undertakes to sign, upon the first request of the Bank,
     all certificates and documents required for the execution of its
     undertakings in accordance with this section. The Pledger further
     undertakes not to cancel and/or change in any manner any condition or
     conditions of the above-mentioned conditions of insurance without the prior
     written consent of the Bank.

INTEREST

15.  A.   The Bank shall be entitled to calculate interest on the Guaranteed
          Sums at such rate as is and/or shall be agreed from time to time
          between itself and the Pledger. In cases in which no interest rate is
          agreed, the Bank is entitled to determine interest at a rate not
          exceeding the maximum rate interest, and to inform the Pledger
          thereof. The Pledger shall be charged in accordance with the
          above-mentioned interest rate, and the Bank is entitled to add the
          interest amounts to the capital at the end of each month, or at the
          end of each other period as established by the Bank;

     B.   In any case of arrears in the payment of the Guaranteed Sums, or of
          part thereof, the Guaranteed Sums shall bear arrears interest in the
          rate agreed in the agreement for the provision of Banking Services. In
          the absence of stipulation of arrears interest, the Guaranteed Sums
          shall bear interest at the maximum rate.



     C.   In any case entitling the Bank to realize the securities in accordance
          with this indenture, the Bank shall be entitled to raise the interest
          rates on the Guaranteed Sums to the maximum interest rate.

DATES OF PAYMENT

16.  The Pledger hereby undertakes to pay the Bank the Guaranteed Sums and any
     part thereof precisely on the dates of payment as are and shall be
     determined from time to time.

17.  A.   The Bank is entitled not to accept the prior payment of the Guaranteed
          Sums or of any part thereof before the date of payment thereof, and
          the Pledger shall not be entitled to redeem any or all of the Liened
          Property through payment of the Guaranteed Sums and/or any part
          thereof prior to the date of payment therefore, unless otherwise
          agreed in writing in the credit agreements.

          The Pledger and any person whose right is liable to be impaired by the
          issuing of this indenture, or by the realization thereof, shall not
          have a right in accordance with Article 13(B) of the Mortgaging Law,
          5727-1967, or any legal provision coming in its place;

     B.   Subject to the provisions of any law, if the Bank consents to prior
          payment on account of the Guaranteed Sums (without its being obliged
          to do so), the Pledger shall pay the prior repayment commission as
          informed by the Bank, unless otherwise agreed in writing with the Bank
          in the credit documents, if at all.

18.  Without derogating from the generality of the provisions of this indenture,
     the Bank shall be entitled, in any of the cases stipulated below, to
     present any or all of the Guaranteed Sums for immediate repayment, and to
     charge in the above-mentioned amount any account of the Pledger with the
     Bank, and the Pledger undertakes to pay all the Guaranteed Sums, while the
     Bank shall be entitled to



     take all steps it shall see fit for the collection of the Guaranteed Sums
     and, in particular, to consolidate the floating lien on the Floating Lien
     Assets as stated in para. 24A below, and to realize the securities by any
     means permitted by law, at the Pledger's expense:

     A.   If the Pledger breaches or fails to observe any fundamental condition
          of the conditions of this indenture, or if the Pledger breaches other
          fundamental undertakings made and/or which shall be made by the
          Pledger to the Bank, and/or if it emerges that any of the Pledger's
          declarations in this indenture and/or any other declaration
          given/which shall be given to the Bank by the Pledger in connection
          with the Guaranteed Sums is incorrect or imprecise. It is clarified
          that the breach of a condition that is not fundamental, or the breach
          of an undertaking that is not fundamental, shall be considered as
          fundamental if, after written request by the Bank to remedy the
          breach, this shall not be remedied by the Pledger 30 days after the
          date of the Bank's request;

     B.   If the Pledger takes a decision regarding the change of the structure
          of the Pledger, or any intent to do so, whether as a company that
          acquires, transfers or divides, or a voluntary liquidation decision,
          or if a liquidation order is issued against it, or if a temporary
          liquidator or special director is appointed for the Pledger, or if the
          Pledger's name is deleted from any registry maintained by law, or is
          due for deletion;

     C.   If a receiver is appointed or if a receivership order is issued for
          the Pledger's assets or for a substantive part thereof. If a receiver
          is appointed as stated, or if a receivership order is issued as
          stated, ex parte, the content of this paragraph shall not apply if the
          appointment or order as stated are cancelled within 30 days from the
          date of their issue;

     D.   If an attachment is imposed or if a similar execution action is taken
          against a substantive portion of the Pledger's assets, and/or against
          any of the securities furnished and/or which shall be furnished by the
          Pledger, and these are not removed within 60 days from the date of
          their issue;

     E.   If the Bank shall consider, at its sole discretion, that a change has
          occurred in the control of the Pledger relative to the situation as of
          the date of



          signing this indenture, and the prior written consent of the Bank was
          not given therefore;

     F.   If the Pledger has ceased to pay its debts and/or to pursue its
          business;

     G.   If work, or a substantive part thereof, shall be halted in the Pledger
          for the duration of two months or more;

     H.   If the Bank shall consider, at its sole discretion, that an event
          occurred that may substantively impair the Pledger's financial
          capability;

     I.   If the Pledger shall be in arrears in payment of any of the Guaranteed
          Sums for a period in excess of 7 days;

     J.   If the Liened Property, or a substantive part thereof, shall be
          destroyed, burned, reduced in value or lost;

     K.   Cancelled;

     L.   Cancelled;

     M.   If, at the Bank's sole discretion and in accordance with its exclusive
          evaluation, a substantive change for the worse shall occur in the
          value of the securities granted and/or which shall be granted for the
          securing of repayment of the Guaranteed Sums;

     N.   If the Pledger is required to repay ahead of schedule debts owed
          and/or which shall be owed by the Pledger to other creditors;

     O.   Cancelled;

     P.   If the Pledger breaches its undertaking to furnish the Bank with
          balance sheets, financial statements, account ledgers and other
          documentation relating to the state of its business;

THE BANK'S RIGHTS

19.  A.   The Bank has rights of possession, lien, offsetting and lien on all
          amounts, assets and rights, including securities, coins, gold, money
          bills, documents of merchandise, insurance policies, certificates,
          endorsements of charges, deposits, securities and



          the remuneration therefore held in the Bank's possession or control at
          any time in favor and/or on behalf of the Pledger, including such
          delivered for collection, security, deposit or otherwise. The Bank is
          entitled to withhold the above-mentioned assets pending the full
          settlement of all or part of the Guaranteed Sums, or to sell them and
          use any or all of the remuneration for the settlement of the
          Guaranteed Sums. In the event that the offset amounts are deposited in
          a currency different from that in which the Guaranteed Sums are
          stated, the Pledger hereby instructs the Bank in advance to sell the
          balance of the right in the other currency at such rate as shall be
          determined by the Bank or as shall be secured by the Bank therefore at
          that time, and to credit the remuneration for the sale, after
          deduction of the appropriate expenses and commissions, against the
          Guaranteed Sums.

     B.   Without derogating from the Bank's right of lien, as stated in para.
          19A above, the Bank shall be entitled at any time:

          (1)  To offset any amount from the Guaranteed Sums due from the ledger
               against amounts due to the Pledger from the Bank in any account
               in Israeli currency or in foreign currency, in any manner, even
               prior to the date of payment of amounts due to the Pledger from
               the Bank as stated and against which offsetting shall be made,
               but, in offsetting against deposits in saving plans, not prior to
               the date on which the Pledger would have been entitled to request
               the early repayment of the deposits.

          (2)  To purchase for the Pledger's account any amount in foreign
               currency required for the settlement of any amount of the
               Guaranteed Amounts, or to sell any foreign currency available to
               the Bank in the Pledger's favor, and to use the remuneration from
               the sale for the purpose of the settlement of any of the
               Guaranteed Sums.



          (3)  To charge any account of the Pledger with any of the Guaranteed
               Sums. However, if the state of such an account does not permit
               its charging by the Bank for the purpose of the final payment of
               any amount, the Bank shall be entitled not to charge the account
               and, if it does so, the Bank shall be entitled to cancel any
               charge as stated and to regard any amount whose charge was
               cancelled as an amount not paid on account of the Guaranteed Sums
               and, accordingly, to take any action as it shall see fit in
               accordance with this indenture.

          (4)  In any case in which any of the sub-paragraphs of para. 18 above
               shall apply, the Bank shall be entitled to offset without any
               prior notification. In the following cases, however, the Bank
               shall be entitled to offset with prior notification to the
               Pledger 10 (ten) days prior to the date of execution of the
               offsetting:

               (A)  In the event of the offsetting of sums the date of payment
                    of which has not yet arrived.

               (B)  In the event of offsetting from a permanent deposit which,
                    were it not for the offsetting, would be extended or renewed
                    automatically, such that rights or benefits would accrue to
                    the Pledger therefrom.

               (C)  Notwithstanding the contents of para. 4(A) above, if the
                    postponement in the execution of offsetting is liable to
                    damage the position of the Bank or to impair any of its
                    rights, the Bank shall be entitled to undertake the
                    offsetting immediately. In addition, in the event that
                    notification was sent to the Pledger and, within ten days
                    from the notification, an attachment order, notification of
                    receivership on the Pledger's assets or similar event
                    occurs, the Bank shall be entitled to execute the offsetting
                    immediately.

     C.   The Pledger hereby declares that it is aware that, in cases in which
          the Bank exercises the rights of offsetting as stated above prior to
          the date of




          payment of any or all of a deposit of the Pledger, changes are liable
          to occur to the Pledger's detriment with regard to the Pledger's
          rights on account of or in connection with that deposit (such as
          regarding interest rates, linkage increments, exchange rate
          discrepancies, rights to grants or loans, exemption or reduction in
          income tax and deductions at source - if in accordance with the
          conditions of that deposit the Pledger enjoyed such above-mentioned
          rights). The Pledger shall bear all expenses and payments current at
          that time in the Bank for the purpose of executing such an action.

     D.   Any purchase or sale as stated in para. 19B(2) above shall be made in
          accordance with the accepted rate at the Bank, from amounts in Israeli
          currency or from amounts in foreign currency, as the case may be,
          available to the Bank in the Pledger's favor or received for the
          realization of any securities granted and/or which shall be granted to
          the Bank by the Pledger.

          The term "the accepted rate at the Bank" means - regarding each
          purchase of foreign currency for the Pledger's account - the highest
          rate for transfers and checks current at the Bank at the relevant time
          for the sale to its customers of the relevant foreign currency in
          return for Israeli currency, with the addition of exchange commission
          and any tax, levy, compulsory payments and/or other such payments,
          and, regarding each sale of foreign currency from the Pledger's
          account - the lowest rate for transfers and checks current at the Bank
          at the relevant time for the purchase from its customers of the
          relevant foreign currency in return for Israeli currency, less
          exchange commission and any tax, levy, compulsory payments and/or
          other such payments.

20.  The Bank is entitled at any time to charge any account of the Pledger with
     any amount due and which shall be due therefrom in any manner, and to
     credit any amount received therefrom or on behalf thereof in favor of such
     account as it shall see fit, and to transfer any amount available in favor
     thereof to any other account as it shall see fit; this whether this account
     is in the Pledger's name alone, or together with another, whether in
     Israeli currency or foreign currency,



     and whether it exists at the time of signing this indenture or is opened in
     the future.

21.  The Pledger confirms that the Bank's ledgers and accounts are acceptable to
     him, shall be considered correct and shall constitute a priori evidence
     against him in all their details, and, inter alia, in all matters regarding
     the calculation of the Guaranteed Sums, the details of the certificates,
     guarantees and other securities, and any other matter relating to this
     indenture.

22.  The Bank shall be entitled, at its sole discretion, to accept or to refuse
     to accept any instructions or notices delivered by word of mouth, telephone
     or facsimile, or by any other manner that is not reliable and/or not in
     clear and legible writing. In the event that the Bank agrees to act in
     accordance with the Pledger's instructions not by means of written
     instruction in the accepted manner, the Ledger accepts full liability for
     any error, misunderstanding or contradiction, and for any damage and/or
     loss and/or expense incurred pursuant to the delivery of the
     above-mentioned instructions.

23.  Without derogating from the other provisions of this indenture, any waiver,
     extension, deduction, silence, refraining from an action (hereinafter -
     waiver) on the part of the Bank regarding the non-observance or the partial
     or incorrect observance of any of the Pledger's undertakings in accordance
     with this indenture shall not be considered as a waiver on the part of the
     Bank of any right, but as a limited agreement for the special occasion for
     which it was granted. Any waiver granted by the Bank to any party in a
     certificate held by the Bank to secure the Guaranteed Sums shall not in any
     manner or way influence the Pledger's undertakings.

24.  A.   In any of the cases detailed in para. 18 above, the Bank shall be
          entitled to notify the Pledger of the consolidation, immediately or on
          the date stated by the Bank, of the floating lien of the Liened
          Property or of any part thereof, to use all means it shall see fit in
          order to collect the Guaranteed Sums, and to realize all its rights in
          accordance with this indenture, including the realization of the
          Liened Property, in full or in part, and to use its realization to
          remove the Guaranteed Sums,



          without the Bank's being required first to realize guarantees or other
          securities held by the Bank, if any;

     B.   In the event that the Bank decides to realize securities, certificates
          and other negotiable documents - notification of three days in advance
          regarding the steps to be taken by the Bank shall be considered a
          reasonable date for the purpose of Article 19(B) of the Mortgage Law,
          5727-1967, or for the purpose of any legal provision coming in its
          stead;

     C.   The Bank is entitled, as the Pledger's representative, and, for the
          purpose of this paragraph, the Pledger appoints the Bank irrevocably
          as its representative, to sell the Liened Property, and any part
          thereof, by auction or otherwise, by itself or by others, in cash or
          in installments or otherwise, at a price and on conditions at the
          Bank's absolute discretion, and the Bank is further entitled, by
          itself or through the court or through the executor's office, to
          realize the Liened Property or any other assets, inter alia by means
          of the appointment of a receiver or a receiver and director on behalf
          of the Bank who, among his other authorities, shall be entitled:

          1)   To receive in his possession all or part of the Liened Property.

          2)   To manage the Pledger's business or to participate in the
               management thereof as he see fit.

          3)   To sell or to agree to sell the Liened Property, in full or in
               part, to transfer or to agree to transfer the said assets by any
               other manner in accordance with such conditions as he shall see
               fit.

          4)   To undertake any other arrangement regarding the Liened Property
               or any part thereof as he shall see fit.

     D.   All income received by the receiver or the receiver and director from
          the Liened Property, as well as any remuneration received by the Bank
          and/or by the receiver or the receiver and director from the sale of
          the Liened Property or part thereof shall be credited in the following
          order:



          1)   Settlement of all expenses incurred and which shall be incurred
               in relation to the collection of the Guaranteed Sums, including
               the expenses of the receiver or of the receiver and director, and
               his salary in such amount as shall be determined by the Bank, or
               as shall be approved by the court or the executor's office.

          2)   Settlement of the Guaranteed Sums due to the Bank pursuant to the
               conditions of linkage, interest, damage fees, commissions and
               expenses due and which shall be due to the Bank in accordance
               with this indenture.

          3)   Settlement of the capital of the Guaranteed Sums.

          Or in any other order of crediting as shall be determined by the Bank.

25.  In the event that, at the time of the sale of the Liened Property, the date
     of repayment of the Guaranteed Sums, or of any thereof, has not yet
     arrived, or the Liened Sums or any thereof are received by the Bank
     conditionally, the Bank shall be entitled to collect from the receipts of
     the sale a sum sufficient to cover the Liened Sums, and the amount
     collected and not yet credited to the settlement of the said sums in para.
     24D above shall be liened to the Bank to secure the Liened Sums and shall
     be held by the Bank pending settlement thereof.

SUBSTANCE OF THE SECURITIES

26.  The securities granted and/or which shall be granted to the Bank in
     accordance with this indenture have a constant character and shall remain
     valid pending written confirmation by the Bank that this indenture is
     nullified.

27.  If other securities and/or guarantees have been or shall be given to the
     Bank for the repayment of the Liened Sums, all securities and guarantees
     shall be mutually independent.

28.  If the Bank compromises or grants an extension or leniency to the Pledger,
     the Bank changes any of the Pledger's undertakings regarding the Liened
     Sums, releases or waives other securities or guarantees - these actions
     shall not alter the substance of the securities to which this indenture
     applies, and all the




     securities and guarantees of the Pledger to which this indenture applies
     shall continue to be fully valid.

29.  The Bank is entitled to deposit the securities delivered and/or which shall
     be delivered in accordance with this indenture, or part thereof, with such
     guard determined thereby, at its sole discretion, and at the Pledger's
     expense, and to replace this guard from time to time; the Bank shall
     further be entitled to register the above-mentioned securities, in whole or
     in part, with any empowered authority in accordance with any law, and/or at
     any public registry.

RIGHT OF TRANSFER

20.  The Bank is entitled at any time, at its sole discretion, without requiring
     the Pledger's consent, to transfer this indenture and the rights in
     accordance therewith, including the securities, to another, in part or in
     full, and any recipient of the transfer shall also be entitled to transfer
     the above-mentioned rights to another without requiring additional consent
     from the Pledger. The transfer may be undertaken by the endorsement in the
     margins or on the face of this indenture or by any other manner as the Bank
     and the recipient of the transfer shall see fit.

NOTIFICATION OF RESERVATION

31.  The Pledger undertakes to notify the Bank in writing of any reservation or
     objection it has, if any, relating to any account, summarized account,
     authorization or notification of any kind received by the Bank, including
     the receipt of information through the computerized information station. If
     the Pledger does not state its reservation or objection within 21 days from
     the date of dispatch of the above-mentioned account, the summarized
     account, the authorization or notification, the Bank shall be entitled to
     consider it as confirming the veracity thereof.



EXPENSES

32.  Without derogating from the Bank's rights as detailed in this indenture,
     all expenses and commissions relating to this indenture (as detailed in the
     Bank's tariffs, as these shall apply from time to time) shall be paid by
     the Pledger upon first written request by the Bank (unless they were paid
     in practice by the guarantee, when this indenture is made to secure the
     liability of the guarantee), with the addition of interest at the maximum
     rate from the date of request and through full and actual payment.

     Said expenses and commissions include, inter alia (and without derogating
     from the generality of the above) security processing fees, stamp duty and
     fees for the registration of documents, expenses for realizing the
     securities and for collection proceedings (including the Bank's attorneys'
     fees), insurance, security, maintenance and repair of the Liened Property.

     All the above-mentioned expenses and commissions, with the addition of the
     interest thereon in accordance with para. 15 of this indenture, shall be
     secured by this indenture pending their full and actual settlement.

THE PLEDGER'S LIABILITY

33.  A.   Cancelled.

     B.   In the event that the Pledger and/or the guarantee constitute a legal
          entity, incorporated or not incorporated, or a trustee, or the manager
          of an estate or the owner of a joint account at the Bank, or an
          organization or body that constitutes a collection of bodies, the
          Pledger's undertakings in accordance with this indenture shall not be
          impaired by any change in the name, structure or composition of the
          Pledger or of the guarantee.

INTERPRETATIONS

34.  In this indenture - (A) The singular includes the plural, and vice versa;
     (B) The masculine includes the feminine, and vice versa; (C) "The Bank"
     means - Bank Hapoalim Ltd. and each of its branches existing as of the date
     of this indenture and/or which shall open in any location in the future,
     its transferees and



     alternates and those acting for the Bank; (D) "Certificates" means
     indentures, certificates of exchange, checks, undertakings, guarantees,
     securities, endorsements, bills of lading, certificates of deposit and all
     other negotiable documents; (E) "Interest at the maximum rate" means
     interest at the maximum rate current at the Bank at the time, and from time
     to time, regarding deviations and arrears in debit accounts or checking
     accounts, whichever is the higher; (F) "Change of structure" means,
     regarding the Pledger - merger or division (as these terms are understood
     in Part E2 of the Income Tax Ordinance (Revised) or any other legal
     provision coming in its place), as well as the transfer of assets in return
     for shares, all whether in accordance with the above-mentioned Part E2 or
     otherwise; (G) In any case in which, according to this indenture, the Bank
     is entitled to perform any action, it is not obliged to do so; (H) In any
     case in which the Bank is granted the right to charge any of the Pledger's
     accounts, the Bank is entitled to charge that account whether it is in
     credit or debit, including if the debit will be credited as a result of the
     charging of the account by the Bank as stated; (I) The titles of the
     paragraphs are for use as a reference only, and are not to be used in
     interpreting this indenture; (J) The preamble to this indenture constitutes
     an integral part thereof.

NOTICES AND WARNINGS

35.  Any notice sent by the Bank by mail to the Pledger, by registered or
     ordinary letter, in accordance with the address recorded above, or in
     accordance with the address of the Pledger's registered office, or in
     accordance with another address as notified by the Pledger in writing to
     the Bank, shall be considered legal notification received by the Pledger
     within 72 hours from the time of the dispatch of the letter including the
     notification. Any notification given to the Pledger by any other means
     shall be considered to have been received thereby at the time of its
     granting or at the time of its publication.

SUBSTANTIVE LAW AND PLACE OF JURISDICTION

36.  A.   This indenture shall be interpreted in accordance with and according
          to the laws of the State of Israel.



     B.   The sole place of jurisdiction for the purpose of this indenture is
          hereby established as follows:

          The closest empowered court to the place of signing of this indenture
          or the empowered court in one of the following cities: Jerusalem, Tel
          Aviv - Jaffa, Haifa, Beersheva or Nazareth.

                      WITNESSED BY THE PLEDGER'S SIGNATURE

                                  /s/ Illegible
                        ITURAN LOCATION AND CONTROL LTD.

ATTORNEY'S CONFIRMATION

I, the undersigned, Guy Aharonov, advocate, serving as the legal advisor of
Ituran Location and Control Ltd., hereby confirm that the company's signatories,
Messrs. Issy Shiratzky and Eli Kamar signed the above document before me, and
that their signatures bind the company.


                               /s/ Guy Aharonov

                               Attorney

                               Signature and Stamp
                          Guy Aharonov, legal advisor
                        Ituran Location and Control Ltd.






                                                        Date:

To:

Bank Hapoalim Ltd.

                     RE: DECISION OF THE BOARD OF DIRECTORS

As you requested, I hereby confirm that, at a meeting of the Board of Directors
of Ituran Location and Control Ltd. convened lawfully and held on January 29,
2002 by means of facsimile, the Board of Directors decided as follows:


     A)   As security for payment of credits received and/or which shall be
          received by the Company from Bank Hapoalim Ltd. (hereinafter - "the
          Bank"), to create in favor of the Bank and in favor of Bank Leumi
          LeIsrael Ltd. a floating first degree lien on all the Company's
          property and assets.

     B)   To empower the representative of the directors, Messrs. Izzy Sheratzky
          and Eli Kamer, to sign all documents relating to the above-mentioned
          lien in the Company's name.

                                       Sincerely,

                                           /s/ Illegible
                                       Ituran Location and Control Ltd.


ATTORNEY'S CONFIRMATION

I, the undersigned, Guy Aharonov, advocate,

Confirm that the above-mentioned decision was taken lawfully and in accordance
with the Company's documents.


                               /s/ Guy Aharonov, Legal Adviser


                               Signature and Stamp





Ministry of Justice

Registrar of Companies

POB 28178

Jerusalem 91281

                         DETAILS OF MORTGAGES AND LIENS

          (Article 178 of the Companies Ordinance (Revised), 5743-1983)
<TABLE>

-----------------------------------------------------------------------------------------------------
NAME OF BORROWING COMPANY                                            COMPANY NO.               CODE
-------------------------------------------------------------------- ------------------------- ------
ITURAN LOCATION AND CONTROL LTD.                                       I      SER.NO.     SN    81
                                                                     ----- ------------ ------ ------
                                                                       52     004381      1
-----------------------------------------------------------------------------------------------------
GUARANTEED AMOUNT IN WORDS                GRT. AMT.   CURRENCY       CURRENCY       DATE OF
NO LIMIT ON AMOUNT                                    CODE           TYPE           CREATION
                                        ------------- -------------- -------------- -----------------
                                          NIS   AG.
-----------------------------------------------------------------------------------------------------
CODE                                 DESCRIPTION OF            STAMP DUTY
                                     DOCUMENT
                                     -------------------------
                                     INDENTURE
-----------------------------------------------------------------------------------------------------
DETAILS OF LENDERS
-----------------------------------------------------------------------------------------------------
ID NO.                               DETAILS OF LOANER         AMOUNT OF LOAN
52-000011-8                          BANK HAPOALIM LTD.
-----------------------------------------------------------------------------------------------------
DETAILS OF LIENED ASSETS

                                    DESCRIPTION OF THE LIENED ASSETS

Floating first degree lien of ALL the property and assets of the Company and the insurance rights on
account thereof.

SPECIAL CONDITIONS
------------------------- ---------- --------------------------------- ------------------------------
IF A RESTRICTION          YES        DATE OF  DECISION                 DATE SERIES ISSUED
APPLIES ON THE CREATION
OF AN ADDITIONAL LIEN,
MARK Y
------------------------- ---------- --------------------------------- ------------------------------
REGISTRATION OF NOTICE AS STATED IN REGULATION 12(B) OF THE COMPANIES REGULATIONS (REPORTING,
REGISTRATION DETAILS AND FORMS), 5760-1999               NO
-----------------------------------------------------------------------------------------------------
NOTE REGARDING PROHIBITION OR RESTRICTION ON THE CREATION OF ADDITIONAL LIENS AND SPECIAL CONDITIONS

THE LIEN COMPANY HAS UNDERTAKEN NOT TO TRANSFER AND/OR TO MORTGAGE THE LIENED PROPERTY AND ASSETS OR
ANY PART THEREOF TO OTHERS WITHOUT THE CONSENT OF THE OWNER OF THE LIEN.
-----------------------------------------------------------------------------------------------------

I HEREBY DECLARE THAT THE DETAILS APPEARING ON THIS FORM ARE CORRECT AND COMPLETE, AND THAT I AM AN
OFFICIAL IN THE COMPANY AS STATED IN ARTICLE 39 OF THE LAW.

/s/ Izzy Sheratsky       007495443       CHAIRMAN OF THE BOARD      FEB. 5, 2002   /s/ Izzy Sheratsky
------------------       ---------       ---------------------      ------------   ------------------
NAME OF SIGNATORY       IDENTITY NO.      POSITION IN COMPANY           DATE           SIGNATURE

I HEREBY DECLARE THAT THE DETAILS APPEARING ON THIS FORM ARE CORRECT AND COMPLETE

NAME OF SIGNATORY      IDENTITY NO.          TITLE               DATE
</TABLE>




                                                        Date:

To:

BANK HAPOALIM LTD.


Dear Sir,

                                 Re: UNDERTAKING

Whereas we have and/or are due to receive from you credits and other banking
services, and we have and/or shall sign undertakings and guarantees to secure
the debts and undertakings of other bodies toward you (hereinafter - "the
Credit");

1.   Accordingly, we hereby undertake toward you that, as of the date of this
     letter and for so long as we have not repaid the credit to you, we
     undertake to maintain financial relations as detailed in our financial
     statements as detailed below:

     EBITDA (in annual terms) will not be less than $ 10,000,000 (ten million US
     dollars).

     The above-mentioned terms shall be interpreted in accordance with the
     standard accounting rules.

2.   We undertake to furnish you each quarter with full data as required by you
     relating to our assets, profits, sales and relating to all our other
     undertakings in the banking system, as well as quarterly and annual
     financial statements as we are obliged to publish in accordance with The
     Securities Law, 5728-1968, immediately on publication thereof.

3.   We are aware that if we breach our above-mentioned undertakings, you shall
     be entitled to take all steps as you shall see fit against us, including
     the presentation of all our debts and undertakings toward you for immediate
     repayment, this in addition to any remedy and/or other relief to which you
     are entitled in accordance with the various documents we have and/or shall
     sign in your favor.

4.   These undertakings are irrevocable and we shall not be entitled to cancel
     and/or amend them without receiving your prior and written consent thereto.



5.   The above shall not derogate from, but shall add to our remaining
     undertakings toward you in accordance with the various documents we have
     and/or shall sign in your favor.


                                  /s/ Illegible
                                  -------------
                        ITURAN LOCATION AND CONTROL LTD.


ATTORNEY'S CONFIRMATION

I, the undersigned, Guy Aharonov, advocate, serving as the legal advisor of
Ituran Location and Control Ltd., hereby confirm that the company's signatories,
Messrs. Issy Shiratzky and Eli Kamar signed the above document before me, and
that their signatures bind the company.

                              /s/ Guy Aharonov

                                    Attorney



                               Signature and Stamp

                               Guy Aharonov, Legal Adviser
                               Ituran Location and Control Ltd.



<TABLE>

=========================== =============== ======================================== ====================
Dudi Ezra                       59809939    24 Beeri St., Kochav Yair                26/7/98
--------------------------- --------------- ---------------------------------------- --------------------
Yoav Cohen                     017054313    3 Arvei Nachal St., Givatayim            1/6/98
--------------------------- --------------- ---------------------------------------- --------------------
Rafael Luxenburg                04344040    87 King David St., Herzliya              1/6/98
--------------------------- --------------- ---------------------------------------- --------------------
Gideon Kotler                   08630998    1 Bavli St., Tel Aviv                    1/6/98
--------------------------- --------------- ---------------------------------------- --------------------
</TABLE>




<TABLE>

---------------------------------------------------------------------------------------------------------
CHANGES TO THE CONSTITUTION
------------------------ --------------------- -------------------------------------------- -------------
Date of Decision         Date of Registration  Summary of Decision                          Court
                                                                                            Order
                                                                                            No.
------------------------ --------------------- -------------------------------------------- -------------
March 10, 1994           March 18, 1994        Change of name of company
------------------------ --------------------- -------------------------------------------- -------------
June 27, 1995            Feb. 7, 1995          Change of name of company
------------------------ --------------------- -------------------------------------------- -------------
June 27, 1995            July 2, 1995          Change of name of company
------------------------ --------------------- -------------------------------------------- -------------
Oct. 30, 1995            Dec. 18, 1995         Amendment of Articles of Association
------------------------ --------------------- -------------------------------------------- -------------
Nov. 14, 1995            Jan. 23, 1996         Change of goals of company
------------------------ --------------------- -------------------------------------------- -------------
May 12, 1998             May 17, 1998          Replacement of Articles of Association
------------------------ --------------------- -------------------------------------------- -------------
May 12, 1998             May 17, 1998          Increase of capital by NIS 6 million
------------------------ --------------------- -------------------------------------------- -------------
May 12, 1998             May 17, 1998          Change of private co. to public co.
------------------------ --------------------- -------------------------------------------- -------------
March 1, 2000            March 14, 2000        Increase of capital
------------------------ --------------------- -------------------------------------------- -------------
</TABLE>




<TABLE>

---------------------------------------------------------------------------------------------------------
PREVIOUS NAMES
---------------------------------------------------------------------------------------------------------
PREVIOUS NAME                        ENGLISH NAME                       CHANGE OF NAME - DATE
------------------------------------ ---------------------------------- ---------------------------------
                                     Eturan - Tadiran Location and      March 18, 1994
                                     Control Ltd.
------------------------------------ ---------------------------------- ---------------------------------
                                     Ituran - Tadiran Location and      July 2, 1995
                                     Control Ltd.
------------------------------------ ---------------------------------- ---------------------------------
</TABLE>




<TABLE>

---------------------------------------------------------------------------------------------------------
DETAILS OF LEVIES DEBT
---------------------------------------------------------------------------------------------------------
The company does not have debts for the annual levy.
---------------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

------------------------------------------------------------------------------------------------------------------------
DETAILS OF LIENS
------------------------------------------------------------------------------------------------------------------------
LIEN NO. 1
---------------- ------------- -------------- ----------------- --------------------------- ------------- --------------
DATE             DATE          DATE           GUARANTEED        DESCRIPTION OF              LIENED        SPECIAL
CREATED          SETTLED       REGISTERED     AMOUNT            DOCUMENT                    ASSETS        CONDITIONS
---------------- ------------- -------------- ----------------- --------------------------- ------------- --------------
17/3/96          19/1/99                      No limit          Indenture
------------------------------------------------------------------------------------------------------------------------
LIEN NO. 2
---------------- ------------- -------------- ----------------- --------------------------- ------------- --------------
DATE             DATE          DATE           GUARANTEED        DESCRIPTION OF              LIENED        SPECIAL
CREATED          SETTLED       REGISTERED     AMOUNT            DOCUMENT                    ASSETS        CONDITIONS
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
16/7/97          25/2/99                      No limit          Indenture
------------------------------------------------------------------------------------------------------------------------
LIEN NO. 3
---------------- ------------- -------------- ----------------- --------------------------- ------------- --------------
DATE             DATE          DATE           GUARANTEED        DESCRIPTION OF              LIENED        SPECIAL
CREATED          SETTLED       REGISTERED     AMOUNT            DOCUMENT                    ASSETS        CONDITIONS
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
15/7/97          25/2/99                      No limit          Indenture
------------------------------------------------------------------------------------------------------------------------
LIEN NO. 4
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
DATE             DATE          DATE           GUARANTEED        DESCRIPTION OF              LIENED        SPECIAL
CREATED          SETTLED       REGISTERED     AMOUNT            DOCUMENT                    ASSETS        CONDITIONS
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
13/12/98         1/10/01                      No limit          Indenture            Fixed first degree   No lien or
                                                                                     lien and             transfer
                                                                                     endorsement of       w/out
                                                                                     rights to all        consent of
                                                                                     monies deposited     owners of
                                                                                     in deposit at        lien
                                                                                     Hamasger branch
                                                                                     and all 166 076686
                                                                                     rights
------------------------------------------------------------------------------------------------------------------------
LIEN NO. 5
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
DATE             DATE          DATE           GUARANTEED        DESCRIPTION OF              LIENED        SPECIAL
CREATED          SETTLED       REGISTERED     AMOUNT            DOCUMENT                    ASSETS        CONDITIONS
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
17/8/99                        1/9/99         No limit          Indenture            Fixed lien of all    No lien or
                                                                                     certificates as      transfer
                                                                                     defined in this      w/out
                                                                                     indenture            consent of
                                                                                     delivered to bank    owners of
                                                                                     by company.  First   lien
                                                                                     current lien all
                                                                                     certificates to
                                                                                     which company has
                                                                                     rights.
------------------------------------------------------------------------------------------------------------------------
LENDERS FOR LIEN NO. 5
---------------------------------------- ------------------------------------- -----------------------------------------
NAME OF LENDER                           AMOUNT OF LOAN                        ID
---------------------------------------- ------------------------------------- -----------------------------------------
Bank Leumi LeIsrael Ltd.                                                       520018078
------------------------------------------------------------------------------------------------------------------------
LIEN NO. 6
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
DATE             DATE          DATE           GUARANTEED        DESCRIPTION OF              LIENED        SPECIAL
CREATED          SETTLED       REGISTERED     AMOUNT            DOCUMENT                    ASSETS        CONDITIONS
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
8/12/99                        13/12/99       No limit          Indenture            Current and fixed    No lien or
                                                                                     first lien and       transfer
                                                                                     endorsement of       w/out
                                                                                     transfers checks     consent of
                                                                                     deposited at bank    owners of
                                                                                                          lien
------------------------------------------------------------------------------------------------------------------------
LENDERS FOR LIEN NO. 6
---------------------------------------- ------------------------------------- -----------------------------------------
NAME OF LENDER                           AMOUNT OF LOAN                        ID
---------------------------------------- ------------------------------------- -----------------------------------------
Bank Discount LeIsrael Ltd.                                                    520007030
------------------------------------------------------------------------------------------------------------------------
</TABLE>





<TABLE>

------------------------------------------------------------------------------------------------------------------------
LIEN NO. 7
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
DATE             DATE          DATE           GUARANTEED        DESCRIPTION OF              LIENED        SPECIAL
CREATED          SETTLED       REGISTERED     AMOUNT            DOCUMENT                    ASSETS        CONDITIONS
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
15/2/00          6/4/00                                         Indenture            Fixed lien of        No lien or
                                                                                     1237800 ordinary     transfer
                                                                                     shares in Tadiran    w/out
                                                                                     Telematics Ltd.      consent of
                                                                                                          owners of
                                                                                                          lien
------------------------------------------------------------------------------------------------------------------------
LIEN NO. 8
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
DATE             DATE          DATE           GUARANTEED        DESCRIPTION OF              LIENED        SPECIAL
CREATED          SETTLED       REGISTERED     AMOUNT            DOCUMENT                    ASSETS        CONDITIONS
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
25/1/00                        12/7/00                          Indenture            Fixed lien on car    No lien or
                                                                                     reg. 18-484-42       transfer
                                                                                     Isuzu in             w/out
                                                                                     accordance with      consent of
                                                                                     rental contract      owners of
                                                                                     and on 18 deposits   lien
                                                                                     or monies
                                                                                     deposited with
                                                                                     company in
                                                                                     relation to
                                                                                     agreement
------------------------------------------------------------------------------------------------------------------------
LENDERS FOR LIEN NO. 8
---------------------------------------- ------------------------------------- -----------------------------------------
NAME OF LENDER                           AMOUNT OF LOAN                        ID
---------------------------------------- ------------------------------------- -----------------------------------------
Darel - Ram Ltd.                                                               511603201
------------------------------------------------------------------------------------------------------------------------
LIEN NO. 9
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
DATE             DATE          DATE           GUARANTEED        DESCRIPTION OF              LIENED        SPECIAL
CREATED          SETTLED       REGISTERED     AMOUNT            DOCUMENT                    ASSETS        CONDITIONS
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
19/8/01                        27/8/01                          Indenture            1666701 ordinary     No lien or
                                                                                     shares in            transfer
                                                                                     Loctiomat Systems    w/out
                                                                                     2000 incl. all       consent of
                                                                                     rights of all types  owners of
                                                                                                          lien
------------------------------------------------------------------------------------------------------------------------
LENDERS FOR LIEN NO. 9
---------------------------------------- ------------------------------------- -----------------------------------------
NAME OF LENDER                           AMOUNT OF LOAN                        ID
---------------------------------------- ------------------------------------- -----------------------------------------
Bank Hapoalim Ltd.                                                             520000118
------------------------------------------------------------------------------------------------------------------------
LIEN NO. 10
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
DATE             DATE          DATE           GUARANTEED        DESCRIPTION OF              LIENED        SPECIAL
CREATED          SETTLED       REGISTERED     AMOUNT            DOCUMENT                    ASSETS        CONDITIONS
---------------- ------------- -------------- ----------------- -------------------- -------------------- --------------
19/8/01                        27/8/01                          Indenture            1237800 ordinary     No lien or
                                                                                     shares in Tadiran    transfer
                                                                                     Telematics Ltd.      w/out
                                                                                     inc rights of all    consent of
                                                                                     types                owners of
                                                                                                          lien
------------------------------------------------------------------------------------------------------------------------
</TABLE>






<TABLE>

------------------------------------------------------------------------------------------------------------------------
LENDERS FOR LIEN NO. 10
---------------------------------------- ------------------------------------- -----------------------------------------
NAME OF LENDER                           AMOUNT OF LOAN                        ID
---------------------------------------- ------------------------------------- -----------------------------------------
Bank Hapoalim Ltd.                                                             520000118
---------------------------------------- ------------------------------------- -----------------------------------------
DATA ON ALL COMPANY LIENS
--------------------------- ------------------------- ------------------------- ----------------------------------------
TOTAL AMOUNT OF LIENS       NO. OF SETTLED LIENS      NO. OF UNLIMITED LIENS    NO. OF LEANS IN ADDITIONAL CURRENCIES
--------------------------- ------------------------- ------------------------- ----------------------------------------
                            5                         5
--------------------------- ------------------------- ------------------------- ----------------------------------------
</TABLE>


--------------------------------------------------------------------------------
This extract was produced from the information held in Kav Mancheh computer on
Jan. 17, 2002 at 16:40. The information relating to the company was last updated
in the database of the Registrar of Companies on January 9, 2002 at 06:34. The
information detailed above was taken from the computer of the Registrar of
Companies. The Registrar of Companies recently began to operate a new database;
slight irregularities may be possible in the data, we will appreciate your
updates; are not responsible for the veracity and updating of the data.
--------------------------------------------------------------------------------






                                                                   EXHIBIT 10.36

                                    INDENTURE

MADE AND SIGNED ON THIS       DAY OF      , 2002

WHEREAS, THE UNDERSIGNED ITURAN LOCATION AND CONTROL LTD. (HEREINAFTER - THE
MORTGAGED)

Has received and shall receive, from time to time from Bank Hapoalim proprietary
limited (hereinafter - the Bank), credit, documentary credit, various loans,
overdraft on current accounts, from a debit account, or another account, letters
of compensation and guarantees of any sort for Mortgaged or for others by the
request of Mortgaged, discounted banknotes, the granting of various bank
deferments and mitigations and various bank services (hereinafter, all as a
whole or individually- bank services) under conditions agreed upon and/or that
shall be agreed upon from time to time regarding the above-mentioned bank
services.

Therefore, it is agreed that Mortgaged shall assure payment of the various sums
that Mortgaged owes and/or that shall be owed to the bank for the granting of
bank services and/or with regard to other debts that are not bank services
and/or of others, all as per the following conditions:

NATURE OF INDENTURE

     1.  This Indenture was made to ensure the full and exact payment of all
         sums due to or that shall be due to Bank from Mortgaged and/or
         regarding the granting of bank services to Mortgaged by Bank and/or
         regarding services other than bank services or in any other manner,
         whether coming from Mortgaged and/or by himself and/or with other(s),
         whether Mortgaged is beholden by them and/or shall be beholden by them
         in the future, as a debtor and/or as a guarantor and/or as an endorser
         and/or as something other, due or that shall be due in the future, to
         be paid prior to the implementation of the securities that apply to
         this Indenture and/or afterwards, that are due in an absolute and/or in
         a conditional manner, that are due directly and/or indirectly: WITH NO
         RESTRICTION ON THE SUM in connection with the expenses and other
         payments that are due or shall be due to Bank from Mortgaged as per and
         in connection with this Indenture (including what was said in clauses
         14 and 31 hereinafter) (All the above-mentioned sums separately or
         together shall be hereinafter called - the guaranteed sums).

COLLATERAL AND ATTACHMENT

     2.  As security for the full and exact defrayal of all the guaranteed sums,
         Mortgaged hereby mortgages to the credit of Bank and its subrogates
         with a collateral of the first level and a transfer by means of
         mortgaging of all funds and/or his rights to receive funds from the
         bank defrayal center with the official code of 26687 for the payments
         of standing orders given for the benefit of Mortgaged by his clients
         (hereinafter - mortgaged assets).
     3.  Nullified.



     4.  The mortgaged assets shall hereinafter be called - the mortgaged
         property.

         The collateral and attachment created by this Indenture shall apply to
         every right to be compensated and/or indemnified of the Mortgaged
         regarding the mortgaged property.

DECLARATIONS OF MORTGAGED

     5.  Mortgaged hereby declares the following:

             A.  That the mortgaged property is not mortgaged or attached to
                 others.
             B.  Nullified.
             C.  That there is no limitation or stipulation by law or agreement
                 that applies to the transfer of the mortgaged property or its
                 attachment.
             D.  That he is permitted to mortgage the mortgaged property.
             E.  That no transfer of rights or any other action which lowers the
                 value of the mortgaged property has been effected.

OBLIGATIONS OF MORTGAGED

     6.  Mortgaged hereby obligates himself to the following:

             F.  Nullified.
             G.  Nullified.
             H.  Nullified.
             I.  Nullified.
             J.  Nullified.
             K.  Not to sell, transfer, assign or endorse the mortgaged assets
                 and the mortgaged documents or any part of them, not to let
                 anyone else use them in any manner whatsoever, and not to allow
                 anyone to effect the above-mentioned actions, without the prior
                 and written agreement of Bank.
             L.  Nullified.
             M.  To immediately notify Bank upon any act of seizure above
                 200,000 New Israeli Shekels placed on the mortgaged property,
                 to immediately notify the confiscated about the Bank's
                 attachment right and to immediately and without delay take at
                 his expense all the necessary steps to remove the seizure.
             N.  To not attach or mortgage in any way shape or form the
                 mortgaged property with identical, prior or later rights than
                 Bank's rights, and not to transfer any right of Mortgaged to
                 the mortgaged property without receiving the prior and written
                 agreement of Bank.
             O.  To be responsible to Bank for any damage to the right of
                 ownership of Mortgaged of the mortgaged property.
             P.  To pay on time as by law, all taxes and required payments
                 imposed on the mortgaged property and/or on all the revenues
                 coming from them, and to provide the bank upon its request all
                 the receipts concerning the said payments. If Mortgaged does
                 not make said payments on time, Bank shall be permitted to pay
                 them at the




                 expense of Mortgaged and to force him to pay them in addition
                 to expenses and interest at the maximum rate. These payments
                 are guaranteed by this Indenture.
             Q.  To keep proper books and to allow Bank or a representative on
                 his behalf to check the books. Mortgaged pledges to assist Bank
                 or his representatives and to hand over to them upon their
                 first request any balance sheet, financial report, account
                 book, card or card catalogue, film, books, references, and
                 other documents, as well as any information requested by them
                 including explanations regarding the financial and operational
                 situation of Mortgaged and/or his business.
             R.  Nullified.
             S.  That no structural change shall occur regarding Mortgaged or
                 any change whatsoever to the control over Mortgaged without
                 prior and written approval of Bank.
             T.  Not to take any action whatsoever regarding the guaranteed sums
                 that would affect Bank's ability to implement this Indenture.

     7.  Mortgaged is obliged to notify Bank immediately:

             A.  Of any claim of right of any kind on any collateral to Bank's
                 benefit that this Indenture is concerned with and/or of any
                 proceedings carried out and/or other implementation steps on
                 the above-mentioned collateral, provided that the sum of the
                 claim/carried out proceedings/other implemented steps shall be
                 taken regarding a sum of at least 200,000 New Israeli Shekels.
             B.  Of any act among the acts mentioned in clause 17 hereinafter.
             C.  Nullified.
             D.  Of any request put forth to dismantle the business of
                 Mortgaged or to collect his assets as well as any decision
                 regarding a structural change to Mortgaged or any intention to
                 do so.
             E.  Of any change of address.

     8.  Nullified.
     9.  Nullified.
     10. Nullified.
     11. Nullified.
     12. Nullified.
     13. Nullified.

     INTEREST

     14.A. Bank shall be permitted to calculate interest on the guaranteed sums
           at the rate agreed upon and/or that shall be agreed upon from time to
           time between itself and Mortgaged. In cases in which the rate of
           interest was not agreed upon, Bank is permitted to fix the interest
           at a rate that shall not exceed the maximum rate and to notify
           Mortgaged of this. Mortgaged shall be obligated to the said interest
           rate and Bank is permitted to gather the sums of interest into a fund
           at the end of each month or at the end of any other period, to be
           established by Bank.




        B. In any event of a delay in the payment of the guaranteed sums or a
           part of them, the guaranteed sums shall carry an interest rate of
           delay at a rate that was agreed upon in the agreement of granting of
           bank services. If the interest of delay was not fixed, the guaranteed
           sums shall carry the maximum interest rate.
        C. In any event granting Bank the right to realize the collaterals as
           per this Indenture, Bank shall be permitted to raise the interest
           rates on the guaranteed sums until the maximum rate.

PERIODS OF PAYMENT

     15. Mortgaged hereby pledges to defray Bank the guaranteed sums and any
         portion of them with exactitude at their period of payment as
         established and as shall be established from time to time.
     16.A. Bank is permitted not to receive early payment of the guaranteed sums
           or any portion of them prior to the period of payment and Mortgaged
           shall not be permitted to cash the mortgaged property, wholly or
           partially, by defrayal of the guaranteed sums and/or any portion of
           them prior to the period of payment, unless if agreed otherwise in
           the credit documents. The Mortgaged, anyone whose rights are liable
           to be infringed upon by the granting of this Indenture, shall not
           have the right, according to clause 13B, to the law of collateral
           -1967 or any legal instruction that shall take its place.
        B. In accordance with the instructions of the law, if Bank agrees to
           early payment on account of the guaranteed sums (without being
           obligated to do so) Mortgaged shall pay the early payment commission
           as agreed upon with Bank in the credit documents, as agreed.

     17. Without infringing on the generality of this Indenture's stipulations,
         Bank shall be permitted in all the cases listed below to put up for
         immediate payment the guaranteed sums, all or part of them, and to bind
         with the above-mentioned sum any bank account of Mortgaged in the bank
         and Mortgaged pledges to pay all the guaranteed sums and Bank shall be
         permitted to take any steps necessary to collect the guaranteed sums
         and to realize the collaterals by any means that the law allows, at the
         expense of Mortgaged:

        A. If Mortgaged violates or does not implement any stipulation of this
           Indenture or if Mortgaged violates other fundamental obligations that
           Mortgaged obligated or shall obligate himself to the Bank or if it
           shall come to light that any declaration of Mortgaged in this
           Indenture and/or any other declaration made and/or shall be made to
           Bank, given in writing to Bank regarding the guaranteed sums that is
           not correct or is not exact: it is evident that the violation of a
           stipulation that is not fundamental or the violation of any
           obligation that is not fundamental shall be considered fundamental,
           if after written request from Bank to correct the violation, it is
           not corrected by the Mortgaged within 30 days of the date of request
           by Bank.
        B. If Mortgaged shall take a decision regarding change of the structure
           of the mortgaged or has any intention to do so, whether by a
           collection agency, a transfer agency or a splitting agency, or a
           willful liquidation decision or




           if a liquidation order is taken out against him or if a temporary
           liquidator is nominated for any one of them, or a special manager, or
           if the name of Mortgaged is struck from any account book conducted by
           law or is about to be struck.
        C. If a receiver is appointed or if an order of dismantling of assets is
           placed on all the property of Mortgaged or on its essential part; to
           the extent that said receiver is appointed or said order is placed
           that is not on the occasion of Mortgaged, this clause shall not apply
           to the extent that the said appointment and order were nullified
           within 30 days of being issued.
        D. If a seizure is placed or if a similar action is taken on an
           essential part of the property of Mortgaged and/or on one of the
           collaterals given or that shall be given by Mortgaged and if not
           given within 60 days of the occasion granted.
        E. If it appears to Bank according to its sole judgement that a change
           in the control of the Mortgaged vis-a-vis the situation on the day of
           signing of this Indenture has occurred and the Bank's prior written
           agreement was not received.
        F. If Mortgaged has stopped to pay his debts and/or to run his business.
        G. If the work or a considerable part thereof has been stopped at the
           Mortgaged for a period of two months or more.
        H. If it appears to Bank according to its sole judgement that an
           incident has occurred liable to infringe in a fundamental manner on
           the financial capability of Mortgaged.
        I. If Mortgaged shall delay in the payment of any sum of the guaranteed
           sums more than 7 days.
        J. Nullified.
        K. Nullified.
        L. Nullified.
        M. If a change had occurred affecting negatively the value of the
           collaterals given and/or that shall be given to guarantee the payment
           of the guaranteed sums.
        N. If Mortgaged requests to make an early payment on the debts he owes
           and/or shall owe other creditors.
        O. Nullified.
        P. Nullified.
        Q. If Mortgaged violates his obligation to provide Bank balance sheets,
           financial documents, accounting books, and other references
           concerning his business dealings.

RIGHTS OF BANK

     18.A. Bank has rights of possession, lien, deduction, and mortgage on all
           sums, assets and rights including valuable papers, currencies, gold,
           banknotes, merchandise documents, insurance policies, notes, transfer
           of rights, sureties, collaterals and their value, found in Bank's
           possession or its control in all the time of the right of Mortgaged
           and/or for him, including those given to him for guarantee,
           safekeeping or other manner. Bank is permitted to block the said
           assets until full defrayal of the guaranteed sums, all or part of
           them, or to sell them and use their entire or partial




           value, for the defrayal of the guaranteed sums. In the event that the
           deducted sums are deposited in a currency in which the guaranteed
           sums are not fixed in, Mortgaged hereby gives Bank in advance orders
           to sell the rest of the right of other currency according to the rate
           to be fixed by Bank or that Bank shall obtain at that time and to
           credit the value of the sale, after deducting expenses and required
           commissions, against the guaranteed sums.

        B. Without infringing on Bank's said right of lien in aforementioned
           clause 18A, Bank shall be permitted at all times:

           1.  To deduct any sum from the guaranteed sums coming from Mortgaged
               against sums coming to Mortgaged from Bank in any account in
               Israeli or foreign currency, by any means or for any reason, and
               this even prior to the period of payment of said sums coming to
               Mortgaged from Bank, against which there shall be deductions,
               except deductions made against sureties in the savings plans, not
               before the period that Mortgaged was permitted to request early
               payment of the sureties.
           2.  To buy for the account of Mortgaged any sum in foreign currency
               needed to defray any sum of the guaranteed sums or to sell any
               foreign currency in the Bank for the right of Mortgaged and to
               use the value of the sale to defray any sum of the guaranteed
               sums.
           3.  To debit any account of Mortgaged of any sum of the guaranteed
               sums. However, if the situation of such an account doesn't allow
               it to be debited by Bank to make the final payment of any sum,
               Bank shall be permitted not to debit the account, and if he did
               so he shall be permitted to annul any said debit and to relate to
               any sum whose debit was annulled as to a sum not paid to the
               account of the guaranteed sums and in accord with this, to take
               any action seen fit as per this Indenture.
           4.  In the event in which anything of the aforementioned clause 17
               took place, Bank shall be permitted to make a deduction without
               any prior warning. However, in the following cases, Bank shall be
               permitted to make a deduction with a prior warning given to
               Mortgaged 10 days prior to the occasion of the deduction:

               A.  In the event of deduction from sums whose day of payment has
                   not yet arrived.





         (b) In the event of a set-off from a bank deposit which would, in
         absence of said set-off, be automatically extended or renewed, such
         that the Mortgagor would derive rights or benefits thereof;

         (c) Notwithstanding that stated in clause 4(a) above, if postponement
         in executing the set-off may have an adverse affect on the Bank, or on
         any right of the Bank, the Bank may execute the set-off forthwith.
         Furthermore, Bank may execute the set-off forthwith if, during the
         ten-day notice period after notice is sent to the Mortgagor, any
         attachment order, notification of receivership in respect of the
         Mortgagor's assets, or [notice of a] similar event is received.

C. The Mortgagor hereby confirms that the exercise by the Bank of its said
set-off rights prior to the maturity date of any deposit of the Mortgagor,
either in entirety or in party, may adversely affect the Mortgagor's rights in
respect of or with regard to said deposit (including, in the matter of interest
rates, linkage differentials, exchange rate differentials, rights to receipt
grants or loans, exemptions or deductions on income tax or tax withheld at
source - provided said rights would confer to the Mortgagor pursuant to the
terms of said deposit). The Mortgagor shall bear all expenses and costs
customarily charged by the Bank at that time for executing this operation.

D. Any sale or purchase as aforementioned in paragraph 18 b (2) above shall be
effected, according to the exchange rate customarily used by the Bank, from
funds in Israeli currency or foreign currency, as the case may be, held by the
Bank in favor of the Mortgagor, or proceeds from the sale of any security that
has been and/or shall be granted to the Bank by the Mortgagor.

The term "exchange rate customarily used by the Bank" means, in respect of any
purchase of foreign currency into the Mortgagor's account, the highest exchange
rate for transfers and checks used by the Bank at the relevant time, for the
sale to its clients of the relevant foreign currency in consideration of Israeli
currency, with the addition of exchange rate commissions and any tax, levy,
mandatory charge and/or other costs, etc.; and for any sale of foreign currency
from the Mortgagor's account - the lowest exchange rate for transfers and checks
used by the Bank at the relevant time for the purchase from its clients of the
relevant foreign currency, in consideration of Israeli currency, after deduction
of exchange rate commissions and all taxes, levies, mandatory charges and/or all
other costs etc.

19. The Bank may, at any time, charge any amount that is or shall be payable by
the Mortgagor, to any account of the Mortgagor, in any manner, and to apply any
amount received from or on behalf of the Mortgagor to any account which the Bank
deems fit, and to transfer any amount held in favor of the Mortgagor to any
account as the Bank deems fit, and all - whether said account is in the name of
the Mortgagor alone or jointly with another, whether in Israeli or foreign
currency, whether existing at the



signing of this Indenture or whether such shall be established in the future.


20. The Mortgagor confirms that the Bank's books and accounts constitute are
reliable, and shall be deemed correct and shall constitute prima facie evidence
against the Mortgagor in all their details, including, inter alia, all regards
to the computation of the secured amounts, and all other matters relating to
this Indenture.

21. At the end of every four quarter period, during which the Mortgagor meets
the payments of principal and interest on the loans assumed from the Bank, the
Bank shall, at the Mortgagor's request in writing, release one fifth (1/5) of
the lien imposed on the Mortgagor's assets pursuant to this Indenture. If, and
for any reason, the Mortgagor fails to meet said payments in a timely manner,
the Bank shall not release any part of the said lien prior to said payment.

22. Without derogating from the remaining provisions of this Indenture, any
waiver, extension, discount, laches, omission, (hereinafter, "Waiver") on part
of the Bank, regarding any omission or partial or improper performance of any of
the Mortgagor's obligations pursuant to this Indenture and/or any undertaking,
shall not be deemed a waiver on part of the Bank of any right, and shall rather
be deemed as limited consent to the specific circumstances of said Waiver. Any
waiver granted by the Bank to any party to any note held by the Bank to secure
the secured amounts, shall have no effect in any manner on the Mortgagor's
undertakings.

23. a. In each of the case specified in clause 17 above, the Bank may notify the
Mortgagor of a lien on the pledged assets or a part thereof, effective
immediately or on a date as the Bank undertakes [...] to use any means as it
deems fit to collect the secured amounts, and exercise all its rights pursuant
to this Indenture, including the sale of the pledged assets, in entirety or in
party, and apply the proceeds thereof to discharge the secured amounts, without
any obligation imposed on the Bank to first exercise guarantees or other
collateral, if any are held by the Bank;

b. Cancelled.

c. The Bank may, as legal representative of the Mortgagor, and for the purpose
of this clause the Mortgager irrevocably appoints the Bank as its legal
representative, to sell the pledged assets and any part thereof, either by the
Bank or through others, for cash or installments or otherwise, at a price and on
terms to be determined at the absolute discretion of the Bank, and the Bank
shall further be entitled, either independently or through the court or through
a Court Execution Office, to sell the pledged assets or any other asset, inter
alia through the appointment or a receiver or a receiver/administrator on behalf
of the Bank, and whose authorities shall, inter alia, include:

     1)  Assume possession of all pledged assets or a part thereof.


     2)  Cancelled

     3)  To sell, or consent to sell the pledged assets, either in entirety or
         in part, or to dispose of or consent to dispose of in any other manner,
         on the terms as he deems fit.

     4)  To effect any other arrangement regarding the pledged assets or a part
         thereof, as he deems fit.

d. All proceeds received by the receiver or receiver/administrator from the
pledged assets, and any proceeds received by the Bank and/or the receiver or
receiver/administrator from the sale of the pledged assets or a part thereof,
shall be applied in the following order:

     1)  To repay any costs incurred and such as shall be incurred regarding the
         collection of the secured amounts, including receivership or
         receivership/administration expenses and fees, at an amount to be
         determined by the Bank or approved by the Court or the Court Execution
         Office.

     2)  To discharge the secured amounts payable to the Bank due to terms of
         linkage, interest, damages, commissions, and expenses that are and
         shall be payable to the Bank pursuant to this Indenture.

     3)  To discharge the principal of the secured amounts;

         or in any other order of application to be determined by the Bank.

24. If, at the time of the sale of the pledged assets, the payment date of the
secured amounts or a part thereof has not yet occurred, or the secured amounts
or a part thereof are payable to the Bank on conditional terms only, the Bank
may collect, from the proceeds of the sale, an amount sufficient to cover the
secured amounts, and any amount collected yet not applied to the discharge of
the amounts specified in clause 23 9d) above shall be pledged to the Bank to
secure the secured amounts and shall remain in the possession of the Bank until
the discharge thereof.

NATURE OF THE COLLATERAL

25. The collateral granted and/or such as shall be granted to the Bank pursuant
to this Indenture, shall be of a permanent nature and shall remain in effect
until termination of this Indenture is confirmed in writing by the Bank.

26. In the event that other collateral and/or guaranteed to secure the discharge
of the secured amounts have been or shall be granted to the Bank, all such
collateral and guarantees shall be independent of each other.

27. In the event of any compromise, extension or relief granted by the Bank to
the Mortgagor, or any amendment effected by the Bank to the Mortgagor's
undertaking regarding the secured amounts, or any release or waiver of other
collateral or guarantees - such modifications shall have no effect on the nature
of the collateral to



which this Indenture applies, and all collateral and undertakings of the
Mortgagor to which this Indenture applies shall remain in full effect.

28. The Bank may register said collateral, either in entirety or in part, with
any competent authority under law and/or any public registry.

RIGHT OF TRANSFER

29. The Bank may, at any time, at its discretion, with advance notice in writing
to the Mortgagor, without requirement of the Mortgagor's consent, to transfer
this Indenture and the rights thereunder, including the collateral, in entirety
or in part, to any third party, and any such transferee may also transfer the
said rights to any third party without requirement of any additional consent on
part of the Mortgagor, provided that such transfer has no adverse effect on the
Mortgagor's rights. Such transfer may be effected by endorsement on the margins
or the text of this Indenture, or in any other manner as the Bank or the
transferee deems fit.

NOTICE OF RESERVATION

30. The Mortgagor undertakes to inform the Bank in writing of any reservation or
objection it may have, if any, regarding any account, account statement,
confirmation or notification received from the Bank, including information
obtained through an ATM. In the absence of any reservation or objection by the
Mortgagor within 21 days from the date of dispatch of said account,
confirmation, or notification, the Bank may consider the Mortgagor as having
confirmed such [information] as true and correct.

EXPENSES

31. Without derogating from the rights of the Bank under this Indenture, all
expenses relating to this Indenture (as specified in the Bank's list of fees, in
effect from time to time), shall be paid by the Mortgagor, at the Bank's first
demand in writing (unless if such are effectively paid, in the event that this
indenture is effected to secure his liability), with the addition of maximal
interest rate, from the date of the demand until the complete and effective
discharge thereof.

Said expenses and commission include, inter alia (and without derogating from
the generality of the aforesaid), collateral handling fees, stamp and document
registration fees, collateral sale expenses and collection expenses (including
fees of the Bank's attorney) and expenses regarding insurance, safeguarding,
possession, and repair of the pledged assets. All said expenses and commissions
with the addition of interest as specified in clause 14 above of this Indenture,
shall be secured by this Indenture until the complete and effective discharge
thereof

LIABILITIES OF THE MORTGAGOR

32. Cancelled




INTERPRETATIONS

33. In this Indenture - (a) The singular includes the plural and visa versa; (b)
The male includes the female, and visa versa; (c) "the Bank" means - Bank
Hapoalim Ltd and any of the Bank's branches existing on the date of this
Indenture and/or such as shall be established in any location in the future, its
transferees, substitutes and any legal representatives of the Bank; (d) "Notes"
- mean promissory notes, exchange notes, checks, undertakings, guarantees,
collateral, checks, bills of lading, deeds of deposit, and any other negotiable
instrument; (e) "Maximal interest rate" means the maximal interest rate
customarily charged by the Bank at the time, and from time to time, regarding
overdrawn amounts and arrears in debitory accounts, or checking accounts, the
higher of the two; (f) "Change in structure" means , in respect of the
Mortgagor, any merger or split, (as these terms are defined in Section E 2 of
the Income Tax Ordinance [New Version], or any provision of law in its stead),
and any transfer of assets in respect of shares, all either pursuant to said
Section E2 or any other [provision]; (g) In any case in which the Bank may
commit any action under this Indenture, the Bank is not obligated to do so; (h)
In any case in which the Bank is entitled to charge amounts to any account of
the Mortgagor, the Bank may charge said account, whether said account is in
credit or debit, and whether debit balance is generated as a result of charging
said account by the Bank; (i) The headings of the paragraphs are for convenience
only and shall not be used in the interpretation of this Indenture; (j) The
preamble to this Indenture constitutes an integral part thereof.

NOTICES AND WARNINGS

34. Any notice sent by registered or ordinary mail by the Bank to the Mortgagor,
to the address above or to the address of the Mortgagor's registered offices or
to any other address as the Mortgagor may notify the Bank in writing from time
to time, shall be deemed duly received by the Mortgagor within 72 hours of
dispatch of the letter containing notification. Any notification made to the
Mortgagor by messenger - at the time of delivery.

SUBSTANTIVE LAW AND JURISDICTION

35. a. This Indenture shall be governed by the laws of the State of Israel.

b. The exclusive jurisdiction over this Indenture is hereby determined as
follows: The competent court closest to the location of the signing of this
Indenture, or the competent of one of the following cities: Jerusalem, Tel
Aviv-Jaffa, Bee'er Sheva or Nazareth.


AND IN WITNESS HAS THE MORTGAGOR SET ITS HAND BELOW


[stamp] [signature]
Ituran
Location and Control Ltd



AFFIRMATION OF ATTORNEY

I, the undersigned, Guy Aharonoff, an attorney serving as the legal advisor of
Ituran Location and Control Ltd, hereby affirm that the company's signatories,
Messrs Izzy Shiretzky and Eli Kemer, signed the above document in my presence,
and their signatures bind the company for all matters and purposes.



[signature]
Attorney Guy Aharonoff, Legal Advisor
Ituran Location and Control Ltd.
-----------------------------------
Attorney
Attorney's signature







Date:
      --------------
Att:
Bank Hapoalim Ltd.


                      RE: RESOLUTION OF BOARD OF DIRECTORS

At your request we hereby confirm that the following resolutions were approved
by the Board of Directors of Ituran Location and Control Ltd., at a meeting duly
convened on January 29, 2002 by facsimile:

                  a)  As collateral to secure payment of the credit granted to
                      and/or such as shall be granted to the Company by Bank
                      Hapoalim Ltd (hereinafter, "the Bank"), to create a lien
                      in favor of the Bank and assignment of rights through lien
                      on all the monies payable and/or such as shall be payable
                      to the company from the Central Bank Clearinghouse in
                      respect of the company's clients' standing payment orders
                      pursuant to Institution Code 26687, which, at any time,
                      shall not be less than 50% of the total monies paid to the
                      Company through the Central Bank Clearinghouse.

                  b)  To grant power of attorney to directors Messrs. Izzy
                      Shiretzky and Eli Kemer to sign, on behalf of the company,
                      all instruments regarding the said lien.


Respectfully,
[signature]
Ituran
Location and Control Ltd

AFFIRMATION OF ATTORNEY

I the undersigned, Guy Aharonoff, attorney,
hereby affirm that the above resolution was duly approved
pursuant to the company's documents.

[signature]
Attorney Guy Aharonoff, Legal Advisor
Ituran Location and Control Ltd.




                                                         Date:
                                                              ------------------
Att:
Bank Hapoalim Ltd.

                            Re: ASSIGNMENT OF RIGHTS
                                --------------------


Whereas we created in your favor a lien and assignment of rights through lien on
all the monies payable and/or such as shall be payable to us from the Central
Bank Clearinghouse (hereinafter, "CBC"), under Institution Code 26687; and,

Whereas the monies transferred by CBC under the above Institute Code are in
respect of monies payable to us through according to standing payment orders
granted to us by our clients as payment for membership fees in respect of
services rendered by us;

We therefore undertake towards you that we, at all times, shall ensure that the
total amount remitted in respect of the said standing orders and through the
Institution Code, to our account held with you, shall not be less than 50% of
the total paid to us by our clients in respect of membership fees.

We confirm that if we breach our above undertaking, you may take any steps as
you deem fit against us, including demand of immediate discharge of all our
debts and liabilities towards you, in addition to any remedy or other relief to
which you are entitled pursuant to various instruments we signed and/or shall
sign in your favor.

These undertakings of ours are irrevocable and we shall not be entitled to
cancel and/or amend these undertakings without your written approval in advance.

The above is intended not to derogate from, but rather to add to our remaining
undertakings towards you, pursuant to various instruments we signed and/or shall
sign in your favor.

[signature]
Ituran
Location and Control Ltd


AFFIRMATION OF ATTORNEY

I, the undersigned, Guy Aharonoff, an attorney serving as the legal advisor of
Ituran Location and Control Ltd, hereby affirm that the company's signatories,
Messrs Izzy Shiretzky and Eli Kemer, signed the above document in my presence,
and their signature binds the company for all matters and purposes.


[signature]
Attorney Guy Aharonoff, Legal Advisor
Ituran Location and Control Ltd.
-----------------------------------

Attorney
Attorney's signature





                                                                   EXHIBIT 10.37


TO
BANK HAPOALIM Ltd.
NACHLAT YITZHAK BRANCH
----------------------


                    DEED OF UNDERTAKING FOR REPAYMENT OF LOAN

                            DRAWN UP ON MAY 20, 2004

NATURE OF THE UNDERTAKING

1.

       1)      We have requested and/or we hereby request from Bank Hapoalim
               Ltd. (hereinafter - "THE BANK") to lend us an amount of NIS
               43,000,000 (forty three million new shekels) (hereinafter - "THE
               PRINCIPAL"). The Bank has acceded and/or will accede to our
               request subject to the signing by us of this Deed of Undertaking
               and subject to the fulfillment, prior to the Principal being
               given, of all the conditions that have been agreed between
               ourselves and the Bank, to the Bank's full satisfaction,
               including the providing of collateral security. It is hereby
               expressly clarified that only the crediting of the account the
               number of which is mentioned at the head of this Deed of
               Undertaking (hereinafter - "THE ACCOUNT") with the amount of the
               Principal will constitute the Bank's agreement to provide us with
               the Principal.

               Our signature to this Deed of Undertaking, coupled with crediting
               of the Account with the amount of the Principal, constitutes our
               confirmation of receipt by us of the Principal.

       2)           *    we hereby give the Bank an instruction to debit the
               Account /account number 507860 (hereinafter - "THE ACCOUNT FOR
               DEBITING") with the amounts required for repayment of all
               payments of the Principal, the interest (as hereinafter defined),
               the linkage differentials, the expenses, commissions and other
               payments that will be due from us as stated below (all the above
               mentioned amounts and each portion thereof will henceforth be
               referred to as - "THE LOAN").Without derogating from the Bank's
               rights pursuant to this Deed of Undertaking and/or in accordance
               with any other document and/or form that we have signed and/or
               may sign and/or according to any law - we are aware that in any
               event that it becomes



                                       1




               apparent that there is no credit balance, or an unutilized credit
               framework in the Account for Debiting on any due date of payment
               (as specified in Clause 3 below), to the extent of the full
               amount of the debit on account of the Loan, the Bank will be
               entitled not to execute the aforesaid instruction on the
               aforesaid due date of payment, until the first business day
               thereafter on which there is a sufficient balance in the Account
               for Debiting. Should the Bank debit the Account for Debiting and
               it becomes apparent that there is not a sufficient balance in the
               Account for Debiting, the Bank will be entitled to reverse any
               such debit and to treat any amount the debiting of which was
               cancelled as an amount which was not paid on account of the Loan,
               and in accordance therewith to take any action it deems fit in
               accordance with this Deed of Undertaking.

               We are aware that there is no obligation imposed on the Bank to
               check whether, on the date of executing the aforesaid
               instruction, as set forth above, there is a credit balance or an
               unutilized credit framework for executing the debits which have
               been recorded or are due to be recorded to the debit of the
               aforesaid Account for Debiting on such date, and we will bear all
               the consequences which may result from there being no credit
               balance or unutilized credit framework.

               We are aware that the debit balance that will result from the
               above mentioned debits may bear interest at a rate higher than
               the rate of penalty interest on the Loan (as mentioned in Clause
               6 below).

               We are aware that in every case that the aforesaid instruction is
               not executed such unpaid amount will bear interest at the rate
               specified in Clause 6 below.

                  *   we undertake to make payment, directly to the Account, of
               all the payments in respect of the Principal, the interest (as
               hereinafter defined), the linkage differentials, the expenses,
               the commissions and other payments that will be due from us as
               set forth below (all the abovementioned amounts and any part
               thereof will henceforth be referred to as - "THE LOAN") on the
               due dates of payment as set forth in Clause 3 below.

OBJECTIVE OF THE LOAN

2.     The Principal is given for the objective of: _______________ and we
       undertake to use it for that purpose alone.

DUE DATES OF PAYMENT OF THE PRINCIPAL AND THE INTEREST

3.

       1)      We undertake to pay the amount of the Principal in 8 successive
               quarterly installments, commencing from August 20, 2004.

       2)      We undertake to pay the interest (as defined below) in 8
               consecutive quarterly installments, commencing from August 20,
               2004.



                                       2




       3)      If the due date of payment of any amount on account of the Loan
               falls on a day which is not a business day, the due date of
               payment will be postponed to the first following business day and
               will bear interest at the rate required pursuant to Clause 4
               below, subject to the contents of any law.

       4)      Details of the payments and the dates for the payments of the
               Principal and the interest (as defined below) will be included in
               the schedule of payments to the Loan (hereinafter - "THE SCHEDULE
               OF PAYMENTS"), which will be sent to us by the Bank shortly after
               effecting the Loan, and the contents thereof will constitute an
               integral part of this Deed of Undertaking.

       5)      If the Schedule of Payments is not received by us within 30 days
               from the date the Account is credited with the amount of the
               Principal, we undertake to give the Bank written notice to that
               effect, and in the absence of such notice, the contents of the
               copy of the Schedule of Payments which is in the Bank's
               possession will apply to us.

INTEREST

4.     The Principal bears cumulative interest, which will be debited on the
       dates set forth in the Schedule of Payments, according to the Bank's
       calculations commencing from the date of receipt of the Principal, at the
       rate set forth below:

       Unless otherwise stated in the Schedule of Payments, the period for
       calculating the interest ends on the dates of debiting the interest. In
       those cases where the periods for debiting the interest end prior
       thereto, the interest may be added to the Principal at the end of each
       period of calculation of interest until the debiting thereof, as
       specified in the Schedule of Payments. The basis for debiting the
       interest may be set forth in the Schedule of Payments.

           *    Fixed interest at a rate of 6.4% per annum (hereinafter -
       "THE INTEREST"). The Interest constitutes adjusted interest at a rate of
       __ % per annum.

CHANGE IN THE CONDITIONS OF INTEREST

5.     Without derogating from the contents of Clause 4 above, the Bank may at
       any time and from time to time alter the rate of Interest, provided that
       notice to that effect shall be given to us or shall be sent to us, or
       notice to that effect will be published in two daily newspapers, at least
       3 business days in advance.

PENALTY INTEREST

6.     If we do not make payment on any due date of payment of any amount we
       owe in accordance with this Deed of Undertaking or if we do not
       immediately repay the Loan in accordance with the contents of Clause
       13 below, the Bank will be entitled to charge us penalty interest on
       such amount at the maximum rate



                                       3



       prevailing at the Bank for the time being in respect of the type of
       loans which are the same as the Loan, or interest at the maximum rate
       in respect of any excess withdrawal which is imposed by the Bank in
       revolving debit accounts or in current accounts or with interest at
       the maximum rate in respect of an excess withdrawal which is imposed
       by the Bank on the accounts to which the amount of the debit was
       transferred, whichever is the higher (hereinafter - "THE MAXIMUM RATE
       OF INTEREST"), from the agreed date for payment of such amount and up
       to the date of full actual payment thereof.

       If the Loan is linked to the Consumer Price Index or any other index and
       we do not make payment of any amount which we are obliged to pay on the
       due date thereof, the Bank will be entitled to charge us interest at the
       Maximum Rate and it will be permissible to charge on such linked Loan.
       The penalty interest will be added to the Principal at the end of each
       month, or at the end of any other period, shorter or longer, to the
       extent that this is permissible in accordance with the provisions of the
       law at that time.

LINKAGE

7.

       1)      The Loan will be linked or unlinked, as stated below:

                X   unlinked.
               ---

               If the Loan is linked as aforesaid, the appropriate conditions of
               linkage will apply to this Deed of Undertaking and we hereby
               undertake to make payment to the Bank, on the date specified for
               payments of the Principal and the Interest, of the linkage
               differentials in respect of such payments.

       2)      CONDITIONS OF LINKAGE TO THE CONSUMER PRICE INDEX

               1)    "CONSUMER PRICE INDEX" - or "THE INDEX" - means the
                     Consumer Price Index (which is also known as the Cost of
                     Living Index), including fruit and vegetables and which is
                     published by the Central Bureau of Statistics (hereinafter
                     - "THE BUREAU"), including such index even if it is
                     published by any other government institution and also
                     including any official index which may come in its stead,
                     whether or not it is structured on the same data on which
                     the existing index is structured. If another index should
                     replace the existing index, the Bureau will fix the ratio
                     between them, and if the Bureau does not fix the ratio
                     during 6 months from publication of the other index, it
                     will be fixed by Poalim Trust Services Ltd. and/or the Bank
                     in consultation with economic experts;


                                       4



               2)    "THE NEW INDEX" - means the last known index on the
                     business day on which we actually pay any payment on
                     account of the Principal and/or the Interest (and/or other
                     amounts which are linked to the Index which we owe in
                     respect of the Loan) (hereinafter - "THE DATE OF PAYMENT").

               3)    If it transpires that the New Index has risen as compared
                     with the last known Index on the date of receipt of the
                     Principal (hereinafter - "THE BASIC INDEX"), we will pay
                     the Bank such payments of Principal and/or Interest (and/or
                     other amounts which are linked to the Index which we owe in
                     respect of the Loan) where such amounts are multiplied by
                     the New Index and are divided by the Basic Index. If it
                     should become apparent that the New Index has not risen, or
                     has fallen as compared with the Basic Index, we will pay
                     the payments in the nominal amount.

               4)    Notwithstanding the contents of sub-clause 2) above, it is
                     hereby agreed that if the last monthly Index which is due
                     to be published prior to the Date of Payment is not
                     published, then "THE NEW INDEX" will mean the Index last
                     published prior to such date. Such Index will serve as a
                     temporary index until publication of the correct New Index
                     or the replacement thereof in a manner stated above.

                     If it becomes apparent that the New Index which was
                     published late, after the aforesaid Date of Payment, has
                     risen or fallen as compared with the Index which served as
                     a temporary basis for payment of such payments, then we
                     will be debited or credited by the Bank with the
                     differences which are necessitated, as the case may be, but
                     we will not be credited with differences where the New
                     Index which was published late has fallen as compared with
                     the Basic Index. In such case we will pay these payments in
                     the nominal amounts.

EARLY REPAYMENT

8.     1)      The Bank will not be obliged to accept from us any payment on
               account of installments of the Principal and/or the Interest
               and/or linkage differentials and/or other payments, which we owe
               in respect of the Loan, before the due date for payment thereof,
               as specified above, has arrived.

       2)      Subject to the provisions of any law, if the Bank should agree to
               early repayment of any amount on account of the Loan (without it
               being obliged to do so), we will pay the Bank the maximum early
               repayment commission of which the Bank will notify us.

COLLATERAL SECURITY

9.     As security for the full and precise repayment of the Loan, in whole or
       in part, all the collateral security which has been given and/or which
       may be given by us and/or for us to the Bank, as well as all the bills of
       exchange as defined in Clause 37.4 of this Deed of Undertaking which we
       have delivered and/or will deliver and/or which our guarantors have
       delivered and/or will deliver to the Bank at any time, will serve as
       security.



                                       5




10.

       1)      In every case in which the Bank holds bills of exchange signed by
               us and/or with our endorsement which have been delivered and/or
               will be delivered to the Bank for collection and/or for safe
               custody and/or as collateral security and/or otherwise, same will
               be deemed to have been encumbered by a first ranking charge in
               favor of the Bank as security for repayment of the Loan, and the
               Bank will be entitled to sell or discount the bills of exchange,
               and to take any legal or other steps as the Bank sees fit for
               purposes of collecting the bills of exchange, and to charge the
               expenses of recovery to our account. The Bank will be entitled to
               compromise with the signatories, endorsers and/or guarantors or
               any of them, according to other conditions, to waive, release,
               accept partial consideration from them and to utilize the
               consideration of the bills of exchange for repayment of debts
               which are due and/or will be due to the Bank from us. The
               acceptance of the bills of exchange or acceptance of the full or
               partial proceeds thereof as aforesaid shall not derogate from our
               obligations to repay the full Loan. We hereby declare that bills
               of exchange that have been delivered and will be delivered by us
               to the Bank from time to time are in our absolute possession and
               ownership and that same are free and clear of any lien,
               attachment and third party right of whatsoever nature, and we are
               entitled to pledge and encumber same to the Bank.

       2)      The following provisions will apply to bills of exchange under
               our signature, under our endorsement and/or with our guarantee
               which the Bank may hold:

               1)    The Bank will be released from all obligations of a holder
                     of a bill of exchange, including presentation, protest and
                     the sending of notice of dishonor and all our obligations
                     arising from our signature, endorsement or our guarantee,
                     will remain in full force even without the Bank performing
                     the above mentioned obligations of a holder;

               2)    We waive all the rights and defenses which are available to
                     us in accordance with the Bills of Exchange Ordinance
                     and/or any other law with regard to statute of limitations;

               3)    In every case in which bills of exchange have been
                     delivered to the Bank for discounting or otherwise, and we
                     are given consideration for them and the bills of exchange
                     are not duly paid, the Bank will be entitled to debit us
                     with the amount of the bills which were not paid;

               4)    We release the Bank from all responsibility for loss of
                     bills of exchange and/or for procrastination in the
                     collection thereof, unless the loss or the procrastination
                     was caused by the Bank's negligence;

               5)    We assume responsibility for the regularity of the bills of
                     exchange, the genuineness thereof, the validity and
                     correctness of the signatures, the endorsements and the
                     details of the bills, the signatures of the guarantors on
                     the bills and also for the stamping thereof according to
                     law;



                                       6



               6)    We agree that in the event that the Bank should decide to
                     sell the bills of exchange itself, notice of three days in
                     advance in regard to the steps which the Bank is about to
                     take will be deemed to be a reasonable time for purposes of
                     Section 19 (b) of the Pledge Law, 5727 - 1967, or any other
                     legal provision which may come in its stead;

               7)    We undertake not to create, without receiving the Bank's
                     prior written consent, any pledge, assignment or other lien
                     over the bills of exchange or the proceeds thereof by way
                     of preferential, equal or later rights to the rights
                     granted to the Bank in accordance with this Deed of
                     Undertaking.

11.    In any event that any deed of charge or encumbrance serves as collateral
       security for repayment of the Loan or for the performance of all our
       obligations pursuant to this Deed of Undertaking, it is expressly
       stipulated that the deed of charge or encumbrance forms an integral part
       of this Deed of Undertaking and all the provisions, conditions,
       declarations and undertakings contained in the deed of charge or
       encumbrance form an integral part of this Deed of Undertaking and are
       included herein. In addition it is hereby expressly stipulated that this
       Deed of Undertaking does not have the effect of altering the deed of
       charge or encumbrance or of derogating therefrom.

12.    All the bills of exchange, the guarantees, the encumbrances and charges
       and the remaining collateral security that have been given and/or will be
       given to the Bank by us, and/or by others in our favor, to secure
       repayment of the Loan or the fulfillment of all our obligations pursuant
       to this Deed of Undertaking, will be cumulative and independent of one
       another, and will not affect other collateral security the Bank holds or
       may hold, will not be affected by such collateral security and will serve
       as repeating or continuous security until the full discharge of all the
       amounts for which we will be indebted to the Bank. The Bank shall be
       entitled to realize the collateral security according to an order of
       priority as will be decided by it, and the realization of one collateral
       security shall not prejudice or derogate from another collateral
       security.

IMMEDIATE REPAYMENT OF THE LOAN

13.    Without prejudice to the generality of the provisions of this Deed of
       Undertaking, the Bank will be entitled in each of the instances
       enumerated below to make the Loan immediately due and payable. In such
       events, we undertake to pay the Bank all the amounts that are due and
       will be due to the Bank on account of the Loan, and the Bank will be
       entitled to debit us with all the abovementioned amounts and to take all
       steps that it deems fit for the recovery thereof, and in particular to
       realize the collateral security in any manner the law allows, at our
       expense. The following are the instances:

       1)      If we breach and/or do not fulfill any of the terms and
               conditions of this Deed of Undertaking and/or any other
               obligation we have undertaken and/or may undertake vis-a-vis the
               Bank and/or if it becomes apparent that any of


                                       7




               our declarations in this Deed of Undertaking, and/or any other
               declaration that has been given and/or may be given to the Bank
               by us, is incorrect and/or is inaccurate;

       2)      If we or one of the guarantors on our behalf passes a resolution
               with respect to a change of structure or any intention to do so,
               whether as an absorbing company, a transferring company or a
               splitting company, or a resolution for voluntary winding up, or
               if a liquidation order is issued against us or against any of our
               guarantors, or if our name or the name of any of our guarantors
               is expunged from any register maintained according to law or is
               about to be expunged;

       3)      If a receiver is appointed or if a receivership order should be
               granted in respect of our property or in respect of property of
               any of our guarantors, or if a provisional liquidator or special
               manager is appointed for us or for any of our guarantors, or if
               an application for liquidation or an application for bankruptcy
               is filed against us or by us or on our behalf or against any of
               our guarantors or by them or on their behalf;

       4)      If an application is filed for the imposition of an attachment or
               if an attachment is imposed or a similar execution proceeding is
               taken in respect of or against any of our property or in respect
               of or against any property of any of our guarantors or in respect
               of and/or against any of the collateral security that has been
               delivered to the Bank by us and/or for us;

       5)      If the Bank, in its sole discretion, believes that a change has
               occurred in control or supervision over us and/or over any of our
               guarantors as compared with the situation on the date of signing
               of this Deed of Undertaking;

       6)      If we cease to pay our debts or to conduct our business or if any
               of our guarantors ceases to pay his or its debts and/or to
               conduct his or its business;

       7)      If the work or a substantial portion thereof in our firm or at
               any of our guarantors is stopped for a period of two months or
               more;

       8)      If it appears to the Bank, in its sole discretion, that an event
               has occurred which is likely to prejudice our financial ability
               or that of any of our guarantors.

       9)      If we or any of our guarantors is late in the payment of any
               amount forming part of the Loan for a period of more than 7 days;

       10)     If we do not furnish the Bank with balance sheets, periodic
               financial statements, books of account and other vouchers in
               connection with the state of our business, as mentioned in Clause
               27 below, or if we are called upon to do so by the Bank and do
               not comply with the demand;

                                       8




       11)     If the number of our shareholders or the shareholders of any of
               our guarantors should drop or the number of members who
               constitute us or any of our guarantors should fall below the
               minimum number required according to law.

       12)     In the case of death, order of legal incapacity, bankruptcy,
               liquidation, arrest, leaving the country or a breach of an
               obligation by us, by any of our guarantors or any party to
               promissory notes, documents and/or securities we have delivered
               and/or will deliver to the Bank as collateral security.

       13)     If in the discretion of the Bank and according to its sole
               assessment, there has been a change for the worse in the value of
               the collateral security given to secure repayment of the Loan
               and/or in the solvency of any of the guarantors, including in the
               case of death of a guarantor, bankruptcy of a guarantor or his
               leaving the country;

       14)     If we or any of our guarantors is called upon to effect early
               repayment of debts for which we or any of our guarantors are
               indebted to other creditors;

       15)     If the Bank should be called upon by the entity which recommended
               the grant of the Loan to demand immediate repayment of the Loan.

THE BANK'S RIGHTS

14.

       1)      The Bank has rights of possession, lien, set-off and charge over
               all the amounts, the assets and the rights, including securities,
               gold coins, silver coins, bank notes, documents in respect of
               goods, insurance policies, bills of exchange, assignments of
               obligations, deposits, securities and the proceeds thereof, which
               may be in the possession of the Bank and/or under its control at
               any time to our credit and/or for us, including those that have
               been delivered to the Bank for collection, as security, for safe
               custody and/or otherwise. The Bank will be entitled to retain the
               aforesaid assets until the full discharge of the Loan or may sell
               same and apply the proceeds thereof, in whole or in part, for the
               discharge of the Loan. In the event that the amounts which are
               set off are deposited in foreign currency, we hereby give the
               Bank instructions in advance to sell the credit balance in
               foreign currency at such rate as will be fixed by the Bank or
               which the Bank will obtain for such credit balance at that time,
               as mentioned in Clause 14(4) below and to set off the proceeds of
               the sale against the Loan after deduction of the necessary
               expenses and commissions.

       2)      Without derogating from the Bank's right of lien as referred to
               in Clause 14(1) above, the Bank will be entitled at any time:

               1)    To set off any amount forming part of the unpaid balance of
                     the Loan against amounts which are due to us from the Bank
                     in any account in Israeli currency or in foreign currency,
                     in any manner or on any



                                       9




                     grounds, and may do so even prior to the due date of
                     payment of the amounts which are due to us from the Bank as
                     aforesaid, against which a set off will be made.

               2)    To sell any foreign currency which may stand to our credit
                     at the Bank and to apply the proceeds of the sale to the
                     discharge of any amount forming part of the unpaid balance
                     of the Loan.

               3)    To debit any account of ours with any amount that is
                     required for repayment of any amount forming part of the
                     unpaid balance of the Loan, whether our Account which will
                     be debited has a credit balance or a debit balance
                     (including if the debit balance will arise as a result of
                     such account being debited by the Bank as aforesaid),
                     without this derogating from the Bank's rights under Clause
                     6 above. However if the state of such account does not
                     allow the debiting thereof by the Bank for purposes of the
                     final repayment of any amount, the Bank will be entitled
                     not to debit the account, and if it has done so it will be
                     entitled to reverse any such debit and to relate to any
                     amount the debit of which was cancelled as an amount which
                     was not paid on account of the Loan, and in accordance
                     therewith to take any action it may deem fit in accordance
                     with this Deed of Undertaking.

               4)    Under all circumstances the Bank will be entitled to effect
                     a set off without any prior notice, but in the following
                     cases the Bank will be entitled to effect the set-off by
                     way of prior notice that shall be given to us 10 (ten) days
                     before the date of effecting the set off:

                     1)     In the case of a set-off of amounts the due date of
                            payment of which has not yet arrived.

                     2)     In the case of a set-off against a fixed deposit
                            which, had it not being for the set-off, would have
                            been extended or renewed automatically, in a manner
                            whereby rights or benefits would have inured to us
                            from it.

                     3)     Notwithstanding the contents of sub clause (4)(1)
                            above, if the postponement in effecting the set-off
                            is likely to worsen the Bank's position or to
                            prejudice any of the Bank's rights, the Bank will be
                            entitled to effect the set-off immediately. In
                            addition, if notice has been sent to us and in the
                            course of ten days an attachment, notice regarding
                            receivership of our assets should arrive or a
                            similar event should occur, the Bank will be
                            entitled to effect the set-off immediately.

       3)      We hereby declare that we are aware that in cases in which the
               Bank exercises rights of set-off as mentioned above prior to the
               due date of maturity of any deposit of ours, in whole or in part,
               there are likely to be changes to our detriment with regard to
               our rights in respect of or in connection with such deposit (such
               as: with respect to rates of interest, linkage differentials,
               currency differentials, rights to grants or loans,



                                       10




               exemption or rebate from income tax and withholding tax at source
               - if according to the conditions of such deposit rights as
               aforesaid), we agree to bear all the expenses and the payments
               which are customarily charged at that time at the Bank for
               purposes of performing such action.

       4)      Any sale as referred to in Clause 2(2) above shall be effected
               according to the customary rate at the Bank, out of amounts in
               foreign currency which will be stand to our credit at the Bank or
               which are received from the realization of any securities which
               have been given or may be given by us to the Bank.

               The term "THE CUSTOMARY RATE AT THE BANK" - means - with respect
               to any sale of foreign currency that stands to our credit - the
               lowest rate for transfers and checks, at which the Bank makes a
               practice at the relevant time of buying the relevant foreign
               currency from its customers in consideration for Israeli
               currency, less exchange commission and any tax, levy, compulsory
               payments or other such payments.

15.    The Bank is entitled at any time to debit any account of ours,
       including any accounts maintained by us jointly and severally with
       other account owners, with any amount that is due and which may be due
       from us in any manner, including in accordance with a written demand
       which has been addressed to us by the Bank as stated in Clause 31
       below, whether our Account that will be debited will have a credit
       balance or a debit balance (including if the debit balance arises from
       the debiting of such account by the Bank, as aforesaid), without this
       derogating from the Bank's rights under Clause 6 above. We agree that
       in any event in which a written demand is addressed to us by the Bank
       which is not complied with by us within the period of time specified
       in the demand, the Bank will be entitled to act in accordance with the
       first part of this Clause 15, and to debit any account of ours with
       the amount that has been demanded. In addition the Bank will be
       entitled, at any time, to apply any amount that may be received from
       us and/or for us to the credit of such account as it sees fit, and to
       transfer any amount that stands to our credit to any other account it
       deems fit.

16.    Our instructions to debit our account, as mentioned in Clause 2(1) above,
       does not derogate from the Bank's right to debit any other account of
       ours, as stated in Clauses 14 and 15 above.

17.    We confirm that the Bank's books and its accounts are accepted by us as
       being true and will be deemed to be correct and will serve as prima facie
       proof against us with regard to all the details thereof, and inter alia
       on all aspects connected with the calculation of the components of the
       Loan, the details of the bills of exchange, the guarantees and the other
       collateral security and any other matter connected with this Deed of
       Undertaking.

18.    The Bank will be entitled, in its sole discretion, to accept or to refuse
       to accept any instructions or notices that may be given to it verbally,
       by telephone or by facsimile or in any other manner which is not reliable
       and/or in clear and legible writing. In the event that the Bank agrees to
       act in accordance with our instructions which are not in accordance with
       a written instruction in the ordinary



                                       11




       course, we assume all responsibility for any error, misunderstanding
       and/or contradiction, and for any damage and/or loss and/or breach
       which may be caused by virtue of the giving of such instructions.

19.

       1)      Without derogating from the other provisions of this Deed of
               Undertaking, any waiver, extension of time, indulgence, silence,
               failure to act (hereinafter - "WAIVER") on the part of the Bank
               in respect of the non-fulfillment or the partial fulfillment or
               the incorrect fulfillment of any of our obligations under this
               Deed of Undertaking, will not be deemed to be a Waiver on the
               part of the Bank of any right, but only as limited acquiescence
               with respect to the special occasion on which it was given. Any
               Waiver that may be granted by the Bank to any party to a bill of
               exchange which the Bank may hold as security for repayment of the
               Loan, will not affect our obligations in any manner or form.

       2)      Without derogating from the other provisions of this Deed of
               Undertaking, any change in our obligations requires the obtaining
               of the Bank's prior written consent. Any other consent, whether
               verbal or by way of Waiver and failure to act and/or in any other
               way which is not in writing, will not be deemed to be consent.

20.

       1)      In each of the cases mentioned in Clause 13 above, the Bank will
               be entitled to employ all the means it deems fit in order to
               recover the Loan and to exercise all its rights pursuant to this
               Deed of Undertaking, including realization of charged property,
               in whole or in part, and to apply the proceeds for the discharge
               of the Loan, without any obligation being imposed on the Bank
               first to realize other guarantees or collateral security, if the
               Bank has such.

       2)      If the Bank decides to realize securities, bills of exchange and
               other negotiable instruments, notice of three days in advance
               with regard to the steps which the Bank intends taking will be
               deemed to be a reasonable time for purposes of Section 19(b) of
               the Pledge Law, 5727-1967, or any other legal provision which may
               come in its stead.

       3)      The Bank will be entitled, as our authorized representative, and
               for purposes of this clause we hereby irrevocably appoint the
               Bank as our authorized representative, to sell any charged
               property and any part thereof by way of auction sale or
               otherwise, itself or through others, for cash or in installments
               or otherwise, at a price and on conditions according to the
               Bank's absolute discretion and the Bank will be entitled, itself
               or through the court or through the Execution Office, to realize
               any charged property and/or any other property, inter alia, by
               the appointment of a receiver and/or a receiver and manager
               and/or a trustee and/or a special manager on behalf of the Bank,
               who, amongst his powers and authorities, will be entitled:



                                       12




               1)    To take possession of any charged and/or other property or
                     portion thereof.

               2)    To conduct our business or to participate in the conduct
                     thereof as he deems fit.

               3)    To sell or to agree to sell charged and/or other property,
                     in whole or in part, to transfer it or to agree to the
                     transfer thereof in any other way in accordance with such
                     conditions as he deems fit.

               4)    To make any other arrangement in relation to charged and/or
                     other property or any portion thereof as he deems fit.

       4)      All the income that will be received by the receiver and/or the
               receiver and manager and/or the trustee and/or the special
               manager from the charged and/or other property and any proceeds
               that may be received by the Bank and/or by the receiver or the
               receiver and manager and/or the trustee and/or the special
               manager from the sale of charged and/or other property or portion
               thereof, shall be applied according to the following order of
               preference:

               1)    For the discharge of all the expenses that have been caused
                     and will be caused in connection with recovering the Loan
                     and/or other amounts, including expenses of the receiver or
                     the receiver and manager and/or the trustee and/or the
                     special manager and his remuneration in such amount as is
                     fixed by the Bank or as will be approved by the court or
                     the Execution Office.

               2)    For the discharge of all the amounts of the Loan which are
                     not the Principal of the Loan which will be due to the Bank
                     in consequence of the conditions of linkage, the Interest,
                     damages, commissions and all other expenses which are due
                     or which will be due to the Bank in accordance with this
                     Deed of Undertaking.

               3)    For the discharge of the Principal of the Loan.

               Or in any other order of priority that may be decided by the
               Bank.

21.    If at the time of a sale of charged or other property the due date for
       payment of any amount on account of the Loan (hereinafter - "THE
       AFORESAID AMOUNTS") has not yet arrived, or if such amount will be due to
       the Bank conditionally only, the Bank will be entitled to recover out of
       the proceeds of the sale an amount which is sufficient in order to cover
       the Aforesaid Amounts, and the amount that will be recovered and which
       has not yet being applied for the discharge of the amounts mentioned in
       Clause 20(4) above, will be encumbered to the Bank as security for
       payment of the Loan and will remain in the possession of the Bank until
       the full discharge of the Loan.


                                       13




NATURE OF THE COLLATERAL SECURITY

22.    The collateral security that has been given and/or will be given to the
       Bank to secure the Loan is of a continuing nature and will remain in
       force until the Bank gives written confirmation as to the cancellation
       thereof.

23.    If other collateral security and/or guarantees for repayment of the Loan
       and/or portion thereof has been given and/or will be given to the Bank,
       all the collateral security and the guarantees will be independent of one
       another.

24.    If the Bank compromises or gives an extension of time or rebate to us
       and/or to any of our guarantors, or if the Bank alters any of our
       obligations in connection with the Loan, or releases or waives other
       collateral security and/or guarantees - these things will not alter the
       nature and essence of the collateral security that has been created to
       secure the Loan, and/or the collateral security and the undertakings that
       have given and/or will be given by us and/or by any of our guarantors
       will remain in full force.

25.    The Bank will be entitled to deposit the collateral security that has
       been delivered and/or will be delivered to secure the Loan or portion
       thereof in the hands of a bailee, who will be selected by the Bank in its
       discretion, and to replace the bailee from time to time, all at our
       expense. The Bank will further be entitled to register the aforesaid
       collateral security, in whole or in part, with any competent authority
       according to any law and/or in any public register.

RIGHT OF TRANSFER

26.    The Bank is entitled at any time, in its discretion, without requiring
       our consent, to transfer and/or to assign its rights in connection with
       the Loan and/or pursuant to this Deed of Undertaking, in whole or in
       part, including the collateral security for the payment of the Loan, in
       its entirety or in part, to another or to others, and any transferee
       and/or assignee will also be entitled to transfer or assign the aforesaid
       rights without requiring additional consent from us. The transfer and/or
       the assignment may be effected in any manner that the Bank or the
       transferee sees fit. We will perform any act that is required by the Bank
       in order that the transfer and/or the assignment as aforesaid, including
       especially a transfer and/or assignment of any of the collateral
       security, will be of full force and of binding effect.

FURNISHING OF BALANCE SHEETS AND PERIODIC FINANCIAL STATEMENTS

27.

       1)      We are aware that if we are will be obliged to draw up balance
               sheets and periodic financial statements according to law, then a
               pre-condition to receiving the Principal and/or the continued
               existence of the Loan is the furnishing of such balance sheets
               and financial statements to the Bank as required in accordance
               with directives of the supervision of the Bank and/or Bank of
               Israel and/or the provisions of any law and/or directives of any
               competent authority, and we undertake to furnish same as
               aforesaid, in the



                                       14



               format specified according to law or in accordance with accepted
               accounting principles and at the frequency that is required from
               us by the Bank from time to time.

       2)      On the Bank's demand from time to time, we will make available to
               its representative for inspection, during normal working hours at
               the Bank, any balance sheet, financial statement, book of
               account, ledger card or card index, tape, books, vouchers and
               other documents, as well as other information in connection with
               our financial and operational conditions and/or the state of our
               business.

OBLIGATIONS TO GIVE NOTICE

28.    We undertake to notify the Bank in writing in regard to any objection or
       opposition that we may have, if any, in connection with any account,
       summarized account, certificate or notice that we may receive from the
       Bank, including the receipt of information by means of "Adkan" [update
       card]. If we do not oppose or object within 21 days of the date of
       sending of the account, the summarized account, the certificate or the
       notice as mentioned above, the Bank will be entitled to regard us as
       having confirmed the correctness thereof.

29.    We undertake to notify the Bank immediately:

       1)      About any instance of any right of claim in respect of any
               collateral security in favor of the Bank for securing the Loan
               and/or in regard to any execution office proceedings and/or
               prohibitory and/or mandatory injunctions or other proceedings
               that have been taken for the attachment, preservation and/or
               realization of such collateral security.

       2)      In regard to any of the matters mentioned in Clause 13 above.

       3)      In regard to a reduction in value of any collateral security in
               favor of the Bank for securing the Loan.

       4)      About a change of address.

FUNDAMENTAL CONDITIONS

30.    The provisions of Clauses 3, 4, 5, 6, 9, 13, 14, 20, 27, 29 and 36
       will be deemed to be fundamental conditions of this Deed of
       Undertaking.

EXPENSES AND COMMISSIONS

31.    Without derogating from the Bank's rights as set forth in this Deed of
       Undertaking, all the expenses and commissions in connection with this
       Deed of Undertaking shall be paid by us to the Bank, together with
       interest at the maximum rate from the date the expenses or commissions
       come into being or from the date of demand in respect thereof (as
       described below), as the case may be, and up to the time of actual full
       payment thereof.



                                       15




       1)      The Bank will be entitled to charge any account of ours, as
               referred to in Clause 15 above, with all the expenses and
               commissions in connection with stamp duty in respect of this
               document according to the Stamp Duty on Documents Law, 5721-1961
               and according to any law, and with all the expenses and
               commissions mentioned in this document, immediately same come
               into being. If and to the extent that commissions and/or expenses
               that are mentioned in this document are fixed according to what
               is stipulated in the Bank's tariff of charges, then, for the
               avoidance of doubt, it is hereby clarified that the amount and/or
               percentage thereof, as specified in this document, apply as at
               the date of execution of this document and could change up to the
               time of actual collection thereof.

       2)      The Bank will be entitled to debit any account of ours as
               mentioned in Clause 15 above, with all the expenses and
               commissions connected with creation of the collateral security,
               if and to the extent that there are such, immediately such
               expenses and commissions come into being.

       3)      Additional expenses and commissions that are connected with the
               ongoing operation of the collateral security, including
               insurance, preservation, holding, repair of the charged property
               and assessment of value of the collateral security, as well as
               the expenses and commissions in connection with realization of
               the collateral security, will be paid by us to the Bank on its
               first written demand.

               These expenses and commissions include, inter alia (and without
               derogating from the generality of the foregoing), expenses for
               the institution of collection proceedings (and this includes the
               fees of the Bank's attorney).

       4)      Additional expenses and commissions in connection with the
               institution of collection proceedings, and including the fees of
               the Bank's attorney, will be paid by us to the Bank on the Bank's
               first written demand.

               It is clarified that if and to the extent that the amount or rate
               of the aforesaid expenses and commissions is not expressly
               stipulated in this document, then if the amount or rate of the
               aforesaid commissions and expenses is specified in the Bank's
               tariff of charges as in force from time to time, the amount or
               rate thereof will be as stated in the Bank's tariff of charges as
               in force from time to time.

       All the aforesaid expenses and commissions, plus interest at the maximum
       rate, will be secured up to the time of full actual discharge thereof, by
       the collateral security that has been given and/or may be given to the
       Bank by us and/or by others on our behalf.

COMMISSION FOR DRAFTING OF DOCUMENTS (HANDLING FEES)

32.    In respect of handling fees in relation to the Loan and the collateral
       security the Account will be debited on the date the Account is credited
       with the amount of the Principal with a commission for drafting of
       documents in a sum of NIS 10,000 (ten thousand New Shekels).



                                       16



       The amount of this commission has been fixed as follows:

           *    according to what is stipulated in the Bank's tariff of charges
       in accordance with the amount of the Principal.

           *    at a rate of ____________ % (____________ percent) of the amount
       of the Principal and not more than the maximum amount specified in the
       Bank's tariff of charges.

           *    according to what has been agreed between the Bank and
       ourselves.

COLLECTION CHARGES

33.    In respect of attending to collection of the payments on account of
       the Principal and/or the Interest, collection charges in a sum of NIS
       ________ (______________ new shekels) will be charged in respect of
       each payment. Collection of this charge will be at the time specified
       for effecting each payment as stated in this deed. The amount of this
       charge has been fixed in accordance with what is stipulated in the
       Bank's tariff of charges. This amount may vary from time to time and
       in regard thereto notice will be given by the Bank in two daily
       newspapers and on the notice board at branches of the Bank. If what is
       involved is an increase in the tariff of the charge, such notice shall
       be given at least two weeks before the date of the change, and if what
       is involved is a decrease in the tariff of the charge, the notice will
       be given not later than three business day after the change.

       If we do not pay any payment/s on account of the Principal and/or the
       Interest on the due date for payment thereof, the amount of this charge
       will be added to the amount of such payment/s on account of the Principal
       and/or the Interest which was/were not paid on due date as aforesaid, and
       the contents of Clause 6 above will apply to this charge.

COMMISSION IN RESPECT OF RECORDING OF OPERATION

34.    In respect of recording an operation in the current account or in the
       Account for Debiting which arises from the Loan, such account will be
       debited with a commission of NIS _________ (_____________ new shekels)
       per operation, with this being done at the beginning of each calendar
       month in respect of the preceding month. The amount of such commission
       has been fixed in accordance with what is stipulated in the Bank's
       tariff of charges. This amount is likely to vary from time to time and
       in connection therewith notice will be given by the Bank in two daily
       newspapers and on the notice board at branches of the Bank. If what is
       involved is an increase in the tariff of the commission, at least two
       weeks before the date of the change, and if what is involved is a
       reduction in the tariff of the commission, not later than three
       business days after the change, in accordance with what is stipulated
       in the Bank's tariff of charges from time to time.



                                       17





ADDITIONAL EXPENSES

35.    _________________________________

LIABILITY OF THE BORROWER

36.    If this Deed of Undertaking is signed by two or more persons, liability
       of the signatories will be joint and several for the fulfillment of all
       the obligations contained herein. Where the owners of the Account
       mentioned in Clause 2(1) above are two or more persons, the liability of
       each of the parties to the Account will be joint and several for the
       fulfillment of all the obligations pursuant to this Deed of Undertaking.

       However, if a signatory or party to such Account was legally incompetent
       or was relieved in any way from his liability for the fulfillment of any
       obligation under this Deed of Undertaking, the liability of the remaining
       signatories to this Deed of Undertaking, or the liability of the
       remaining Account owners mentioned in Clause 2(1) above, will not be
       affected.

INTERPRETATION

37.    In this Deed of Undertaking -

       1)      The singular shall include the plural, and vice versa;

       2)      The masculine gender shall include the feminine, and vice versa;

       3)      "THE BANK" means - Bank Hapoalim B.M. and each and every one of
               its branches that exists on the date of this Deed of Undertaking
               and/or which may be opened at any place in the future, its
               transferees and assignees and the successors in title of the
               Bank;

       4)      "BILLS OF EXCHANGE" means - promissory notes, bills of exchange,
               checks, undertakings, guarantees, securities, drafts, bills of
               lading, deeds of deposit and any other negotiable documents;

       5)      "BUSINESS DAY" means - a day on which branches of the Bank in
               Israel, or most of the branches, are open to the general public
               for business;

       6)      "PRIME" - means - the basic rate of debit interest imposed by the
               Bank on revolving debit accounts, as will be fixed from time to
               time by the Bank;

       7)      "CHANGE OF STRUCTURE" - means - in respect of the customer and in
               respect of each of the customer's guarantors - merger or split
               (within the meaning of these terms in Part E2 of the Income Tax
               Ordinance [New Version], or in the Companies Law, 5759-1999, or
               any legal provision which may replace either of them) and a
               transfer of assets in consideration for shares, either pursuant
               to the aforesaid Part E2 or otherwise;



                                       18



       8)      In every case the Bank is entitled to perform any act in
               accordance with this Deed of Undertaking it shall not be obliged
               to perform such act;

       9)      In every case the Bank is entitled to debit any account of ours,
               it is entitled to do so whether the account that will be debited
               has a debit balance or a credit balance, and including a
               situation where the debit balance arises from the debiting of
               such account by the Bank as aforesaid;

       10)     The headings to clauses are intended to serve as place-finders
               only and no use shall be made thereof in interpreting this Deed
               of Undertaking.

NOTICES AND WARNING NOTICES

38.    Any notice that may be sent to us by the Bank via the post in a
       registered or ordinary letter, according to the address mentioned above
       or according to the address of our registered office or according to any
       other address of which we give the Bank written notice, will be deemed to
       be a lawful notice that was received by us within 72 hours from the time
       the letter containing the notice was sent. A declaration in writing from
       the Bank shall serve as proof of the time of sending of the notice. Any
       notice that may be given to us in any other way shall be deemed to have
       been received by us at the time it was given or at the time of
       publication thereof.

SUBSTANTIVE LAW AND VENUE OF JURISDICTION

39.

       1)      This Deed of Undertaking shall be interpreted pursuant to and in
               accordance with the laws of the State of Israel.

       2)      The sole venue of jurisdiction for purposes of this Deed of
               Undertaking is hereby fixed as follows: the competent court
               nearest to the branch of the Bank mentioned at the head of this
               Deed of Undertaking or the competent court in one of the
               following cities: Jerusalem, Tel Aviv - Jaffa, Haifa, Beersheva
               or Nazareth.

SPECIAL CONDITIONS













                                       19




40.    Notwithstanding anything contained in this Deed of Undertaking, this
       document is an appendix to an application for the opening of an account
       dated __________ and forms an integral part thereof.



              IN WITNESS WHEREOF THE PARTIES HAVE HEREUNTO SIGNED:


   Ituran Location and Control Ltd.                    May 20, 2004
          ------------------                     ----------------------
         Signature of customer                       Date of signature






       ATTORNEY'S CERTIFICATION

I the undersigned, Guy Aharonov, Adv., being the attorney of Ituran Location and
Control Ltd., hereby certify that the aforesaid company signed the above
document through Mr. Issy Shiratzky I.D. _____________ and Eli Kimchi
I.D.__________________, with this being in accordance with a resolution of the
company duly passed and in accordance with the documents of incorporation of the
company, and that the above signatures bind the company in all respects.

       May 19, 2004
   --------------------              Adv. Guy Aharonov, Legal Adviser
            Date                     Ituran Location and Control Ltd.

                                   -------------------------------------
                                                 Advocate
                                        Signature and rubber stamp







(8,925)





                                       20




                                                                   EXHIBIT 10.38


                                   AGREEMENT

Made and entered into in Sao Paulo on March 16th 2000

Between: T4U HOLDING B.V.
     A Dutch Company registered in the Netherlands which address is at
     Schouwburgplein 30-34 CL Rotterdam P.O. Box 21153, 3001 AD Rotterdam, The
     Netherlands Herein represented by its attorney-in-fact, Mr. Hagai Porat,
     Israeli Citizen, Passport No. 9020777, presently in Brazil (hereinafter -
     "T4U")

                                                              OF THE FIRST PART;

And: TELERAN LOCALIZACAO E CONTROLE LTDA. A Brazilian company registered in
     Brazil Which address is at R. Cenno Sbrighi, 170-4 A Edificio I CEP Agua
     Branca-Sao-Paulo - SP - Brazil, CNPJ #02-762-221/0001-22 hereinafter -
     "TELERAN")

                                                              OF THE SECOND PART

WHEREAS: Teleran declares that it owns a radio frequency license, granted to it
by the competent authorities in Brazil (hereinafter - the "LICENSE"), pursuant
to which it holds a license to operate a system, in Brazil, that enables to
provide security, protection and location services with regard to vehicles,
mobile and immobile objects, persons and animals, and with regard to a transfer
of messages, based on a "time of arrival" technology (hereinafter - the
"SYSTEM"); and

A copy of the License is attached hereto, marked APPENDIX A;

WHEREAS: Teleran declares that the System is operated through sites (hereinafter
- the "SITES"), which include wireless telecommunications equipment, such as:
mast, equipment room, air-conditioning, system and electricity system (AC)
(hereinafter - the "INFRASTRUCTURE SYSTEM"), as well as other equipment designed
to operate the System (hereinafter - the "DEDICATED EQUIPMENT"); and

WHEREAS: Teleran declares that prior to the signature hereof, it has constructed
and set up 23 Sites (hereinafter - the "EXISTING SITES"), on rooftops, in the
Metropolitan of Sao Palo, Brazil, and that it intends to commence operating the
System as of March 30, 2000; and

WHEREAS: Teleran declares that for the purpose of expanding the System it
requires additional Sites, in addition to the 23 Existing Sites that have
already been established by it (hereinafter - the "ADDITIONAL SITES"); and

WHEREAS: Teleran is interested in having T4U provide maintenance and management
services in connection with the Existing Sites as set forth herein below; and

WHEREAS: Teleran is interested in having T4U construct and set up the Additional
Sites, inter alia, according to Teleran's needs, in getting T4U to grant Teleran
the right to use the Additional Sites, and in having T4U provide Teleran with
maintenance and management services in connection with the Additional Sites as
well; all - as set forth in this Agreement below:



                                       2


NOW THEREFORE IT IS DECLARED, STIPULATED AND AGREED BETWEEN THE PARTIES AS
FOLLOWS:

PREAMBLE; INTERPRETATION; DEFINITIONS

1. (a) The preamble and Appendixes hereto constitute an integral part hereof.

(b) The headings of the clauses are recorded for the sake of convenience only,
and they shall not serve for the purpose of interpreting this Agreement.

(c) All the definitions and expressions that appear in this Agreement shall have
the same meaning when such definitions and expressions appear in any of the
Appendixes hereof.

(d) The following terms shall have the meanings set forth underneath them:

(I) TYPE A SITE

An Additional Site (as defined below), to be built by T4U, in accordance with
the provisions of clause 5 below, and to be located on rooftops, which normally
requires a transportable or non- transportable equipment room.

A site of this type will contain at least the following: facilities required for
hanging antenna systems, grounding, air-conditioning, break control for
non-dedicated systems, fire extinguishing system, connection to electricity grid
and installation of meter, connection to telephone line or substitute.

(II) TYPE B SITE

An additional Site (as defined below), to be built by T4U in accordance with the
provisions of clause 5 below, and to be located on the ground.

The B Site will include at least the following: a mast up to 20 m. high, a 2X2.5
transportable or non-transportable equipment room, site foundation and
development works, fencing, gate, lighting, access path, grounding,
air-conditioning, fire-extinguishing systems, connection of Electricity Co.
meter, connection of telephone line.

(III) TYPE C SITE:

An Additional Site (as defined below), to be built by T4U, in accordance with
the provisions of clause 5 below, and located on the ground.

The C Site will include at least the following: a mast up to 40 m. high, as well
as all other items contained in the Type B site.

(IV) ADDITIONAL SITE

A Site, to be built by T4U, in accordance with the provisions of clause 5 below,
which is either Type A Site or Type B Site or Type C Site, in which T4U will
grant Teleran a license to use, in accordance with provisions of clause 7 below.



                                       3


(V) EXISTING SITE

Any one of the 23 Sites that were built by Teleran, prior to the signature of
this Agreement, in the Metropolitan of Sao Paulo, Brazil, on roof-tops.

THE PARTIES' DECLARATIONS AND CONFIRMATIONS

2. Teleran and T4U declare, each with respect to itself, as follows:

(a) Their entering into this Agreement and fulfilling their undertakings
hereunder do not constitute a breach of any agreement to which they are a party
or of any license or any order or judgment whatsoever or any undertaking given
to any third party whatsoever applicable to them, or the Memorandum and Articles
of Incorporation of either of them.

(b) No claims or legal proceedings or demands are pending against them and/or
their managers and/or executives in connection with their operations up to the
date of signature hereof, which could be detrimental to their ability to fulfill
their undertakings hereunder, and they are not aware of any intention to file or
initiate any claims or legal proceedings whatsoever against them as aforesaid.

(c) As at the date of signature hereof, no decision or order has been received
for liquidation and/or receivership of their assets, no warning or notice has
been received of the intention to apply for such an order and they have no
knowledge of any reason whatsoever existing at the time of signature hereof that
might constitute a cause therefor.

(d) All approvals required with respect to entering into this Agreement have
been granted by the competent organs of each of Teleran and T4U, so that this
Agreement shall take effect as of the date of signature hereof.

REPRESENTATIONS

3. Teleran declares and undertakes as follows:

(a) Teleran is the owner of all of the rental and possession rights with respect
to each of the Existing Sites.

A detailed list of all Existing Sites is attached hereto, marked as APPENDIX B.

(b) (1) Teleran has entered into a final and binding rental agreements with
respect to each of the Existing Sites (hereinafter - the "RENTAL AGREEMENTS").

Copies of all of the Rental Agreements are attached hereto, marked as APPENDIX
"C".

(2) As at the date of signature hereof, Teleran has been and is fulfilling all
of the undertakings imposed on it under each of the Rental Agreements.

(3) None of the owners of any of the Existing Sites and/or the owners of any
rights and interests whatsoever in any of the Existing Sites (hereinafter - the
"OWNERS") has any complaint and/or


                                       4


demand against Teleran in connection with the Rental Agreements pursuant to the
terms set forth therein and/or any matter connected therewith, and Teleran has
no knowledge of any cause whatsoever with respect to which any of the Owners
might raise such complaint in the future and/or due to which any of the Rental
Agreements may be cancelled or terminated.

(4) All the terms and conditions with regard to the leasing of the Existing
Sites, are as detailed in the Rental Agreements attached hereto (Appendix C) and
there are no other terms, conditions, understandings or agreements, of any kind,
between Teleran and the Owners.

(c) Attached to this Agreement, marked as APPENDIX "D", are the Site files for
every one of the Existing Sites, each containing the following particulars:

(1) Infrastructure equipment existing on the site in question, as at the date of
signature hereof;

(2) Dedicated Equipment existing on the site in question, as at the date of
signature hereof;

(3) Infrastructure existing on the site in question (including electricity,
communications, etc.).

(4) Access and entry procedures to the site in question, as at the date of
signature hereof;

(5) All types of payment arrangements and actual payments effected in the course
of the past six months in connection with the Site in question, including rental
payments, payments to the authorities, such as the Electricity Co., etc.

(6) All the sketches, drawings, measurements and other documents, with regard to
the relevant Site, including, especially, "as made" plans.

(d) Teleran undertakes that in the event that any of the particulars mentioned
in subclause (c) above is not in the possession of Teleran at the date of
signature thereof, such particulars will be provided to T4U, subsequent to the
signature of this Agreement, and in any event, by no later than the Delivery
Date, as defined in APPENDIX "E".

(e) Teleran undertakes to assist T4U as will be required, to enable T4U to issue
and execute, at its expense, all the permits, approvals and permissions that are
required under any applicable law and/or regulation, in connection with any of
the Existing Sites.

Teleran declares that it is not aware of any obstacle or prevention, of any
kind, that may prevent or delay the issuance or execution of any of the said
approvals, permits and permissions in connection with any of the Existing Sites.

ACQUISITION OF ALL RIGHTS IN THE EXISTING SITES

4. (a) Immediately subsequent to the signature hereof, Teleran shall transfer to
T4U all of the rights and interests, of all kinds and types, that it may hold in
respect of any Existing Site, under any law and/or agreement, both present and
future, in each of the Existing Sites, including, but not only, rights of
rental, easements, covenants, holding and possession, usage and all proprietary
rights in all of the Infrastructure Equipment that exists in the relevant Site,
as set forth in APPENDIX "D" etc. (hereinafter - the "RIGHTS"), so that after
the transfer of the Rights to T4U,


                                       5


T4U will be able, immediately and without delay, deferral or impediment to enter
each of the Existing Sites, take possession therein, fulfill its undertakings
and exercise all of its Rights pursuant to this Agreement and the Appendices
hereto.

The procedure of transferring a Site from Teleran to T4U shall be as provided in
detail in APPENDIX E hereto.

The Dedicated Equipment located in any Existing Site, as set forth in the list
to be made up by the parties, as provided for in Appendix D, and that equipment
only, shall remain under Teleran's ownership.

(b) Teleran undertakes to execute, at its expense, any operation and take any
step, that may be required in order for the transfer of Rights in each of the
Existing Sites to T4U, as set forth in sub-Clause 4(a) above, to be executed
immediately after signature hereof, without delay and/or deferral, as provided
in Appendix E hereto.

In order to implement the provisions of this Agreement, expediently and
efficiently, and in order to reduce, to the extent possible, the costs involved
with the transfer of Rights from Teleran to T4U, it is agreed that the Rights
will be transferred in two stages, as follows -

(i) Firstly, Teleran will transfer to T4U all of the rights in the
Infrastructure Equipment (in accordance with the list detailed in Appendix D)
that exist in each one of the Existing Sites (Hereinafter - THE RIGHTS IN THE
Equipment), and

(ii) Simultaneously with the transfer of the Rights in the Equipment and
thereafter, Teleran will conmmence transferring to T4U all of Teleran's
contractual rights in connection with any of the Existing Sites and all of its
rights under any applicable law, in each of the Existing Sites (hereinafter -
THE LEASING RIGHTS).

(c) The transfer of the Rights in each one of the Existing Sites will be made in
accordance with the following provisions -

(1) On the Delivery Date of any Existing Site, Teleran will transfer to T4U all
of the Rights in the Equipment that exists in each one of the Existing Sites.
Further, Teleran will execute any operation, take any necessary action and sign
any document in order to procure and execute the said transfer.

(2) Immediately subsequent to the signature of this Agreement, Teleran will take
all necessary actions, including the conducting of negotiations with the Owners,
in order to transfer to T4U all of the Leasing Rights.

If, and to the extent that it may be required, to procure the transfer of the
Leasing Rights, T4U will assist Teleran with the conducting of the negotiations
with the Owners, but, in any event T4U will not be responsible or liable for the
transfer of the Leasing Rights and, further, said assistance will not derogate
from any of Teleran's obligations and responsibility to transfer the Leasing
Rights, as aforesaid.



                                       6


It is expressly clarified that, notwithstanding the above, T4U is entitled, at
its sole discretion, to decide, at any time and for any reason, that it is not
interested in having the Leasing Rights being transferred to it, in any of the
Existing Sites, in which case T4U will continue to hold the Rights in the
Equipment in the relevant Existing Site.

(3) In the event that T4U will decide, as aforesaid, that it is not interested
in having the Leasing Rights being transferred to it, in connection with any of
the Existing Site, as aforesaid and/or in the event that T4U will be interested
in having the Leasing Rights transferred to it, yet an obstacle or delay will
prevent such transfer, for any reason, the following provisions will apply to
the Relevant Existing Site, until the entire of the Leasing Rights are
transferred to T4U -

(i) Teleran will remain the sole lessee, in accordance with the relevant Rental
Agreement, for all intents and purposes.

(ii) Teleran will take all actions that will be required from it and shall
obtain all of the required approvals from the Owner in order to ensure full
compliance with the provisions of the relevant Rental Agreement and in order to
enable T4U to fulfill all of its obligations hereunder and exercise all of its
rights under this Agreement and any of its Appendixes.

It is clarified that in the event that T4U will be prevented from fulfilling any
of its obligations hereunder and/or from exercising all of its rights hereunder,
because the Leasing Rights were not transferred to it, for any reason, T4U will
not be liable or responsible for any non-fulfillment of this Agreement.

(iii) Notwithstanding the above, in the event that, for any reason whatsoever,
including due to the Owner's refusal, T4U will be prevented from entering into
any of the Sites and/or from being able to exercise any of its obligations or
rights under this Agreement and such prevention is not removed by not later than
30 days from the date on which the Rights in the Equipment in such Site were
transferred to T4U, T4U will be entitled, at its sole discretion, to cancel this
Agreement, in whole or in part, and any applicable Appendix hereof, with regard
to the relevant Site, including the relevant Usage Rights Agreement, and Teleran
undertakes that in such case it shall pay back to T4U all the amounts that were
paid by T4U to Teleran in respect of such relevant Site.




                                       7


(4) T4U will pay Teleran the rental fees that are set forth in the Rental
Agreement that applies to the relevant Existing Site, and Teleran undertakes to
pay the Owner such rental fees, timely, in accordance with the provisions of the
relevant Rental Agreement in the manner that will ensure full compliance with
the provisions of the relevant Rental Agreement.

T4U is entitled to decide, as its sole discretion, that in lieu of paying the
rental fees to Teleran, as set forth above, such rental fees will be set off any
payment to which T4U is entitled to from Teleran, and Teleran undertakes that in
such case it will pay the Owners directly, from its own resources.

(d) In any event whereby, after Teleran has executed all the operations required
of it as aforesaid, there still remains any impediment to the transfer of the
Rights in the Equipment in any of the Existing Sites to T4U as aforesaid, the
date of transfer of Rights in the Equipment in the Site in question shall be
deferred until the relevant impediment has been removed.

It is clarified that in any event whereby, at the end of a period of forty days
commencing on the date of signature hereof, Teleran shall be prevented, for any
reason whatsoever, from transferring to T4U Rights in the Equipment in five or
more of the Existing Sites, T4U shall have the right, but shall not be
obligated, to cancel all or part of this Agreement, after giving Teleran prior
notice 30 days before the designated cancellation, if Teleran does not succeed
in removing such impediment within the said period.

(e) It is clarified that T4U shall not provide any services whatsoever and shall
bear no responsibility whatsoever with respect to any Site whatsoever, except
after the occurrence of all of the following:

(1) All impediments to the transfer of the Rights in the Equipment in that Site
have been removed;

(2) All Rights in the Equipment with respect to the Site in question have
actually been transferred to T4U, in accordance with the site transfer
procedure, as detailed in Appendix E;

(3) Teleran has delivered a written notice to the Owners, with a copy to T4U, in
which it states that it grants T4U an irrevocable right to enter into the
relevant Site, for the purpose of performing all of the obligations imposed on
T4U under this Agreement and its Appendixes and for the exercise of T4U's rights
hereunder (hereinafter - TELERAN'S NOTICE), and the Owner did not object to the
content of Teleran's Notice.

(f) Without derogation from T4U's right to cancel this Agreement, as provided
for in clause (d) above, in any event whereby Teleran shall be interested in
receiving maintenance and management services from T4U, as set forth in Clause 7
above and in Appendix H attached hereto, with respect to an Existing Site, the
Rights in the Equipment in which have not been transferred to T4U due to an
impediment, as aforesaid, T4U shall provide to Teleran maintenance and
management services with respect to the said Existing Site, provided Teleran has
proved, to T4U's satisfaction, that there is nothing whatsoever to prevent T4U
from providing such maintenance and management services on the Relevant Site,
and the provisions hereof shall apply accordingly.



                                       8


(g) T4U shall pay Teleran an amount of US$ 87,000 (hereinafter - the "PRICE OF
THE SITE") for each Existing Site with respect to which Teleran shall actually
transfer all of the Rights in the Equipment to T4U, in accordance with the
provisions of Appendix E and provided all of the following conditions precedent
have been fulfilled:

(1) Teleran's Notice was actually provided to and received by the Owners and
T4U, in such fashion as to enable T4U to fulfill all of its obligations and
exercise all its rights hereunder;

(2) All approvals required for the purpose of transferring the Rights in the
Equipment in the Site in question to T4U have been given, if and to the extent
such approvals are required, under any law and/or agreement, and the Rights in
the Equipment in such Site have actually been transferred to T4U;

The Price of the Site, with respect to each Existing Site, shall be paid by no
later than three working days after the date of actual transfer of Rights in the
Equipment in the Site in question, provided that all the above mentioned
conditions precedent have occurred, and provided that Teleran has rectified, to
T4U's full satisfaction, all failures, defects and faults set forth in the
examination report prepared by T4U with respect to the said Site, and T4U has
approved same in writing.

SETTING UP ADDITIONAL SITES AND EXPANDING THE NETWORK

5. Teleran declares that it estimates that during the years 2000 and 2001 it
shall require a vacant space in at least 60 (sixty) Additional Sites (in
addition to the Existing Sites) and it undertakes that, in any event, it shall
order from T4U, usage rights, maintenance and management services in at least 45
Additional Sites; Therefore, in reliance on Teleran's said declaration, it has
been agreed as follows:

(a) T4U shall set up Additional Sites, as aforesaid, during each of the years
2000 and 2001, inter alia, according to Teleran's needs, as shall be presented
to T4U and as provided in a technical specification to be prepared by Teleran
with respect to each of the types of site: Type A, Type B and Type C.

The said technical specification is as set forth in APPENDIX F hereto.

Teleran will define, with respect to each Additional Site, in accordance with
the possibilities to be presented by T4U (in accordance with the provisions of
clause 4 of Appendix G hereof) the type of such Site, inter alia, for the
purpose of determining the extent of payments Teleran shall have to make to T4U,
the extent of the maintenance and management services and the provisions that
shall apply in accordance with the payments schedule attached hereto.

The Additional Sites to be set up by T4U as aforesaid, shall be the exclusive
property of T4U, who shall have rights, of every kind and type, with respect to
such Additional Sites.

(b) Teleran undertakes that, in the course of each of the years 2000 and 2001,
it shall request and order from T4U usage rights, maintenance and management
services in the Additional Sites, whereby, in any event, the number of
Additional Sites in which Teleran shall request and order such usage rights,
maintenance and management services, during the year 2000, shall be no less than
twenty five, and during the year 2001, no less


                                       9


than twenty, and in total, at least 45 Additional Sites by the end of the year
2001.

The provisions of this clause (b) are material and fundamental.

(c) The manner in which the Additional Sites shall be set up, the timetables and
all other terms connected with the set up are as set forth in APPENDIX G,
attached hereto.

(d) In the event that Teleran shall request from T4U to perform works, as part
of setting up the Additional Sites, in addition to the works contained in the
technical specification that was prepared by Teleran, as set forth in clause
5(a), Teleran shall grant a right of first refusal to T4U in connection with the
said works.

In the event that Teleran will wish to hire the execution of works, as
aforesaid, Teleran shall apply first to T4U, in writing, and offer it to execute
the said works (hereinafter- TELERAN'S OFFER). Teleran's Offer will include the
offered price, the terms of payment, the timetable and other relevant
conditions.

T4U shall notify Teleran, within 21 working days from receipt of the Teleran's
Offer, whether it accepts Teleran's Offer or rejects it; In the event that T4U
notifies Teleran that it accepts Teleran's Offer, T4U shall execute the said
works in accordance with Teleran's Offer or in accordance with other terms
agreed upon between the parties.

In the event that T4U notifies Teleran that it rejects Telerans Offer, Teleran
will be entitled to hire a third party to execute the said works, provided that
the following two conditions are met: (i) the terms granted by Teleran to the
third party are not more favorable from those specified in Teleran's Offer; (ii)
the third party has commenced the works by not later that 30 days from the date
on which T4U notified that it rejects the Teleran's Offer.

6. Notwithstanding the aforesaid in Clause 5 above, it is clarified that
whenever Teleran shall wish to expand the network of sites in which it receives
usage rights, T4U shall have the right, at its exclusive discretion, taking
account, inter alia, of Teleran's needs, to give Teleran usage rights in sites
that are not Existing Sites which have been transferred to T4U as set forth in
Clause 4 above, and are not Additional Sites set up as provided in sub-Clause
5(a) above (hereinafter - the "OTHER SITES").

Whenever T4U shall grant Teleran usage rights in Other Sites as defined above,
Teleran shall pay T4U for maintenance and management services and usage rights
with respect to the relevant Other Site in accordance with the type of Site that
was defined by Teleran pursuant to the conditions of clause 5(a) above, and at
the prices mentioned in sub-Clause 7(e) below. Whenever the relevant Other Site
shall be neither Type A, B nor C, as defined above, Teleran shall pay T4U the
said payments according to the type closest to the type of the relevant site.

Teleran shall have the right to object to T4U's granting it usage rights in any
Other Site, provided that it notifies T4U in writing and in advance that it is
not interested in receiving usage rights in such Other Site, and provided
further that in the said notice Teleran gives details and the grounds for its
objection, and it is obligatory for the said grounds to be proven and technical,


                                       10


showing clearly that, in the event T4U grants Teleran usage rights in the Site,
this will actually be detrimental to the standard of service provided by Teleran
to its customers.

MAINTENANCE AND MANAGEMENT SERVICES; GRANTING USAGE RIGHT

(a) As of the date of signature of a usage rights agreement with respect to any
Existing Site, as detailed in clause (d) below, T4U shall provide maintenance
and management services with respect to Existing Sites as provided in the
Maintenance Agreement attached hereto, marked Appendix H (hereinafter - the
"MAINTENANCE AGREEMENT").

(b) Upon completion of any Additional Site by T4U, as provided in Appendix G,
and a signature of a Usage Rights Agreement with regard to the relevant
Additional Site, T4U shall provide Teleran with and Teleran undertakes to
receive, maintenance and management services with respect to each Additional
Site so completed, as provided in the Maintenance Agreement (Appendix H).

(c) The maintenance and management services provided by T4U with respect to
Existing Sites and/or with respect to Additional Sites shall be so provided only
with respect to the Infrastructure Equipment as defined in Appendix D.

It is hereby clarified that maintenance and management with respect to the
Dedicated Equipment shall be performed by Teleran and/or someone on its behalf,
and not by T4U; it is further clarified that T4U shall not be responsible with
respect to any damage and/or breakdown whatsoever that may be caused to the
Dedicated Equipment as defined in Appendix D, unless such damage was caused
directly as a result of negligence on the part of T4U.

Should Teleran also be interested in having T4U provide it with maintenance and
management services with respect to the Dedicated Equipment, or any other
equipment which is not infrastructure equipment, the parties shall negotiate on
that issue, and, subject to agreement between them concerning the price and the
terms of providing the said maintenance and management services, T4U shall also
provide to Teleran maintenance and management services with respect to the
Dedicated Equipment.

(d) T4U shall enter into usage rights agreements with Teleran with respect to
each site in which all the Rights in the Equipment (as defined in Clause 4
above) have been transferred to T4U (provided T4U received actual possession of
the said site), and with respect to each Additional Site paid for by T4U, as
provided in Appendix G (hereinafter - the "USAGE RIGHTS AGREEMENTS").

The date of signature of the Usage Rights Agreement with regard to Existing
Sites will be as set forth in APPENDIX "E" and the date of signature of Usage
Rights Agreements with regard to Additional Sites will be as set forth in
APPENDIX "G".

The form of the Usage Rights Agreements is attached hereto, marked APPENDIX I.

The Usage Rights Agreements shall include provisions under which Teleran shall
have usage rights in each of the said sites; the said usage right shall be
non-exclusive, and its extent shall be limited solely to whatever is required,
in accordance with the provisions of the technical


                                       11


specification, prepared by Teleran, pursuant to the provisions of APPENDIX F,
for the purpose of operating the System and performing the maintenance
operations with respect to the Dedicated Equipment (hereinafter - the "USAGE
RIGHT").

The Usage Rights Agreements shall not confer on Teleran any rights of possession
and/or entry into any of the sites, save for the right to visit the site for the
purpose of performing maintenance operations on the Dedicated Equipment. Teleran
undertakes that the visits in any site and the performance of the maintenance
activities in such site shall be made in such manner that shall not cause any
disturbance to T4U, the Other Users, or any other third party.

Prior to any visit in any site, Teleran shall notify T4U's headquarter that it
intends to operate a visit and at the end of any visit, Teleran shall notify the
said headquarter that the visit has ended.

Teleran shall record each and every visit in a visits book of T4U that will be
located in every Site and shall specify the time of the visit, the purpose
thereof, the time of ending the visit and any other events or defects that have
occurred or discovered during the visit.

The Usage Right granted to Teleran as aforesaid shall be inferior and
subordinate to the rights of T4U in the Sites in question, and it shall be
revocable by T4U in respect to the relevant Site, the event of Teleran's
breaching any fundamental provision hereof and/or of the Usage Rights
Agreements.

T4U shall be entitled to cancel and terminate any of the Usage Rights Agreement
that apply to the Site with respect to which Teleran has committed a breach, as
aforesaid.

In the event that a fundamental breach was committed in connection to 10 Sites
or more, T4U shall be entitled to cancel and terminate the entire Usage Rights
Agreement as well as this Agreement.

(e) Teleran undertakes to pay T4U, as of the date of signature of the Usage
Rights Agreement (with regard to Existing Sites) and as of the earlier of the
date of signature of Usage Rights Agreement or the date on which the Dedicated
Equipment is installed at the Relevant Site (with regard to Additional Sites),
for the Usage respect to each of the sites, a monthly sum, to be paid on the
first day of each month, for the coming month, as follows:

(1) For a Type A site, Teleran shall pay T4U a monthly amount composed of US$130
and R$920.

(2) For a Type B site, Teleran shall pay T4U a monthly amount composed of US$160
and R$800.

(3) For a Type C site, Teleran shall pay T4U a monthly amount composed of US$280
and R$800.

(4) For a site with respect to which T4U acquired the rights from Teleran, as
set forth in Clause 4 above, a monthly sum composed of US$920 and R$920.



                                       12


In the event of any Site being delivered during a calendar month, Teleran shall
pay T4U the pro rata portion for that month, on a daily basis, on the basis of
thirty days a month.

Payments denominated in Brazilian reais shall be annually monetarily corrected
by the IGPM-FGV Index.

The prices specified in this sub-Clause (e) above shall be converted by its
equivalent in reais by the sale exchange rate published by the Central Bank of
Brazil, and in its absence by the Banco Safra S.A. All payments mentioned in
this clause (e) do not include, inter alia, taxes such as: ICMS, ISS, PIS,
Cofins, which taxes shall be borne solely by Teleran.

It is further clarified that the prices mentioned in clause (e) above, do not
include payment for raw materials and various spare parts. T4U shall provide
Teleran with the aforesaid raw materials and spare parts, if and to the extent
required, against payment by Teleran, which shall be based on "cost +15%", and
after Teleran has signed a purchase order issued by T4U. The purchase order
shall specify the cost of the raw materials and spare parts and the direct cost
of the work. In addition to each cost, as set forth above, Teleran will pay
additional amount of 15% of the relevant cost and any applicable tax, imposed in
connection therewith, including PIS, ISS, ICMS, Cofins The direct cost of one
hour of work is 40 R$.

Shelter and mast materials are not included in the "cost+" mechanism above.

The shelter and the mast will be kept in a good condition.

T4U will procure that the invoices it issues, against payments made by Teleran,
as aforesaid, will be issued from offices that are located either at Alfavil
and/or Saokaitano, Brazil, and/or from other locations at similar conditions.

(f) All the provisions of clause 7 above are material and fundamental.

GRANTING USAGE RIGHTS TO OTHER USERS

8. (a) In accordance with the provisions of Appendix "J' hereof, T4U shall have
the right at any time and without limitation, at its exclusive discretion, to
grant usage rights in each of the sites in which Teleran has Usage Rights, to
another user and/or other users (hereinafter - the "OTHER USER") for the purpose
of any use whatsoever, as shall be agreed between T4U and the Other User
(hereinafter - the "USAGE RIGHT TO OTHERS"), provided this does not actually
interfere with the operation of the System on the site in question.

The extent of the Usage Right to Others, the manner in which it is granted, the
format thereof, the price to be charged therefor, and any other matter connected
thereto, shall be determined by T4U, at its exclusive discretion.

Should Teleran believe that granting Usage Rights in the site in question to
Other User might interfere with the operation of the System, Teleran shall
notify T4U thereof in a written notice containing technical, proven grounds
showing clearly that granting the Usage Right to Others in the site in question
will actually interfere with the operation of the System, and in such case T4U
shall ensure that there shall be no such interference.



                                       13


The procedure for granting Usage Rights to Others shall be as set forth in
APPENDIX J attached hereto.

(b) In the case of T4U entering into a final and binding agreement with any
Other User, pursuant to which Usage Rights shall be granted in any site to such
Other User (hereinafter - the "AGREEMENT WITH OTHER USER"), then throughout the
period in which the Agreement with the Other User shall be in effect and so long
as the Other User fulfills all of its undertakings under the Agreement with the
Other User (provided however that, in any event, the said period shall not
exceed the period of the Usage Agreement applicable to the relevant Site), T4U
shall grant Teleran a discount with respect to maintenance and management
services which T4U provides to Teleran on the site in question, as set forth in
Clause 5 above, as follows: In the event the Other User is a mobile telephone
operator, the discount shall be at the rate of up to 10% of the price which
Teleran is obligated to pay T4U for such site, and in the event the Other User
is not a mobile telephone operator, as aforesaid, the discount shall be at the
rate of up to 5% of the price which Teleran is obligated to pay T4U for such
site. It is hereby expressly clarified that the said discount shall apply only
in connection with the site regarding which T4U entered into the Agreement with
the Other User.

Furthermore, it is clarified that Teleran shall be entitled to the said discount
only in connection with Existing Sites (i.e. sites with respect to which the
Rights have been transferred from Teleran to T4U, as set forth in Clause 4
above), and in connection with Additional Sites, in which T4U shall set up and
grant Usage Rights to Teleran, as set forth in sub-Clause 5(b) above.

T4U shall furnish to Teleran, at its request, confirmation by T4U's auditors
with respect to the date on which the Other User commenced remitting payments to
T4U with respect to the Site in which the Usage Right was granted, as aforesaid.

In the event that Teleran is in delay of any of the payments it is liable to pay
under this Agreement or any of its Appendixes, it shall pay T4U a penalty of 2%
on the unpaid amount, plus 1% moratorium interest per each month.

EXPANSION OF SITES

9. T4U shall have the right, without limitation and at its exclusive discretion,
to perform expansion works in all the sites, subject to receipt of consent from
the owner of the site in question, provided this shall not constitute actual
interference with the operation of the System.

In the event that the Leasing Rights in connection with the Site in question,
were not transferred to T4U, for any reason, Teleran shall assist T4U in order
to enable T4U to perform the said works, including conducting negotiations and
contacts with the Owners, etc.

UNIFICATION OF SITES; CLOSING DOWN A SITE

10. In any event whereby T4U shall wish to unify and/or to close down the
operation of any site in order to perform maintenance works, service, up-keep,
repairs, or any other operation that may be required (hereinafter - the "CLOSED
SITE"), it shall have the right to perform all of the said operations (i.e. - to
close down and/or to cancel the Closed Site), and the following provisions shall
apply:



                                       14


(a) T4U shall ensure that substitute infrastructure shall be made available, at
T4U's specification, which shall provide the functions that had been provided by
the Closed Site, to the extent this is required, in place of the Closed Site
(hereinafter - the "SUBSTITUTE SITE"), to Teleran's satisfaction.

(b) Teleran shall provide, at its expense, all the Dedicated Equipment required
in order to operate the Substitute Site.

(c) T4U shall pay Teleran the direct expenses involved in dismantling,
transferring and installing the Dedicated Equipment in the Substitute Site and
in connection with geodetic measurements, if and to the extent that such
measurements are required, at the price of direct cost +20%.

(d) Should T4U have any Rights in a site which is nearby any Closed Site
(hereinafter - the "NEARBY SITE"), it shall have the right, at its discretion,
to grant Teleran Usage Rights in the Nearby Site in place of the Usage Rights
granted in the Closed Site.

Teleran shall have the right to object to being granted Usage Rights in the
Nearby Site, only if it proves in writing, based on technical grounds, that
being granted the Usage Rights in the Nearby Site will actually interfere with
the operation of the System.

THE TERM OF THE AGREEMENT

11. (a) This Agreement and the Appendices attached hereto shall be in effect
with respect to each and every Site for a period of twelve (12) years, which
shall commence, with respect to each relevant Site, on the following dates:

(1) With respect to an Existing Site - on the date on which T4U actually
received possession of the Site in question to set forth in Appendix "E" and in
the event that the Leasing Rights with regard to the relevant Site were not
transferred to T4U, on the date on which all the Rights in the Equipment in the
relevant Site were actually transferred to T4U;

(2) With respect to an Additional Site - on the date on which an Agreement was
signed granting Usage Rights in that particular site in accordance with the
provisions of Appendix "G" and "I";

(b) Teleran has the option to extend the term of the Agreement with respect to
each site by four additional years, provided it notifies T4U thereof in writing
at least six months before the end of the relevant period concerning the site in
question.

(c) If any of the Rental Agreements is not renewed by the Owners of the Relevant
Site, for any reason whatsoever and T4U is obligated to rent a new space,
Teleran shall be responsible and incur all expenses and costs involved with the
moving to a new place.

CANCELLATION OF THE AGREEMENT

12. Either party shall have the right to cancel this contract with respect to
one or more of the sites, as set forth in detail in APPENDIX K.

GOVERNING LAW; JURISDICTION



                                       15


13. (a) The law governing this Agreement shall be law prevailing in Brazil.

(b) The jurisdiction with respect to this Agreement shall be vested exclusively
in the courts of Sao-Paulo, Brazil.

ARBITRATION

14. (a) Any disagreements concerning this Agreement, or the construction or
performance hereof, shall be submitted for the decision of an agreed arbitrator
(hereinafter - the "ARBITRATOR").

(b) The Arbitrator shall be appointed by the parties, by consent.

(c) The Arbitrator shall be bound by the provisions of substantive law, but not
by procedural law or the laws of evidence, and he shall be obligated to give the
grounds for his decision.

(d) The parties' signature on this Agreement shall be considered as if they had
signed an arbitration agreement to submit to the decision of the Arbitrator all
disagreements or disputes, of any type or kind, which may arise between them in
connection herewith.

ENTIRE AGREEMENT

15. This Agreement exhausts everything agreed between the parties, and cancels
any previous presentation, agreement, arrangement or undertaking between the
parties with respect to any of the matters mentioned herein.

MISCELLANEOUS

16. (a) Any amendment hereof or waiver of any of the terms hereof requires a
written document signed by both parties.

(b) After signature hereof, this Agreement shall bind the parties and shall take
effect vis-a-vis both of them. However, it is clarified that neither all nor
part of the rights and duties deriving herefrom are assignable by either party
without the consent of the other party.

Notwithstanding the aforesaid, both T4U and Teleran shall have the right to
transfer any of their undertakings and/or rights hereunder to any corporation
controlling them, directly or indirectly, and/or to any corporation under their
control, directly or indirectly; T4U shall have the right to encumber and/or
assign and/or mortgage any of its rights and undertakings hereunder to any
financial institution whatsoever.

(c) Teleran undertakes that until the end of the year 2001 it shall not
contract, whether directly or indirectly, with any third party in order to
obtain any of the services provided by T4U hereunder, and it shall obtain these
services solely from T4U and/or from anyone to whom T4U shall assign its
undertakings pursuant hereto.

Teleran undertakes that in the event that after the year 2001, it will be
interested in hiring any of the services rendered by T4U under this agreement,
Teleran shall grant a right of first refusal to


                                       16


T4U with regard to the rendering of the said services in accordance with the
mechanism set forth in clause 5(d) above which will apply, mutatis mutandis.

(d) It is clarified that should either party refrain from demanding performance
by the other party of any of its duties hereunder, this shall not in any way
affect the rights of the former to demand enforcement of performance at a later
stage. Furthermore, it is clarified that any waiver by either party with respect
to the other party's breach of any of the provisions hereof shall be
independent, and shall not be considered or construed as a permanent or future
waiver with respect to any breach of such provision or provisions hereof that
had been committed in the past, or as a waiver of any of the rights of the
waiving party hereunder.

(e) The parties' addresses for the purposes hereof are as set forth in the
preamble, unless either party notifies in writing of a change in its address;
any notice sent by one party to the other shall be considered to have been
delivered within 72 hours from the date it is deposited in the post office, and
at the time of delivery - if delivered by hand or transmitted by fax.

(f) Each of the parties undertakes to perform all operations, as well as sign
all documents and to appear before any authority to the extent required for the
purpose of the efficient, reliable and correct execution of the contract
contemplated hereby, and for the complete fulfillment of all the provisions
hereof.

IN WITNESS WHEREOF THE PARTIES HAVE HEREBY SIGNED:




 /s/ Illegible                            /s/ Hagai Porat
--------------------------------------    --------------------------------------
TELERAN LOCALIZACAO E CONTROLE LTDA.      T4U HOLDING B.V.


Witness

1. /s/ Illegible

2. /s/ Illegible



                                       17



                      LETTER OF GUARANTEE AND UNDERTAKING

We the undersigned, Ituran Itur & Shlita Ltd. hereby undertake to be the
guarantee of all the undertakings and representations, of the company whose name
is specified below, with respect to its undertakings pursuant to the Agreement
dated March 15th 2000 including all Appendices thereto, signed between T4U
Holding B.V. and Teleran Localizacao e Controle Ltda.

This guarantee of ours shall remain in effect even with respect to any amendment
or addition that may be inserted in the agreement with the consent of the
parties thereto, even if such amendment or addition were not brought to our
knowledge.

This guarantee of ours shall remain in effect even after the agreement expires
for any reason, so long as the party to the agreement for whom we are guarantors
owes anything whatsoever to the other party to the agreement.





NAME OF GUARANTOR CORPORATION               NAME OF GUARANTEED CORPORATION
-----------------------------               ------------------------------

ITURAN ITUR & SHLITA LTD.                   TELERAN LOCALIZACAO E CONTROLE LTDA.

In witness whereof we have signed this day:
                                            ------------------------------------




--------------------------------
ITURAN ITUR & SHLITA LTD.



                                       18



                      LETTER OF GUARANTEE AND UNDERTAKING

We the undersigned, GILTEK TELECOMMUNICATIONS LTD., hereby guarantee all the
undertakings and representations of the Company whose name is specified below,
with respect to its undertakings pursuant to the Agreement dated March 15th 2000
including all Appendices thereto, signed between T4U Holding B.V. and Teleran
Localizacao e Controle Ltda.

This guarantee of ours shall remain in effect even with respect to any amendment
or addition that may be inserted in the agreement with the consent of the
parties thereto, even if such amendment or addition were not brought to our
knowledge.

This guarantee of ours shall remain in effect even after the agreement expires
for any reason, so long as the party to the agreement for whom we are guarantors
owes anything whatsoever to the other party to the agreement.



NAME OF GUARANTOR CORPORATION                  NAME OF GUARANTEED CORPORATION
-----------------------------                  ------------------------------

GILTEK TELECOMMUNICATIONS LTD.                 T4U HOLDING B.V.

In witness whereof we have signed this day: /s/ Hagai Porat
                                            ------------------------------------



-------------------------------------
GILTEK TELECOMMUNICATIONS LTD.



                                       19



                      LETTER OF GUARANTEE AND UNDERTAKING

We the undersigned, GILTEK TELECOMMUNICATIONS LTD., hereby guarantee all the
undertakings and representations of the Company whose name is specified below,
with respect to its undertakings pursuant to the Agreement dated March 15th 2000
including all Appendices thereto, signed between T4U Holding B.V. and Teleran
Localizacao e Controle Ltda.

This guarantee of ours shall remain in effect even with respect to any amendment
or addition that may be inserted in the agreement with the consent of the
parties thereto, even if such amendment or addition were not brought to our
knowledge.

This guarantee of ours shall remain in effect even after the agreement expires
for any reason, so long as the party to the agreement for whom we are guarantors
owes anything whatsoever to the other party to the agreement.





NAME OF GUARANTOR CORPORATION                NAME OF GUARANTEED CORPORATION
-----------------------------                ------------------------------

GILTEK TELECOMMUNICATIONS LTD.               T4U HOLDING B.V.

In witness whereof we have signed this day:
                                            ------------------------------------




/S/ Hagai Porat
---------------------------------------
GILTEK TELECOMMUNICATIONS LTD.




                                       20





LIST OF APPENDICES
------------------

APPENDIX A  Radio Frequency License

APPENDIX B  List of Sites

APPENDIX C  Copies of the Rental Agreements

APPENDIX D  Site Files

APPENDIX E  Procedure of Transferring a Site from Teleran to T4U

APPENDIX F  Technical Specification of Teleran

APPENDIX G  Provisions Concerning Setting Up Sites

APPENDIX H  Maintenance Agreement

APPENDIX I  Usage Rights Agreements

APPENDIX J  Procedure for Granting Usage Rights to Other Users

APPENDIX K  Provisions Concerning Cancellation of Contract





                                       21



                                   APPENDIX E

                   (as per sub-Clause 4(a) of the Agreement)

PROCEDURE FOR TRANSFERRING A SITE FROM TELERAN TO T4U

PREPARATION FOR AN EXISTING DELIVERY OF A SITE

1. Teleran undertakes that immediately after signing the Agreement, it shall
commence transferring the Rights in the Equipment to T4U with respect to the
Existing Sites, and that within no later than thirty days after signing the
Agreement, it shall complete the transfer of all Rights concerning all the
Existing Sites, in accordance with the procedures set forth herein.

2. (a) As soon as Teleran has completed all operations required for the purpose
of effecting the transfer of Rights in the Equipment in a Site to T4U, Teleran
shall send T4U a written notice, at least ten working days prior to the
designated date of transfer, concerning the transfer of the Rights in the
Equipment in the Site in question (hereinafter - the "NOTICE OF DELIVERY").

(b) The Notice of Delivery shall contain, inter alia, all the following
particulars:

(1) Precise address and location of the site in question;

(2) Dates on which T4U can visit the site in question and conduct inspections
and reviews, before the date of actual delivery of the site;

(3) Names of contacts with whom T4U can coordinate the precise date to visit the
site, for the purpose of conducting inspections;

(4) Procedures for entering the site in question and any other information that
shall be required by T4U for visiting the site and conducting inspections
therein;

(5) Precise date on which Teleran wishes to effect the transfer of Rights in the
Equipment in the Site in question;

(b) Teleran shall deliver a Notice of Delivery as aforesaid with respect to a
Site only after it shall have in its possession all the approvals required for
the purpose of transferring all the Rights in the Equipment in the Site in
question to T4U and/or after Teleran shall notify T4U in writing that it is
aware, in absolute certainty, and that it undertakes that all the said approvals
and permits, if required, shall be in its possession before the date of actual
delivery of the site in question, and further, after Teleran has completed all
of the details to be included in the Site files, in accordance with sub clause
4(a) (Appendix D) of the Agreement.

(c) In any event, a site shall be delivered to T4U only after Teleran has proved
to T4U, to the latter's full satisfaction, that all the approvals required for
the purpose of transferring all the Rights in the Equipment the Site in question
have been given, and that there is no impediment, of any type or kind, to the
aforesaid transfer of the Rights in the Equipment, and after T4U has completed
all inspections in the site in question Teleran has performed all the
rectifications required by T4U, and T4U has confirmed that the Rights in the
Equipment in the Site in question are ready and capable for delivery.



                                       22


3. After receiving the Notice of Delivery, T4U shall visit the site in question
and shall conduct the inspection and review, inter alia, with respect to the
condition of the Site, the contents thereof, as well as the Infrastructure
Equipment.

T4U shall prepare an inspection report for each Site indicating the functional
abilities of each Site, including the possibilities of granting Usage Rights in
the site to Other Users, in addition to Teleran (subject to the approval of the
Owners, if and to the extent that such approval will be necessary, in accordance
with the terms of the applicable Rental Agreement).

Furthermore, T4U shall prepare an additional report that shall specify the
defects, discovered in the Site in question (hereinafter - THE INSPECTION
REPORT).

It is clarified that the maintenance and management services to be provided to
Teleran by T4U, as well as Teleran's responsibility, shall apply only with
respect to the Infrastructure Equipment expressly mentioned in the list included
in Appendix "D" of the Agreement.

Teleran alone shall be responsible for performing maintenance with respect to
the Dedicated Equipment.

Moreover, T4U and Teleran shall prepare a list setting forth the Dedicated
Equipment and the infrastructure equipment located in the site in question.

4. After T4U has visited the site in question and prepared the Inspection
Report, it shall be transferred to Teleran.

Teleran shall rectify any defect, set forth in the Inspection Report, within no
more than 14 days after receipt of the Inspection Report.

Immediately after Teleran has completed the rectifications as aforesaid, Teleran
shall notify T4U that they have been implemented, and T4U shall conduct an
additional inspection in the Site.

The final receipt by T4U in the Equipment in each Existing Site shall be deemed
approval by T4U that the defects in such Equipment were rectified (subject to
latent defects).

5. Should T4U decide that the site is fit for delivery, as aforesaid, the
parties shall determine, by consent, a date for actual delivery of the site in
question (hereinafter - the "DELIVERY DATE").

In any event, the Delivery Date shall only after Teleran has transferred to T4U
all approvals and permits required in order to transfer the Rights in the
Equipment the site in question to T4U.

In the event that, up to the Delivery Date, Teleran shall not have all the said
approvals prior to the determined Delivery Date, the Delivery Date shall be
postponed until after all the said approvals have been submitted, and T4U has
been given proper opportunity to examine all the said documents. It is clarified
that in any event, the Delivery Date shall take place by no later than the dates
set forth in clause 1 above.


                                       23


THE DELIVERY

6. At the time of delivering the site, the parties shall perform the following
actions:

(a) Representatives on behalf of T4U and Teleran shall conduct an inspection of
the site and shall prepare a delivery protocol, in the text attached to this
document, marked "L".

In the delivery protocol the parties shall list the contents of the site as it
is on the Delivery Date and they shall verify that all Infrastructure Equipment
and Dedicated Equipment contained in the Sites files (Appendix D) above is
located in the site.

(b) T4U shall confirm that all defects, discovered in any site, as set forth in
Clause 4 above, have been rectified by Teleran.

(c) Teleran shall deliver to T4U the keys to the Site in question, as well as a
Teleran's Notice.

It is clarified that there may be Existing Sites with respect to which the key
will have to remain at a specific place from which each of Teleran and T4U will
be entitled to take such keys.

In cases where T4U will be entitled to hold the keys of a specific Existing
Site, T4U will deliver to Teleran a copy of such key.

(d) T4U and Teleran will enter into a Usage Right Agreement, in accordance with
the form of Agreement enclosed as Appendix "J".




                                       24


                                   APPENDIX G

(In accordance with the provisions of clause 5(c) of the Agreement)

PROVISIONS WITH REGARD TO THE CONSTRUCTION OF ADDITIONAL SITES

1. In the event that Teleran will wish that T4U shall grant it usage rights in
Additional Sites, as defined in the Agreement, Teleran shall notify T4U, in
writing, what is the number of the Additional Sites in which it wishes to
receive usage rights (hereinafter - TELERAN'S NOTICE).

Teleran's Notice shall include all of the following details -

(a) The exact number of the Additional Sites in which Teleran wishes to be
granted usage rights.

(b) The location of the Additional Sites in which Teleran wishes to be granted
usage rights, as aforesaid; For that purpose Teleran shall specify its request
with regard to the location of the relevant Additional Sites, by indicating a
squared area of 1x1 km, in which the said requested Additional Sites will be
located.

(c) The type of the Additional Sites in which Teleran wishes to be granted usage
rights.

2. Teleran undertakes that the Teleran's Notices shall be delivered to T4U in
accordance with the following time-table:

(a) In the event that the number of the Additional Sites in which Teleran asks
to receive within one month is not greater than 10 Additional Sites, Teleran
shall deliver the Telelran's Notice to T4U at least 60 days prior to the
designated date of the grant of usage rights in the said Additional Sites.

(b) In the event that the number of the Additional Sites in which Teleran asks
to receive within one month is more than 10, but less than 20 Additional Sites,
Teleran shall deliver the Telelran's Notice to T4U at least 120 days prior to
the designated date of the grant of usage rights in the said Additional Sites.

(c) In the event that the number of the Additional Sites in which Teleran asks
to receive within one month is more than 20 Additional Sites, Teleran shall
deliver the Telelran's Notice to T4U at least 150 days prior to the designated
date of the grant of usage rights in the said Additional Sites.

3. Teleran undertakes that at least 60 days prior to the designated date of the
grant of usage rights in any Additional Site, Teleran shall deliver to T4U a
detailed map which includes detailed coordinations (hereinafter - THE MAP); the
Map shall specify the location of the Additional Site in question, in which
Teleran wishes to be granted usage rights.

The area to be specified in the Map, in which the relevant Additional Site is to
be located shall be a squared area of 1 X 1 km (hereinafter - THE AREA OF THE
ADDITIONAL SITE).



                                       25


4. Within 14 working days from receipt of the Map by T4U, in accordance with the
provision of clause 3 above, T4U shall notify Teleran what is the alternative or
alternatives, as the case may be, for the exact location of an Additional Site
within the Area of the Additional Site.

5. Within 5 working days from the date on which T4U has notified Teleran what is
the alternative (or alternatives) for the exact location of the Additional Site
within the relevant Area of the Additional Site, in accordance with the
provisions of clause 4 above, Teleran shall notify T4U that it agrees to the
exact location of the said Additional Site, in accordance with the content of
the said notice of T4U.

In the event that Teleran shall be of the opinion that the exact location of the
relevant Additional Site is improper, and provided that the said opinion is
clearly based on the ground of technical reasons, and provided further that
Teleran clearly proves that the level of service to Teleran's clients is
actually going to be damaged, Teleran shall notify T4U, within the said 5 days
period, that such is the case and shall detail the said technical reasons; In
such case T4U shall make best efforts to identify another location for the
relevant Additional Site, within the Area of the Additional Site.

6. Within 60 working days from receipt of the Map by T4U, in accordance with the
provisions of clause 3 above, T4U shall invite representatives of Teleran to the
relevant Additional Site, in order to perform a preliminary examination of the
Additional Site.

At the end of the said examination, the parties shall prepare a report with
regard to the said examination, in which they shall detail defects, if any, that
were discovered in the said Additional Site (hereinafter - THE EXAMINATION
REPORT). Within 20 working days from receipt of the Examination Report by T4U,
T4U shall correct the said defects.

7. During the performance of the Additional Site construction works, Teleran
shall be allowed to visit the said Site in subject to advanced coordination with
T4U, and to render its comments concerning the said performance.

8. T4U shall inform Teleran, of the exact date by which the construction of the
relevant Additional Site shall be completed, within 5 working days from the date
of receipt of the Examination Report (hereinafter - THE COMPLETION DATE).

On the Completion Date the parties shall execute a sight delivery protocol and
final acceptance declaration.

In the event that on the Completion Date further defects resulting from T4U's
faults, shall be revealed, T4U shall amend the said defects within 10 working
days.

9. On the Completion Date the parties shall execute a Usage Rights Agreement,
whether all of the defects have been amended or not.




                                       26



                                   APPENDIX H

                   (as per sub-Clause 7(a) of the Agreement)

MANAGEMENT OF SITES AND MAINTENANCE OF INFRASTRUCTURE EQUIPMENT

1. DEFINITIONS

1.1 All expressions, terms and definitions contained and appearing in this
Appendix shall have the same meanings given to them in the Agreement of which
this Appendix constitutes an integral part (hereinafter - the "AGREEMENT").

1.2 In this Appendix, the "SERVICE" means - provision of management and
maintenance services, as set forth hereinafter in this Appendix.

1.3 In this Appendix, "MANAGEMENT" means - site management services, including
liaison with the owners and the relevant authorities, payment to the owners of
rental fee applicable to the site in question, payment of electricity and
telephone bills, house committee charges and Municipality rates payable on the
site in question.

PERMITS

1.4 T4U shall issue, at its expense, the permits required under the law in
connection with the Existing Sites actually delivered to it from Teleran, and
shall do everything in its power in order to prevent a situation in which a site
shall be closed or its operation discontinued due to failure to issue a permit.

Teleran shall make it best efforts and assist T4U to issue any required permit
and/or approval in connection with any of the Sites.

It is expressly clarified that T4U shall not be liable for failure to receive a
permit in any case whereby the permit in question was not granted due to any act
or omission made by Teleran or any other third party.

T4U shall not be liable for any loss, damage, expense or loss, that arise or may
be arisen due to a failure to obtain any permit, where the failure is not
directly and clearly attributed to a negligence of T4U.

It is clarified that, in any event, T4U will not be liable to any damage, loss,
cost or expense, of any kind, that may be caused, for any reason, in connection
with any of the Additional Sites or the Other Sites.

T4U shall be liable only with respect to direct damage actually caused to
Teleran, if any, due to failure to obtain a permit for an Existing Site,
provided the said damage was caused as a consequence of a direct and clear
negligence on the part of T4U.

2. GENERAL TERMS



                                       27


2.1 The Service shall apply solely to the Infrastructure Equipment supplied by
T4U as defined in the Agreement and, in connection with Existing Sites - solely
with respect to the Infrastructure Equipment present at the Existing Sites, as
contained in the list to be drawn up between the parties, as set forth in
Appendix D above.

2.2 The Service shall be provided during the term of the Agreement, with respect
to each site, as set forth in Clause 11 of the Agreement.

2.3 The Service shall be provided solely with respect to the Infrastructure
Equipment contained in the list mentioned in Appendix D.

2.4 T4U shall issue, at its expense, insurance policies to be issued against all
risks, as well as third party insurance, with respect to provision of the
maintenance and management Services on the sites actually delivered to it.

3. SERVICE PERIOD

3.1 The term of the Service period with respect to each site shall be as
mentioned in Clause 11 of the Agreement.

4. REMUNERATION

4.1 In the course of the period in which the Service is provided for the
Infrastructure Equipment, Teleran shall pay T4U, for each site, with respect to
the management and maintenance Service, as provided in sub-Clause 7(e) of the
Agreement.

The prices specified in this sub-Clause 4 shall be paid in Brazilian currency
(R$), and they do not include taxes such as ICMS, ISS, PIS, Cofins.

5. PAYMENT TERMS

5.1 The invoice for the Services pursuant to this Appendix shall be sent to
Teleran for advance payment at the beginning of each month for the next month.

5.2 Payment terms shall be current month + 30 days.

5.3 All payments for maintenance and management Services shall be effected in
Brazilian currency (R$).

6. FORCE MAJEURE

It is agreed between the parties that whenever any impediment is created for the
performance of the works by T4U as a consequence of the occurrence of an event
over which T4U has no control, including but not only, the events set forth
below, the timetables specified in this Appendix, and any other agreed
timetable, shall be postponed respectively by the length of the period in which
such events shall prevent the possibility of T4U's performing the works.



                                       28


(a) Administrative and/or judgmental orders and/or injunctions under any law
which prevent performance of the Service.

(b) Natural disasters, including: floods, inundations, fires, explosion,
earthquake, harsh climatic conditions, and the like.

(c) Strikes by any entities who are independent of or not connected with T4U
(including sub-contractors), provided that T4U has made all efforts to find an
alternative entity.

(d) Breach of undertakings by suppliers from whom T4U or someone on its behalf
orders equipment, without respect to any action or inaction of T4U.

(e) Shortage of manpower or any raw materials, provided that T4U has made
efforts to find alternative manpower or raw materials.

(f) Wars, terror attacks, riots, acts of violence, etc.

7. SCOPE OF THE SERVICE

7.1 The maintenance Services, which shall be provided solely with respect to the
Infrastructure Equipment as defined in the file of the site in question
(Appendix D to the Agreement), shall include the following:

7.2  Lighting maintenance
AC system maintenance
Fence maintenance (if required)
Yard maintenance (if required)
Pathways maintenance (if required)
Coordination and examination of Rental Fee planning (only in the case of
granting Usage Rights to Other Users as defined in the Agreement).
Maintenance of lightning protection system.
Preparation of planning and authorities approvals files, and obtaining such
approvals.
Maintenance of air-conditioning system.
Handling and paying rental, electricity, etc.
Maintenance of alarm, fire detection and extinguishing systems (in future).
Maintenance of dedicated switch/equipment room (if required).
Maintenance of antennas hanging mast/tower/system, including RF cables and
antennas, (if required).
Teleran shall have the right to receive from T4U information with respect to the
above.

7.2 The maintenance shall be performed in accordance with the technical
specification attached to this Appendix, marked "__".

7.3 Provision of the maintenance service is conditioned upon availability of
free access for the T4U technician to the various sites for the purpose of
preventive and breakage maintenance.

7.4 It is further clarified that the prices mentioned in clause 7(e) of the
agreement, do not include payment for raw materials and various spare parts. T4U
shall provide Teleran with the aforesaid


                                       29


raw materials and spare parts, if and to the extent required, against payment by
Teleran, which shall be based on "cost +15%", and after Teleran has signed a
purchase order issued by T4U. The purchase order shall specify the cost of the
raw materials and spare parts and the direct cost of the work. In addition to
each cost, as set forth above, Teleran will pay additional amount of 15% of the
relevant cost and any applicable tax, imposed in connection therewith, including
PIS, ISS, ICMS, Cofins. The direct cost of one hour of work is 40 R$.

8. TIMETABLES

(a) Preventive maintenance shall be performed in accordance with the technical
specification, once every two months, or as shall be agreed between the parties.

(b) Breakages shall be dealt with within 8 working hours from receipt of the
call, in accordance with the technical specification.

(c) On weekends and religious holidays, breakages shall be dealt with within 24
hours.

(d) Breakages shall be dealt with up to three at a time.

9. Teleran shall compensate and indemnify T4U, in any case whereby damage is
caused to the Infrastructure Equipment on any of the Sites, in the case in which
the said damage was caused, by Teleran and/or anyone on its behalf and/or by any
of its employees.

T4U shall indemnify Teleran in any case whereby actual damage is caused to the
Dedicated Equipment located in any of the sites the Rights in which have been
transferred to T4U, in the event such damage was caused as a direct result of by
T4U and/or anyone on its behalf.




                                       30



APPENDIX I
(Pursuant to Clause 7(d) of the Agreement)

USAGE RIGHT AGREEMENT Made and entered into in Sao Paulo on _________________

Between: T4U HOLDING B.V.
A Dutch Company registered in the
Netherlands which address is at
Schouwburgplein 30-34 CL Rotterdam
P.O. Box 21153, 3001 AD
Rotterdam, The Netherlands
(hereinafter - "T4U")

OF THE FIRST PART;

And: TELERAN LOCALIZACAO E CONTROLE LTDA.
A Brazilian company registered in Brazil
Which address is at R. Cenno Sbrighi,
170-4 A Edificio I CEP Agua Branca-
Sao-Paulo - SP -- Brazil,
CNPJ #02-762-221/0001-22
Hereinafter - "TELERAN")

OF THE SECOND PART

WHEREAS: T4U holds certain rights in a site located in ________________
(hereinafter - "THE SITE"); and

WHEREAS: Teleran wishes to be granted certain usage rights with regard to an
infrastructure equipment that is located in the Site.

NOW THEREFORE IT IS DECLARED, STIPULATED AND AGREED BETWEEN THE PARTIES AS
FOLLOWS:

PREAMBLE; INTERPRETATION; DEFINITIONS

1. (a) The preamble and Appendixes hereto constitute an integral part hereof.

(d) The headings of the clauses are recorded for the sake of convenience only,
and they shall not serve for the purpose of interpreting this Agreement.

(e) All the definitions and expressions that appear in this appendix shall have
the same meaning given to such definitions and expressions in the Agreement to
which this appendix is attached.

PURPOSE OF THIS AGREEMENT

2. The purpose of this agreement is the grant of usage rights by T4U to Teleran
under which Teleran will be entitled to use an infrastructure equipment for
telecommunications which includes wireless telecommunications equipment, such
as: mast, equipment room,


                                       31


air-conditioning system and electricity system (AC) (hereinafter - the
"INFRASTRUCTURE SYSTEM"), that exist in the Site for the purpose of operation,
by Teleran of security, protection and location services with regard to
vehicles, mobile and immobile objects, persons and animals, and with regard to a
transfer of messages, based on a "time of arrival" technology (hereinafter - the
"SYSTEM"), during the period of this agreement (hereinafter- the "USAGE RIGHT").

TERM OF THE AGREEMENT

3. Subject to the provisions of the Rental Agreement the applies to the relevant
Site and provided that there is no prevention or obstacle, of any kind, under
any applicable agreement or law, the Usage Right is given for a period of 12
years, commencing on the date hereof (hereinafter- the "TERM").

Teleran has the option (hereinafter- the "OPTION") to extend the Term of the
Agreement by four additional years, provided it notifies T4U in writing at least
six months before the end of the Term that it wishes to extend the Term.

During the term of the Option, the provisions of this agreement shall apply,
mutatis mutandis.

TERMINATION

4. (a) Each of the parties is entitled to terminate this agreement, prior to the
end of the Term, in accordance with the provisions of Appendix K of the
agreement to which this Appendix is attached.

(b) In addition T4U is entitled to terminate this agreement, at any time,
without having to pay to Teleran any compensation whatsoever, upon the
occurrence of any of the following events -

(1) Any prevention of any kind arises which prevent from T4U go grant Usage
Right to Teleran.

(2) Teleran has committed a fundamental breach of this agreement.

USAGE RIGHTS FEES

5. Teleran will pay T4U fees as set forth in clause 7(e) of the agreement.

TELERAN OBLIGATIONS

6. (a) Teleran will be entitled to enter into the Site, in prior co-ordination
with T4U only for the purpose of performing maintenance to the Dedicated
Equipment that exists in the Site.

(b) Teleran undertakes to perform the maintenance with due care and not to cause
any nuisance of any kind to T4U and/or any Other Users.

(c) Teleran declares that it has examined the Site and found it fully suitable
and feet for its purposes.

(d) Teleran undertakes to correct at its expects any damage that may be caused
to any item in the Site due to its act omission.



                                       32


INSURANCE

7. Teleran undertakes to issue policy insurance to cover any damage that may be
caused to the Dedicated Equipment and/or Teleran and/or any third party.

PERMITS

8. (a) Teleran undertakes to co-operate with T4U and make its best efforts to
assist T4U to obtain any required permit, approval or license with regard to the
Site and any equipment that exist therein.

(b) If, for any reason, T4U will not be able to issue any of the required
permits, license or approval, T4U will be entitled to terminate this agreement.
In such case T4U will identify a substitute site for Teleran.

In the event of said termination, Teleran will compensate T4U by paying it the
amount that was paid by T4U to Teleran in respect of the Site and the equipment
that exist therein.

GOVERNING LAW; JURISDICTION

9.(a) The law governing this Agreement shall be law prevailing in Brazil.

(b) The jurisdiction with respect to this Agreement shall be vested exclusively
in the courts of Sao-Paulo, Brazil.

MISCELLANEOUS

10. (a) Any amendment hereof or waiver of any of the terms hereof requires a
written document signed by both parties.

(b) After signature hereof, this Agreement shall bind the parties and shall take
effect vis-a-vis both of them. However, it is clarified that neither all nor
part of the rights and duties deriving herefrom are assignable by either party
without the consent of the other party.

Notwithstanding the aforesaid, both T4U and Teleran shall have the right to
transfer any of their undertakings and/or rights hereunder to any corporation
controlling them, directly or indirectly, and/or to any corporation under their
control, directly or indirectly; T4U shall have the right to encumber and/or
assign and/or mortgage any of its rights and undertakings hereunder to any
financial institution whatsoever.

(c) It is clarified that should either party refrain from demanding performance
by the other party of any of its duties hereunder, this shall not in any way
affect the rights of the former to demand enforcement of performance at a later
stage. Furthermore, it is clarified that any waiver by either party with respect
to the other party's breach of any of the provisions hereof shall be
independent, and shall not be considered or construed as a permanent or future
waiver with respect to any breach of such provision or provisions hereof that
had been committed in the past, or as a waiver of any of the rights of the
waiving party hereunder.



                                       33


(d) The parties' addresses for the purposes hereof are as set forth in the
preamble, unless either party notifies in writing of a change in its address;
any notice sent by one party to the other shall be considered to have been
delivered within 72 hours from the date it is deposited in the post office, and
at the time of delivery - if delivered by hand or transmitted by fax.

(e) Each of the parties undertakes to perform all operations, as well as sign
all documents and to appear before any authority to the extent required for the
purpose of the efficient, reliable and correct execution of the contract
contemplated hereby, and for the complete fulfillment of all the provisions
hereof.

IN WITNESS WHEREOF THE PARTIES HAVE HEREBY SIGNED:


 /s/ Illegible                            /s/ Hagai Porat
--------------------------------------    --------------------------------------
TELERAN LOCALIZACAO E CONTROLE LTDA.      T4U HOLDING B.V.


Witness

1. /s/ Illegible

2. /s/ Illegible



                                       34



                                   APPENDIX J

                    (Pursuant to Clause 8 of the Agreement)

PROCEDURE FOR GRANTING USAGE RIGHTS TO OTHER USERS

1. Teleran undertakes that, in any case whereby any third party shall apply to
Teleran requesting permission to use any site, whether an Existing Site or an
Additional Site, as defined in the above Agreement (hereinafter - the "OTHER
USER"), it shall transfer the application to T4U, and in parallel shall refer
the Other user directly to T4U.

2. (a) T4U shall notify Teleran of its intention to grant Usage Rights to the
Other Users in the said sites, giving details of the sites in which they intend
to grant Usage Rights.

T4U shall detail in its notice, the user of the site and its working frequencies
and broadcasting methods, to the extent there is a broadcast, the capacity, the
directions and types of the antennas, spectralic clearance, type of broadcasting
equipment, location on the mast and the existence together with Other Users.

Details shall also be given, in general, of the area required for the Other User
in the site.

Teleran undertakes to reply to T4U in writing, within 5 working days from the
date on which T4U notified it of the aforesaid Other User, whether Teleran
itself requires the area designated for the Other User and/or whether it
estimates that there is an RFI or other problem with respect to granting Usage
Rights to the Other User.

In the event that Teleran does not respond to T4U's aforesaid notice, for any
reason, this shall be considered as full and final consent on the part of
Teleran to T4U granting Usage Rights to the Other User with respect to the Site
in question and shall notify Teleran of it.

In the event that Teleran shall believe that there is an RFI problem or other,
if any, in connection with granting Usage Rights to the Other User, it shall
detail in writing the reasons and grounds therefor.

(b) T4U shall submit to Teleran the results of the theoretical analysis of the
RFI effect with respect to granting Usage Rights in the site to the Other user,
and shall clarify whether, in its opinion, there is no RFI problem in granting
Usage Rights to the Other User, and in the case of an anticipated problem - the
method in which it can be solved.

Teleran shall cooperate, if required, in order to solve the problem, if any. In
the event that Teleran shall incur direct expenses with respect to examining the
RFI problem, T4U shall refund such expenses to Teleran against a tax invoice,
all in reasonable amounts and at market prices. The said cooperation shall be
within a reasonable time frame, while taking all steps required in order not to
cause any damage to T4U's business.

To the extent it becomes necessary, a substitute site shall be provided,
pursuant to Clause 10 of the Agreement, in order to close down partially and/or
temporarily, for the purpose of granting Usage Rights to the Other User and/or
performing the works involved therein.



                                       35


(c) T4U shall provide RFI inspection, as required, after granting usage Rights
to the Other User.

(d) T4U shall notify Teleran of having completed locating the Other user in any
of the sites, and shall update it with respect to maintenance responsibility and
liaison personnel.

4. T4U shall use its best efforts, in order to avoid directly compromising
Teleran's service to its customers.




                                       36



                                   APPENDIX K

                 PROVISIONS CONCERNING TERMINATION OF CONTRACT

1. In the event either of the parties shall wish to terminate the contract with
respect to any site, the parties shall act as provided in the above Agreement
and in this Appendix.

TERMINATION OF THE CONTRACT BY TELERAN

2. (a) Subject to the provisions of the above Agreement, and of this Appendix
below, Teleran shall have the right to terminate the contract with respect to
any of the sites at the end of each three calendar years period, the beginning
of the first period being the date on which Teleran was granted the Usage Right
in the site in question.

(b) Teleran undertakes that in the event it shall wish to terminate the contract
with respect to any site, as aforesaid, it shall pay T4U all the relevant
amounts, as set forth in the attached payment schedules, applicable to the
relevant site type.

(c) It is expressly clarified that a condition for Teleran's right to terminate
the contract is that the following conditions have been met:

(1) Teleran has notified T4U of its wish to terminate the contract with respect
to the site in question, at least six months before the date of the designated
termination.

(2) Teleran has paid T4U, on time, all of its financial obligations pursuant to
the above agreement, before the designated termination date.

(d) In addition to the payments that Teleran is liable to pay under clause 2(b)
above, Teleran undertakes to pay T4U the remainder of the principal amount, as
set forth in the payment schedules attached hereto, plus an amount of US$ 2,000
for each Site, by no later than three working days from the designated
termination date.

In addition to all of the payments set forth above, Teleran undertakes to pay
T4U all of the costs and expenses involved with the advanced repayment of the
bank credit.

(e) In the case of Teleran terminating the contract with respect to Additional
Site, it shall have the right to take with it only the Designated Equipment
located in the site, and any other equipment that was provided by Teleran, if
any, under the supervision and control of T4U, as defined and set forth in
Appendix D to the Agreement.

(f) The first 23 sites, Teleran will stay as a tenant and will pay the rental
cost, as well as the operational costs, with T4U.

TERMINATION OF CONTRACT BY T4U

3. T4U has the right to terminate the Agreement with respect to any of the
sites, and in such case it shall provide an alternative site for Teleran, which
shall comply with Teleran's requirements. Teleran shall be able to elect,
instead of being granted Usage Rights in the alternative site, to


                                       37


purchase the site with respect to which the contract was terminated, according
to the payments schedule applicable to the relevant site type, provide there are
no Other Users in the site.

In the event that T4U wishes to cancel the Agreement with regard to a Site in
which there are Other Users, it will be entitled to do so if it shall find a
suitable alternative Site for Teleran.

In a situation of transition to alternative solution, the provisions of Clause
10 of the Agreement shall apply.





                                                                   EXHIBIT 10.39
                                 LEASE AGREEMENT

1.     PARTIES

1.1    THE LESSOR:

Mr. Mario Galuppo, CI Number 9932124 with domicile in Calle General Guido,
number 1472, Beccar, Province of Buenos Aires, in his position as LESSOR of the
spaces whose location is recorded in the respective annexes added to this
document, and through the lease agreement they are signing with the proprietors
of those spaces. In what follows, he is called the LESSOR.

1.2      THE LESSEE:

The firm Ituran de Argentina, S.A. with domicile in Calle Marcello de Alvear,
925.5 floor B, Federal Capital, represented by Mr. Avi Anais, Israeli passport
number 9027867 in his position as its president in what follows it is called the
LESSEE. The signers declare under oath that they have the authority to sign this
document in representation invoked and the authenticity in effect for the
instruments that guarantee it, copies of which are added to this document.

2.     PURPOSE:

2.1 THE LESSOR delivers in lease to THE LESSEE, for its use and enjoyment, the
spaces located in the terraces of the buildings registered in the attached
annexes. They are governed by the terms and conditions that are detailed below:

Requirements of the spaces to be provided by THE LESSOR:

a) A closed space in the Shelter that is property of THE LESSOR (the Space
below)of approximately 2.5 x 1.5 meters

b) A space in the structure of the pole that is the property of THE LESSOR for
installing an irradiant system that is property of THE LESSEE.

In the spaces, THE LESSEE will install the following equipment (the Equipment
below).

The spaces mentioned in point (a): will be used to locate radio-electric
equipment and their accessories.
The spaces mentioned in point (b) will be used to install transmission antennas
and receivers

[2 sets of handwritten initials]




receivers with their respective coaxial cables up to the closed space mentioned
in (a) located no more than 15 meters from the support structure of the
antennas.

2.2 Likewise, THE LESSEE will install data and telephone lines and may request
THE LESSOR for the installation, in the Space of the pto (a), of air
conditioning equipment intended to maintain the working temperature of the
radio-electric equipment installed there within the range specified by THE
LESSEE.

2.3 THE LESSOR expressly declares to be authorized to sublet to THE LESSEE the
spaces mentioned in the various annexes, and to allow the installation of
support structures of antennas, shelter, radio-electric equipment, air
conditioning equipment, and data and telephone lines in accordance with the
terms of this Agreement.

3 - PERIOD

The period of the term of this agreement will be 5 (five) years. The beginning
and end of the period of each space will be specified in each annex attached.
THE LESSEE is granted the ability to extend for another similar period, after
notification made by authentic means with advance notice of no more than thirty
days of the expiration of each period.

4 - PRICE

4.1 The price of the lease will be entered into the corresponding annexes in
relation to each space rented. It is duly established that, for tax purposes,
the agreed lease in this agreement refers to a physical space that forms part of
a building and for commercial purposes. The price that is stipulated will
include the VAT, where appropriate and will be paid monthly 1st to the 10th of
each month in the domicile of THE LESSEE with the following guidelines.

The payment of each space will be governed by the following guidelines:
With relation to the spaces already rented by THE LESSOR and put at the disposal
of THE LESSEE as in those others that THE LESSEE has not yet rented, the price
will be paid starting with the signature of the corresponding annexes.

4.2 THE LESSEE does not have to pay any sum beyond that provided for in each
annex. For such reasons it will not be obliged to pay: a) expenses, either
ordinary or extraordinary, b) establishment of the reserve fund, c) common
payments of the consortium or all or any of the proprietors, d) co-participation
in the expenses of



the consortium of any type, or, e) taxes of any kind that correspond to the
consortium or the proprietors of their units.

5.     DELAY
The expiration of the periods established in this agreement is produced by law
automatically, solely for the passage of time. On the assumption of delay in
payment of rent, the sum owed will receive interest for every day of delay equal
to the amount set by the National Bank of Argentina for its discount operations
(active rate), which will be paid at the terms and form established in the
fourth paragraph of this document.

6 - OBLIGATIONS OF THE LESSOR

6.1 To allow THE LESSEE to carry out repairs on the equipment in the spaces that
are referred to in each of the annexes.

6.2 To facilitate the unrestricted access of personnel named by THE LESSEE to
the spaces that are mentioned in each of the annexes. This access will not have
limits of day nor time, during the entire year, for installation, removal,
maintenance or repair of the equipment.

6.3 If in the spaces there will be radio-electric equipment installed, or new
equipment is to be installed, THE LESSEE must deliver all technical
documentation that THE LESSOR must make sure that they do not interfere with the
operation of the equipment of THE LESSEE.

6.4 To pay for all the taxes and contributions that bear on the space and in
particular, the cost of conservation of the building in general and repair of
damage that the terrace may undergo (as such they are not attributable to THE
LESSEE) for the purpose of allowing THE LESSEE its normal and pacific use and
enjoyment.

6.5 Guarantee for the spaces the same control and watchfulness that the rest of
the buildings where they are located receive.

6.6 THE LESSOR states that the support structures of antennas and shelters
mentioned in each one of the annexes meets the standards in effect as to
materials used, construction, assembly, foundations, anchoring and stability.
Any modification to the standards that are in effect must be met in the periods
established by the competent authority. In case the regulatory authority
requests THE LESSOR to provide estimates of the

[2 sets of handwritten initials]



structure, THE LESSOR will make them available to THE LESSEE to be presented
within the periods fixed by the competent authority. THE LESSOR promises to
carry out the preventative and corrective maintenance for the purpose of
assuring the perfect condition of installation and safety of the tower in
fulfilling the existing standards as being day and night beacons, installation
of lightening rods and descent to the ground. The preceding enumeration is
simply by example and does not in any way exhaust the fulfillment of THE
LESSOR'S obligation with respect to the perfect condition of installation and
safety of the tower. THE LESSOR assumes full responsibility for the fulfillment
of the tasks of installation and safety mentioned above.

6.7 THE LESSOR will be responsible for all damages caused to third parties or to
THE LESSEE by accidents produced in the rented spaces and/or for the equipment
that is the property of THE LESSOR, except for damage that is created by THE
LESSEE's fault of by force majeure.

6.8 THE LESSOR will contract for insurance that will cover its civil liability
to third parties, specified in clause 6.7 above, and will maintain THE LESSEE
free of damage for any claim for the damages mentioned during the period of this
agreement.

6.9 In case THE LESSOR wishes to cancel any of the leases, that are annexed to
this agreement, it must reliably advise THE LESSEE with a ninety day advance
notice, offering it a site of similar characteristics to the one being canceled
with the costs of moving and installation at the expense of THE LESSOR. On the
assumption that THE LESSEE is deprived of its lease rights with relation to any
of the sites annexed to this agreement, and THE LESSOR cannot find a substitute
with the obligation referred to this clause, THE LESSEE will have the right to
claim damages caused to it as a consequence of this non-fulfillment, in
accordance with the provision of clause 9.3.

7 -      OBLIGATIONS OF THE LESSEE

7.1      Pay the taxes and contributions that affect its activity.

7.2      Will be  responsible  for damages hat his  equipment may cause to third
parties for which he will contract a Civil Liability policy. In this insurance.
The civil liability policy will not include the spaces and equipment for which

the LESSOR is responsible.

7.3 THE LESSEE will have free access to the use of electrical energy necessary
for the operation of the installed equipment, the consumption of it being at its
exclusive costs. For such a purpose, THE LESSOR will provide THE LESSEE an
exclusive meter for its equipment by means of which the readings can be obtained
for the payment of the energy consumed.

7.4 At the end of the agreement, THE LESSEE must remove the equipment, leaving
the spaces in the same condition that they were found before its occupation,
except for deterioration produced by the passage of time, and good use.

8        CONDITION SUBSEQUENT

Both parties agree to base this agreement on the life of the authorization
granted to THE LESSEE to operate licenses and/or authorizations. If they are
denied or revoked, this agreement will be cancelled, without this circumstance
generating right to any claim or indemnity for any of the parties.

9        RESCISSION

9.1 THE LESSEE may, without invoking any cause, rescind this agreement, with
relation to all of the spaces or part of them, without penalty or any indemnity.
For the exercise of this authority, THE LESSEE must notify this circumstance by
reliable means to THE LESSOR with an advance of no less than ninety days.

9.2 The failure to pay the rent during the following months, will give THE
LESSOR the right to cancel this agreement.

9.3 Without prejudice to the last clause, each of the parties will have the
right to rescind this agreement, if the other party does not meet its
obligations after the passage of ten days notice by the reliable party of its
fulfillment. The reliable party will have the right to claim compensation for
damages.

10       OBLIGATION IN PASSING

THE LESSOR expressly authorizes all the obligations that may reasonably be
required so that THE LESSEE may carry out and have installed in the spaces of
each of the annexes the services that it needs as well as in order to be able to
make normal use of the spaces mentioned in each of the annexes according to the
needs and uses that the equipment requires. In this way, THE LESSOR will make
improvements in the spaces, in accordance with THE LESSEE's specifications, and
that are necessary for the removal, maintenance or repair of the equipment.

[2 sets of handwritten initials]

11.      TRANSFER OF THE AGREEMENT

THE LESSEE is expressly authorized to sell or transfer this agreement.

12.      USE OF DANGEROUS SUBSTANCES

THE LESSEE declares that it will not deposit, use or generate radioactive
material, substances or dangerous waste in the spaces. THE LESSOR, for its part,
affirms that up until now in the spaces there has not been deposited used or
generate radioactive material substances or dangerous waste.

13.      JURISDICTION AND DOMICILES

For all legal purposes arising from this agreement, the parties agree to submit
to the jurisdiction of the Ordinary Courts of the City of Buenos Aires and
establish domiciles in those locations expressed at the heading, where they will
hold as valid all the notifications up to the establishment of special
domiciles.

14.      STAMP TAX

If the stamp tax must be paid, it must be paid by THE LESSOR and THE LESSEE in
equal parts.

In proof of agreement, 2 (two) copies are signed of the same purport and one
effect in the City of Buenos Aires on the 23rd day of the month of November of
2001.

[handwritten signatures]








ANNEX II:

1) This is added to copy of the agreement between THE LESSOR and the Consortium
of the Entre Rios 2949 site, San Justo, Province of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:
         a) A 19" rack property of THE LESSEE,
         b) An antenna property of THE LESSEE,

3) The price of the lease is established at $US600., this sum will be paid in
American Dollars or Argentine Pesos

4) The term of the lease will be from December 3, 2001 to December 3, 2006.




[handwritten signatures]










ANNEX III:

1) This is added to a copy of the agreement between THE LESSOR and the
Consortium of the Libertador 1742 site, Olivos, Province of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR where there
will be installed:
         a) A rack of 19" property of THE LESSEE.
         b) One antenna property of THE LESSOR.

3) The price of the lease is established at $US600. This sum will be paid by THE
LESSEE in American Dollars or Argentine Pesos.

4) The term of the lease will be from the December 20, 2001 to December 20,
2006.






[handwritten signatures]










ANNEX IV:

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Cuyo 258 site, Gonzalez Catan, Province of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:
         a) A rack of 19" property of THE LESSEE.
         b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US450, This sum will be paid by THE
LESSEE in American Dollars or Argentine Pesos.

4) The term of the lease will be from February 13, 2002 to February 13, 2007.






[handwritten signatures]





ANNEX V:

1) This is added to the copy of the agreement between THE LESSOR and the
proprietor of the Colombres 320 site, Lomas de Zamora, Province of Buenos Aires

2) In the Space of the Building property of THE LESSOR there will be installed:
         a) a rack of 19" property of THE LESSEE.
         b) An antenna property of THE LESSEE.

3) The price of the lease is established at $600. This sum will be paid by THE
LESSEE in American Dollars or Argentine Pesos..

4) The term of the loan will be from April 12, 2002 to April 12, 2007.














ANNEX VI:

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Bulnes 2240 site, federal capital.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:
         a) A rack of 19" property of THE LESSEE.
         b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US $1000. This sum will be paid by
THE LESSEE in American Dollars or Argentine Pesos.

4) The term of the lease will be from May 1, 2002 to April 30, 2005.




[2 sets of handwritten initials]






ANNEX VII TO THE LEASE AGREEMENT OF SITES SIGNED NOVEMBER 23, 2001:
-------------------------------------------------------------------

Between Sites Service S.R.L., with domicile in Lavalle 710, 2nd floor Dept. A,
Federal Capital, represented in this document by Mario Galuppo, C.I. No. 9,932,
124, in his position as Director, in what follows THE LESSOR, party of the first
part, and as party of the second part Ituran de Argentina S.A., domiciled in
Sucre 2480, Beccar, Peia, of Buenos Aires, represented in this document by Mr.
Abraham Anais, D.N.I. No. 93,897,631, in his position as its President, in what
follows THE LESSEE, agrees to sign this ANNEX to the lease agreement entered
into by the parties on November 23, 2001, in accordance with the following
clauses and conditions. FIRST: considering that SITES Service S.R.L. is the
holder of the lease belonging to Mr. Mario Galuppo by the session of rights held
on March 7, 2003. A certified copy of the session of rights is added.

SECOND: a copy of the lease agreement signed between THE LESSEE and the
Association of the building located in Calle Dorrego NO. 898 Federal Capital
serving THE LESSOR as a base for granting this sublease in the space rented by
him, in what follows "the Space of the Building".

THIRD: in the Space of the Building there will be installed
         a) a 19" rack, property of THE LESSEE.
         b) an antenna, property of THE LESSEE.

FOURTH: The lease price is established at $US 465 (Four Hundred Sixty Five
United States dollars), payable in Argentine Pesos taking the rate of the dollar
of the BCRA, buyer's rate, of the day before the date of payment. The parties
agree to establish to the value of the dollar a ceiling of $1=$US3.20 and a
floor of $1=$US2.20, by which, in the future, for purposes of calculating the
rent, if rate of the United States dollar exceeds the limits stated, the rent
will be paid, as previously established, in Argentine Pesos, multiplying its
value stated in dollars by the ceiling rate and/or the floor stated n this
clause, as appropriate.

FIFTH: On the assumption that THE LESSOR will sublet to other third parties, the
Space of the Building and/or the support structure of the antenna, THE LESSEE
will receive a discount in the lease price of 30%.

SIXTH: the term of the lease corresponding to this Annex will be from the first
of [page missing]





ANNEX VIII TO THE LEASE AGREEMENT OF SITES SIGNED NOVEMBER 23, 2001:
--------------------------------------------------------------------

Between Sites Service S.R.L., with domicile in Lavalle 710, 2nd floor Dept. A,
Federal Capital, represented in this document by Mario Galuppo, C.I. No. 9,932,
124, in his position as Director, in what follows THE LESSOR, party of the first
part, and as party of the second part Ituran de Argentina S.A., domiciled in
Sucre 2480, Beccar, Peia, of Buenos Aires, represented in this document by Mr.
Abraham Anais, D.N.I. No. 93,897,631, in his position as its President, in what
follows THE LESSEE, agrees to sign this ANNEX to the lease agreement entered
into by the parties on November 23, 2001, in accordance with the following
clauses and conditions. FIRST: considering that SITES Service S.R.L. is the
holder of the lease belonging to Mr. Mario Galuppo by the session of rights held
on March 7, 2003. A certified copy of the session of rights is added.

SECOND: a copy of the lease agreement signed between THE LESSEE and the
Association of the building located in Calle 44 between Calles 161 and 164, La
Plata, Province of Buenos Aires, serving THE LESSOR as a base for granting this
sublease in the space rented by him, in what follows "the Space of the
Building".

THIRD: in the Space of the Building there will be installed
         a) a 19" rack, property of THE LESSEE.
         b) an antenna, property of THE LESSEE.

FOURTH: The lease price is established at $US 295 (Two Hundred Ninety Five
United States dollars), payable in Argentine Pesos taking the rate of the dollar
of the BCRA, buyer's rate, of the day before the date of payment. The parties
agree to establish to the value of the dollar a ceiling of $1=$US3.20 and a
floor of $1=$US 2.20 by which, in the future, for purposes of calculating the
rent, if rate of the United States dollar exceeds the limits stated, the rent
will be paid, as previously established, in Argentine Pesos, multiplying its
value stated in dollars by the ceiling rate and/or the floor stated n this
clause, as appropriate.

FIFTH: On the assumption that THE LESSOR will sublet to other third parties, the
Space of the Building and/or the support structure of the antenna, THE LESSEE
will receive a discount of in the lease price of 30%.

SIXTH: the term of the lease corresponding to this Annex will be from August 1,
2003 until July 31, 2008. In proof of agreement two copies are signed of the
same meaning, and for just one purpose, in the City of Buenos Aires on July 31
2003.

[two signatures]





ANNEX IX TO THE LEASE AGREEMENT OF SITES SIGNED NOVEMBER 23, 2001:
------------------------------------------------------------------

Between Sites Service S.R.L., with domicile in Lavalle 710, 2nd floor Dept. A,
Federal Capital, represented in this document by Mario Galuppo, C.I. No. 9,932,
124, in his position as Director, in what follows THE LESSOR, party of the first
part, and as party of the second part Ituran de Argentina S.A., domiciled in
Sucre 2480, Beccar, Peia, of Buenos Aires, represented in this document by Mr.
Abraham Anais, D.N.I. No. 93,897,631, in his position as its President, in what
follows THE LESSEE, agrees to sign this ANNEX to the lease agreement entered
into by the parties on November 23, 2001, in accordance with the following
clauses and conditions. FIRST: considering that SITES Service S.R.L. is the
holder of the lease belonging to Mr. Mario Galuppo by the session of rights held
on March 7, 2003. A certified copy of the session of rights is added.

SECOND: a copy of the lease agreement signed between THE LESSEE and the
Association of the building located in Calle 7 between Calles 603 and 604,
serving THE LESSOR as a base for granting this sublease in the space rented by
him, in what follows "the Space of the Building".

THIRD: in the Space of the Building there will be installed
         a) a 19" rack, property of THE LESSEE.
         b) an antenna, property of THE LESSEE.

FOURTH: The lease price is established at $US 248 (Two Hundred Forty Eight
United States dollars), payable in Argentine Pesos taking the rate of the dollar
of the BCRA, buyer's rate, of the day before the date of payment. The parties
agree to establish to the value of the dollar a ceiling of $1=$US3.20 and a
floor of $1=$US2.20 by which, in the future, for purposes of calculating the
rent, if rate of the United States dollar exceeds the limits stated, the rent
will be paid, as previously established, in Argentine Pesos, multiplying its
value stated in dollars by the ceiling rate and/or the floor stated n this
clause, as appropriate.

FIFTH: On the assumption that THE LESSOR will sublet to other third parties, the
Space of the Building and/or the support structure of the antenna, THE LESSEE
will receive a discount of in the lease price of 30%.

SIXTH: the term of the lease corresponding to this Annex will be from August 1,
2003 to July 31, 2008 In proof of agreement two copies of the same meaning are
signed, and for just one purpose on July 31, 2003.

[two signatures]





ANNEX X TO THE LEASE AGREEMENT OF SITES SIGNED NOVEMBER 23, 2001:
-----------------------------------------------------------------

Between Sites Service S.R.L., with domicile in Lavalle 710, 2nd floor Dept. A,
Federal Capital, represented in this document by Mario Galuppo, C.I. No. 9,932,
124, in his position as Director, in what follows THE LESSOR, party of the first
part, and as party of the second part Ituran de Argentina S.A., domiciled in
Sucre 2480, Beccar, Peia, of Buenos Aires, represented in this document by Mr.
Abraham Anais, D.N.I. No. 93,897,631, in his position as its President, in what
follows THE LESSEE, agrees to sign this ANNEX to the lease agreement entered
into by the parties on November 23, 2001, in accordance with the following
clauses and conditions. FIRST: considering that SITES Service S.R.L. is the
holder of the lease belonging to Mr. Mario Galuppo by the session of rights held
on March 7, 2003. A certified copy of the session of rights is added.

SECOND: a copy of the lease agreement signed between THE LESSEE and the
Association of the building located in Calle 9 and Av. Arana, Tower 15 (Villa
Elisa, Province of Buenos Aires, serving THE LESSOR as a base for granting this
sublease in the space rented by him, in what follows "the Space of the
Building".

THIRD: in the Space of the Building there will be installed
         a) a 19" rack, property of THE LESSEE.
         b) an antenna, property of THE LESSEE.

FOURTH: The lease price is established at $US435 (Four Hundred Thirty Five
United States dollars), payable in Argentine Pesos taking the rate of the dollar
of the BCRA, buyer's rate, of the day before the date of payment. The parties
agree to establish to the value of the dollar a ceiling of $1=$US3.20 and a
floor of $1=$US2.20 by which, in the future, for purposes of calculating the
rent, if rate of the United States dollar exceeds the limits stated, the rent
will be paid, as previously established, in Argentine Pesos, multiplying its
value stated in dollars by the ceiling rate and/or the floor stated n this
clause, as appropriate.

FIFTH: On the assumption that THE LESSOR will sublet to other third parties, the
Space of the Building and/or the support structure of the antenna, THE LESSEE
will receive a discount of in the lease price of 30%.

SIXTH: the term of the lease corresponding to this Annex will be from September
1, 2003 to August 30, 2008. In proof of agreement two copies of the same meaning
are signed, and for just one purpose, in the City of Buenos Aires on August 30,
2003.








                                                                    EXHBIT 10.40

                                 LEASE AGREEMENT

1.   PARTIES

1.1  THE LESSOR:

Mr. Gustavo Eduardo Bazan, D.N.I. Number 23.328.079, with domicile in Calle
Rivadavia 8348, 23rd floor, Federal Capital, in his situation as LESSOR of the
spaces whose location is registered in the respective annexes added to this
document, and through the lease agreement that is signed with the proprietors of
these spaces. Below it will be called the LESSOR.

1.2  THE LESSEE:

The firm Ituran de Argentina S.A. domiciled in Marcelo T. Alvear St. 925, 5th
floor B, Federal Capital, represented by Mr. Avi Anais, Israeli passport No.
9,027,867, in his position as President of the firm. In what follows, he is
called the LESSEE. The signers declare under oath that the authorization to sign
this document in representation that is invoked, and the authenticity and term
of the instruments that guarantee it, copies of which are added to this
document.

2.   PURPOSE:

2.1 THE LESSOR delivers in lease to THE LESSEE, for installing irradiating
systems and radio-electric equipment, the spaces located in the terraces of the
buildings registered in the attached annexes. They are governed by the terms and
conditions that are detailed below: Space requirements to be provided by THE
LESSOR:

a) A space in the Shelter that is property of THE LESSOR (the Space in what
follows), that is necessary to lodge the items mentioned in each one of the
annexes.

b) A space in the structure of the pole that is the property of THE LESSOR for
installing an irradiant system that is property of THE LESSEE. In the spaces,
THE LESSEE will install the following equipment (the Equipment below). The space
mentioned in point (a): will be used to locate radio-electric equipment and
their accessories according to the details which appear in each annex. The space
mentioned in point (b) will be used to install transmitting antennas and

[2 sets of handwritten initials]




and receivers with their respective coaxial cables up to the shelter located no
more than 15 meters from the support structure of the antennas according to the
details that appear in each annex.

c) At the time of delivery of each building THE LESSOR must deliver a report on
the installation in which there figured all the details that THE LESSEE
considers necessary.

2.2 Likewise, THE LESSEE will install data and telephone lines and may request
THE LESSOR for the installation, and the Space of the pto (a), of air
conditioning equipment intended to maintain the working temperature of the
radio-electric equipment installed there within the range specified by THE
LESSEE.

2.3 THE LESSOR expressly declares to be authorized to sublet to THE LESSEE the
spaces mentioned in the various annexes, and to allow the installation of
support structures of antennas, shelter, radio-electric equipment, air
conditioning equipment, and data and telephone lines in accordance with the
terms of this Agreement.

3 - PERIOD

The period of the term of this agreement will be 5 (five) years in those spaces
where THE LESSEE has a period unless it will be guaranteed at least a period of
3 (three) years. The beginning and end of the period of each space will be
specified in each annex attached. THE LESSEE is granted the ability to extend
for another similar period, after notification made by authentic means with
advance notice of no more than thirty days of the expiration of each period.

4 - PRICE

4.1 The price of lease will be entered into the corresponding annexes in
relation to each space rented. The price that is stipulated will not include the
VAT, and will be paid for the first 6 (six) months from the 1st to the 10th of
each month, after the period mentioned has passed, the price will be paid from
the 1st to the 5th of each month in the domicile that is established that THE
LESSEE has established after reception with an advance notice of 5 (five) days
in the domicile set by THE LESSEE from the corresponding original invoices.
The payment of each space will be governed by the following guidelines:
With relation to the spaces already rented by THE LESSOR and put at the disposal
of THE LESSEE as in those others that THE LESSEE has not already rented,

[2 sets of handwritten initials]




the price will be paid starting with the signature of the corresponding annexes.

4.2 THE LESSEE does not have to pay any sum beyond that provided for in each
annex. For such reasons it will not be obliged to pay: a) expenses, either
ordinary or extraordinary, b) establishment of the reserve fund, c) common
payments of the consortium or all or any of the proprietors, d) co-participation
in the expenses of the consortium of any type, nor, e) of taxes of any kind that
correspond to the consortium or the proprietors of their units.

4.3 On the assumption that THE LESSOR, in renewing its lease agreement with the
proprietors of the spaces, should obtain any variation in the prices, it will
notify THE LESSEE of the new price with 2 (two) months in advance of the
expiration of the corresponding annex. If THE LESSEE does not accept the new
price, THE LESSOR will give a period of 3 (three) months to THE LESSEE to find a
new site, maintaining the price fixed in the corresponding annex during those 3
months.

5.   DELAY

The expiration of the periods established in this agreement is produced by law
automatically, just by the passage of time. On the assumption of delay in
payment of rent, the sum owed will receive interest for every day of delay equal
to the amount set by the Argentina National Bank for its discount operations
(active rate), which will be paid at the terms and form established in the
fourth paragraph of this document.

6 - OBLIGATIONS OF THE LESSOR

6.1 To allow THE LESSEE to carry out repairs on the equipment in the spaces that
are referred to in each of the annexes.

6.2 To facilitate the unrestricted access of personnel named by THE LESSEE to
the spaces that are mentioned in each of the annexes. This access will not have
limits of day or time, during the entire year, for installation, removal,
maintenance or repair of the equipment, and the time for access may not exceed
more than 12 (twelve) hours requested.

6.3 If in the spaces installed radio-electric equipment is found, or new
equipment is to be installed, THE LESSEE must deliver all technical
documentation that THE LESSOR requests in order to verify that they do not
interfere with the operation of the


[2 sets of handwritten initials]




equipment of THE LESSEE. The installation of new equipment may be carried out
after THE LESSOR proves that there will not be interference generated by it.

6.4 Pay for all the taxes and contributions that bear on the space and in
particular, the cost of conservation of the building in general and repair of
damage that the terrace may undergo (as such they are not attributable to THE
LESSEE) for the purpose of allowing THE LESSEE its normal and pacific use and
enjoyment.

6.5 Guarantee for the spaces the same control and watchfulness that the rest of
the buildings where they are located receives.

6.6 THE LESSOR states that the support structures of antennas and shelters
mentioned in each one of the annexes meets the standards in effect as to
materials used, construction, assembly, foundations, anchoring and stability.
Any modification to the standards that are in effect must be met in the periods
established by the competent authority. In case the regulatory authority
requests THE LESSOR to provide the estimates of the structure, THE LESSOR will
make them available to THE LESSEE to be presented within the periods fixed by
the competent authority. THE LESSOR promises to carry out the preventative and
corrective maintenance for the purpose of assuring the perfect condition of
installation and safety of the tower in fulfilling the existing standards as
being day and night beacons, installation of lightening rods and descent to the
ground. The preceding enumeration is simply by example and does not in any way
exhaust the fulfillment of THE LESSOR'S obligation with respect to the perfect
condition of installation and safety of the tower. THE LESSOR assumes full
responsibility for the fulfillment of the tasks of installation and safety
mentioned above.

6.7 THE LESSOR will be responsible for all damages caused to third parties or to
THE LESSEE by accidents produced in the rented spaces and/or for the equipment
that is the property of THE LESSOR.

6.8 THE LESSOR will contract insurance that will cover its civil liability to
third parties, specified in clause 6.7 above, and will maintain THE LESSEE on
damage for any claim for the damages mentioned during the period of this
agreement.

6.9 In case THE LESSOR wishes to cancel any of the leases, that

[2 sets of handwritten initials]





are annexed to this agreement, it must reliably advise THE LESSEE with a ninety
day advance notice, offering it a site of similar characteristics being canceled
in no more than thirty (30) days of the date of cancellation of the lease,
including the costs of moving and installation at the expense of THE LESSOR. On
the assumption that THE LESSEE is deprived of its lease rights with relation to
any of the sites annexed to this agreement, and THE LESSOR cannot find a given
site with the obligation referred to this clause, THE LESSEE will have the right
to claim damages caused to it as a consequence of this non-fulfillment, the
amount to be claimed will be equivalent to 3 months rent.

7 - OBLIGATIONS OF THE LESSEE

7.1 Pay the taxes and contributions that affect its activity.

7.2 THE LESSEE will have free access to the use of electrical energy necessary
for the operation of the installed equipment, the consumption of it being at its
exclusive costs. For such a purpose, THE LESSOR will provide THE LESSEE an
exclusive meter for its equipment by means of which the readings can be obtained
for the payment of the energy consumed.

7.3 At the end of the agreement, THE LESSEE must remove the equipment with the
aid of THE LESSOR, leaving the spaces in the same condition that they were found
before its occupation, except for deterioration produced by the passage of time,
and good use. For the case of removing the antenna, THE LESSEE will pay the same
price that it will pay at the beginning of the agreement for the installation.

8    CONDITION SUBSEQUENT

Both parties agree to base this agreement on the term of the authorization
granted to THE LESSEE to operate licenses and/or authorizations. If they are
denied or revoked, this agreement will be cancelled, without this circumstance
generating right to any claim or indemnity for any of the parties.

9    RESCISSION

9.1 THE LESSEE may, after 18 (eighteen) months after the signature of this
agreement and without invoking any cause rescind this agreement, with relation
to all of the spaces or part of them, without penalty or any indemnity. For the
exercise of this authority, THE LESSEE must notify such a circumstance by
reliable means

[2 sets of handwritten initials]





to THE LESSOR with an advance of no less than thirty days.

9.2 The failure to pay the rent during the following months, will give THE
LESSOR the right to cancel this agreement.

10   OBLIGATION IN PASSING

THE LESSOR expressly authorizes all the obligations that may reasonably be
required so that THE LESSEE may carry out and have installed in the spaces of
each of the annexes the services that it needs as well as in order to be able to
make normal use of the spaces mentioned in each of the annexes according to the
needs and uses that the equipment requires. There is accepted from this last the
support structure of the antenna. If as a consequence of the addition of new
items that are the property of third parties authorized by THE LESSEE, these
affect the minimum requirements necessary for the maintenance of the equipment,
THE LESSEE may require improvements in the spaces, the costs of these
improvements being at the LESSOR'S expense. In case THE LESSEE needs to gain
access to the spaces mentioned in the annex, it must advise THE LESSOR and it
will facilitate the access to them in a maximum of a period of 12 (twelve) hours
after being notified.

11.  USE OF DANGEROUS SUBSTANCES

THE LESSEE declares that it will not deposit, use or generate radioactive
material, substances or dangerous waste in the spaces. THE LESSOR, for its part,
affirms that up until now in the spaces there has not been deposited use or
generated radioactive material substances or dangerous waste.

12.  JURISDICTION AND DOMICILES

For all legal purposes arising from this agreement, the parties agree to submit
to the jurisdiction of the Ordinary Courts of the City of Buenos Aires and
establish domiciles in those locations stated at the heading, where they will
hold as valid all the notifications up to the establishment of special
domiciles.

13.  STAMP TAX

If the stamp tax must be paid, it must be paid by THE LESSOR and THE LESSEE in
equal parts.

In proof of agreement, 2 (two) copies of the same purport and one purpose are
signed in the City of Buenos Aires on the 7th day of the month of September of
2001.

[handwritten signatures]




ANNEX 1:
--------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Tucuman 540 site - Federal Capital.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A 19" rack property of THE LESSEE,

     b) An antenna property of THE LESSEE,

3) The price of the lease is established at $US 850.-

4) The term of the lease will be from the 20th of June, 2001 to the 20th of
June, 2006.








[handwritten signature]                         [handwritten signature]

[illegible word] President              Gustavo E. Bazan

[illegible words]                       GENERAL MANAGER






ANNEX II:
---------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Ciudad de La Paz 2211 site - Federal Capital.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A 19" rack property of THE LESSEE,

     b) An antenna property of THE LESSEE,

3) The price of the lease is established at $US 700.-

4) The term of the lease will be from the August 22, 2001 until August 22, 2006.






[handwritten signature]                         [handwritten signature]

[illegible word] President              Gustavo E. Bazan

[illegible words]                       GENERAL MANAGER








ANNEX III:
----------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Rivadavia 8348 site - Federal Capital.

2) In the Space of the Building that is the property of THE LESSOR where there
will be installed:

     a) A rack of 19" property of THE LESSEE which will be operated together
with the transmitter provided by THE LESSOR located in the same shelter.

     b) Three antennas property of THE LESSOR.

3) The price of the lease is established at $US 600.-

4) The term of the lease will be from the June 19, 2001 to the June 19, 2006.








[handwritten signature]                         [handwritten signature]

[illegible word] President              Gustavo E. Bazan

[illegible words]                       GENERAL MANAGER








ANNEX IV:
---------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Salguero 2154 site - San Martin - Province of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A rack of 19" property of THE LESSEE.

     b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US 600.-

4) The term of the lease will be from the June 19, 2001 to the June 19, 2006.








[handwritten signature]                         [2 sets of handwritten initials]

[illegible word] President              Gustavo E. Bazan

[illegible words]                       GENERAL MANAGER






ANNEX V:
--------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the site Av. Mitre 4668- San Miguel - Province of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A rack of 19" property of THE LESSEE.

     b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US 600.-

4) The term of the lease will be from July 17, 2001 to July 17, 2006.








[handwritten signature]                         [handwritten signature]

[illegible word] President              Gustavo E. Bazan

[illegible words]                       GENERAL MANAGER










ANNEX VI:
---------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Rivadavia 313 site - Quilmes - Province of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A rack of 19" property of THE LESSEE.

     b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US 600.-

4) The term of the lease will be from the August 17, 2001 to the August 17,
2006.








[handwritten signature]                         [handwritten signature]

[illegible word] President              Gustavo E. Bazan

[illegible words]                       GENERAL MANAGER






ANNEX VII:
----------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Santamarina 538 site - Mte. Grande -- Province of Buenos
Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A rack of 19" property of THE LESSEE, which will operate together with
the transmitter provided by THE LESSOR located in the same shelter.

     b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US 600.-

4) The term of the lease will be from July 23, 2001 to July 23, 2006.








[handwritten signature]                         [handwritten signature]

[illegible word] President              Gustavo E. Bazan

[illegible words]                       GENERAL MANAGER








ANNEX VIII:
-----------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Chacabuco 534 site - Pilar - Province of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A rack of 19" property of THE LESSEE.

     b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US 650.-

4) The term of the lease will be from the October 10, 2001 to October 10, 2006.








[handwritten signature]                         [handwritten signature]

[illegible word] President              Gustavo E. Bazan

[illegible words]                       GENERAL MANAGER






ANNEX IX:
---------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Panamericana and Constituents, Barrio Malvinas Argentinas,
Tower 6 (FONAVI) -Tortuguitas - Province of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A rack of 19" property of THE LESSEE.

     b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US 600.-

4) The term of the lease will be from the August 29, 2001 to August 29, 2006.






[handwritten signature]                         [handwritten signature]

[illegible word] President              Gustavo E. Bazan

[illegible words]                       GENERAL MANAGER












ANNEX X:
--------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Hipolito Yrigoyen site No. 577 - Belen de Escobar - Province
of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A rack of 19" property of THE LESSEE.

     b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US 600.- 4) The term of the lease
will be from the July 16, 2001 to July 16, 2006.








[handwritten signature]                         [handwritten signature]

[illegible word] President              Gustavo E. Bazan

[illegible words]                       GENERAL MANAGER







ANNEX XI:
---------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Hipolito Yrigoyen 4009 site - Lanus - Province of Buenos
Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A rack of 19" property of THE LESSEE.

     b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US 600.-

4) The term of the lease will be from the September 20, 2001 to September 20,
2006.






[handwritten signature]                         [handwritten signature]

[illegible word] President

[illegible words]






ANNEX XII:
----------

1) This is added to the copy of the agreement between THE LESSOR and the
Consortium of the Heritier - Brrio. Police - Tower K73 site - Merlo - Province
of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A rack of 19" property of THE LESSEE.

     b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US 600.-

4) The term of the lease will be from the September 12, 2001 to September 12,
2006.






[handwritten signature]                         [handwritten signature]

[illegible word] President

[illegible words]





ANNEX XIII:
-----------

1) There is added to the copy of the agreement between THE LESSOR and the
Consortium of the Dans Rey 742, site Fcio. Varela - Province of Buenos Aires.

2) In the Space of the Building that is the property of THE LESSOR there will be
installed:

     a) A rack of 19" property of THE LESSEE.

     b) An antenna property of THE LESSOR.

3) The price of the lease is established at $US 600.-

4) The term of the lease will be from the August 21, 2001 to August 12, 2006.





[handwritten signature]                         [handwritten signature]

[illegible word] President

[illegible words]




ANNEX FOURTEEN TO THE AGREEMENT FOR LEASE OF SITES SIGNED FOR ON
SEPTEMBER 7, 2001.

Between Instal Electric with the domicile at Rivadavia 8348, 23rd floor, Federal
Capital, represented in this document by Gustavo Eduardo Bazan, DNI Number
23328079 in his position as President, in the following THE LESSOR, party of the
first part, and for the other Ituran de Argentina, S.A., domiciled in Sucre,
2480, Beccar, Peia of Buenos Aires, represented in this document by Mr. Abraham
Anaias DNI number 93, 897 631 in his position as president of that firm, in what
follows THE LESSEE, they agree to sign this Annex to the lease agreement signed
between the parties on the 7th of September 2001 in accordance with the
following clauses and conditions:

FIRST: There is added to a copy of the lease agreement signed between THE LESSOR
and the consortium of the building located in Calla 10, number 857, the La
Plata, Province of Buenos Aires, that serves as a basis for THE LESSOR to grant
the present sublease in the space rented by it below called "The Space of the
Building".

SECOND: In the space of the building, there will be installed:

a) A rack of 19" property of THE LESSEE, which will operate together with the
transmitter provided by THE LESSOR located within the same shelter.

b) Three antennas, property of THE LESSEE.

THIRD: The price of the lease is established at $US 410 (410 United States
dollars), payable in Argentine pesos taking the rate of the dollar of the BCRA,
a buyer's rate, of the day before the date of payment, the parties agree to
establish to the value of the dollar a ceiling of $1 equal US $3.20 and a floor
of $1 equals $US 3.20, for which in the future for the purposes of calculating
the rent, if the rate of the US dollar increases above the limits stated, the
rent will be paid, as previously fixed in Argentine pesos multiplying its value
expressed in dollars by the ceiling rate and/or the floor assigned to it in this
clause as appropriate. This is left agreed between the parties that in case THE
LESSOR cancels the lease of the site and without prejudice to what is stipulated
in Clause 6.9 of the principal text of the agreement, it must assure the
continuity of the operation of the transmitter during the time that the move to
the new site takes place. In case the LESSOR has to move the site, the cost of
the move will be for THE LESSOR'S account.

FOURTH: On the assumption that THE LESSOR will sublease to other third parties,
the space of the building and/or the support structure of the antenna, THE
LESSEE will receive a discount in the price of the lease of 5%.




FIFTH: The duration of the lease corresponding to this annex, will be from the
1st of August 2003 until the 31st of July 2008. In proof of agreement, two
copies signed of the same meaning and for one purpose only in the City of Buenos
Aires on the 31st of July 2003.

[2 signatures]










                                                                  EXHIBIT 10.41

To:

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

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

                        LETTER OF INDEMNITY AND EXEMPTION



1.     GENERAL

       1.1    We hereby inform you that in accordance with the decision of the
              Audit Committee and the Board of Directors of Ituran Location and
              Control Ltd ("THE COMPANY") dated August 24, 2005, and pursuant to
              the decision of the Company's General Meeting dated September 15,
              2005 (Hereinafter: "THE DETERMINING DATE"), it was decided to
              exempt the Company's functionaries, including functionaries who
              are controlling shareholders in the Company (Hereinafter:
              "FUNCTIONARIES") from responsibility due to breach of duty of care
              towards the Company as detailed in this letter of indemnity and
              exemption (Hereinafter: "THIS LETTER") as follows, and to pledge
              to the functionaries that the Company shall indemnify each of them
              of any liability or expense, as detailed in this letter below,
              which may be imposed upon him due to any action he has done ex
              officio, by virtue of his being a functionary in the Company.

       1.2    The terms which have not been defined in this Letter shall be
              interpreted as in the Companies Law, 5759 - 1999 (hereinafter:
              "COMPANIES LAW"), save if the context of the matter shall require
              otherwise.

2.     EXEMPTION FROM RESPONSIBILITY

       The Company exempts you in advance, subject to the provisions of any law,
       of any responsibility thereto, for any damage caused and/or which may be
       caused by you to the Company due to breach of duty of care for which you
       are obligated thereto (including damage as aforesaid caused due to
       actions carried out before the date of signing this Letter) save the
       breach of distributive care.







3.     COMMITMENT TO INDEMNIFY

       Subject to the provisions hereof and the provisions of any law, the
       Company hereby commits itself toward you to indemnify you of any
       liability and/or expense as detailed in paragraph 4.1 below, which may be
       imposed on you due to any action you have carried out and/or may carry
       out in the Company and/or in a subsidiary and/or in an affiliated company
       (as defined in the Securities Law 5728-1968) and/or in a related company
       (hereinafter in this Letter, subsidiary and/or affiliated company and/or
       related company: "RELATED COMPANY"), including actions carried out by you
       before the date of signing this Letter, by virtue of your being a
       functionary in the Company, and on condition that said actions were
       directly and/or indirectly related to one (or more) of the types of
       events specified in paragraph 6 below.



4. THE LIABILITY AND EXPENSES TO WHICH INDEMNITY SHALL APPLY

       4.1 The indemnity pursuant hereto shall apply only due to liability
and/or expenses as follows:

              4.1.1 Financial liability imposed on you in favor of another
                    person in accordance with a verdict, including a verdict
                    given in conciliation or an arbitration award authorized by
                    a Court of Law;

              4.1.2 Reasonable litigation expenses, including attorney's fees,
                    which you have expended or for which you have been charged
                    due to an interrogation or a proceeding that has been
                    conducted against you by an authority competent to wage an
                    interrogation or a proceeding, and which has ended without
                    the filing of an indictment against you and without a
                    financial liability having been imposed on you as an
                    alternative to a criminal proceeding or that ended without
                    the filing of an indictment against you but with the
                    imposition of a financial liability as an alternative to a
                    criminal proceeding in an offense which does not require the
                    substantiation of criminal intent.

                    For the purpose of this paragraph - the ending of a
                    proceeding without the filing of an indictment in a matter
                    in which a criminal investigation has been opened -
                    signifies the closing of the case





                    pursuant to section 62 of the Criminal Procedure Law
                    [Consolidated Version], 5742-1982 ("the CRIMINAL PROCEDURE
                    LAW"), or a delay of proceedings by the Legal Advisor to the
                    Government pursuant to section 231 of the Criminal Procedure
                    Law.

                    "FINANCIAL ALTERNATIVE AS AN ALTERNATIVE TO CRIMINAL
                    PROCEEDING" - Financial liability imposed in accordance with
                    law as an alternative to a criminal proceeding, including an
                    administrative penalty according to the Administrative
                    Offenses Law 5746-1985, fine for an offense that has been
                    determined as a fineable offense in accordance with the
                    provisions of the Criminal Procedure Law, Financial Sanction
                    or Indemnity.

                    Reasonable litigation expenses, including attorney's fees,
                    which you have expended or been charged with by a court of
                    law, in a proceeding filed by the Company or on the
                    Company's behalf or by another person, or in a criminal
                    indictment from which you have been acquitted or in a
                    criminal indictment in which you have been convicted of an
                    offense which does not require the substantiation of
                    criminal intent.

       4.2    It is hereby clarified that the indemnity as well as the exemption
              from liability pursuant to this Letter shall not apply in the
              following cases:

              4.2.1 Breach of fiduciary duty, save in the matter of indemnity
                    and insurance due to breach of fiduciary duty in cases in
                    which you have acted in good faith and for which you had a
                    reasonable basis to assume that the act would not compromise
                    the Company's interest;

              4.2.2 Breach of the duty of care made intentionally or
                    impulsively, save if made in negligence only;

              4.2.3 Acting with the intent of gaining unlawful personal profit;

              4.2.4 A fine or redemption imposed upon you.

       4.3    In cases in which you shall receive compensation from the
              insurance company of the Company's insurance policy for the
              Company's functionaries (hereinafter: "THE INSURER"), on account
              of the matter subject






              of the indemnity, the indemnity given by the Company in the amount
              of the difference between the amount of financial liability
              imposed on the functionary and/or the litigation expenses which
              the functionary has expended or been charged with, as stated in
              paragraph 4.1 above, and the amount received from the insurer on
              account of that same matter, and on condition that the indemnity
              amount for which the Company shall be charged as aforesaid shall
              not be greater than the maximum indemnity amount (as defined
              below).



5.     MAXIMUM INDEMNITY AMOUNT

       5.1    The indemnity amount that the Company shall pay (including amounts
              which shall be received by the functionaries from insurance
              companies, if such shall be received, in the frame of insurances
              which the company has acquired, if it has acquired such) for all
              the functionaries, cumulatively, pursuant to letters of indemnity
              and exemption for functionaries shall not exceed a total amount
              equal to the rate of 25% of the Company's equity (consolidated) in
              accordance with the Company's last financial reports published
              before the granting of the indemnity payment in practice
              (hereinafter: "the MAXIMUM INDEMNITY AMOUNT"). The maximum
              indemnity amount has been determined by the Company's Board of
              Directors as reasonable under the circumstances.

       5.2    Should and as far as the total of all the indemnity amounts that
              the Company shall be required to pay shall exceed the maximum
              indemnity amount or the balance of the maximum indemnity amount
              (as it shall be at that time), the maximum indemnity amount or the
              balance thereof, as applicable, shall be divided between the
              functionaries who shall be entitled to indemnity, in a manner that
              the indemnity amount which shall be received by each of the
              functionaries, in practice, shall be calculated pursuant to the
              ratio between the indemnity amount which shall be forthcoming to
              each of the functionaries on account of the liabilities and/or the
              expenses which each shall be obliged to bear as a result of the
              legal proceeding and the indemnity amount which shall be
              forthcoming to all






              the said functionaries on account of liabilities and/or expenses
              which they shall be obliged to bear as a result of the legal
              proceeding, cumulatively on account of that same event.


6. THE EVENTS TO WHICH THE INDEMNITY SHALL APPLY

       The indemnity in accordance with this letter of indemnity shall apply to
       a liability and/or an expense as aforesaid, which stem from one (or more)
       of the events detailed below, which have been determined by the Board of
       Directors as anticipated in view of the Company's actual activities at
       the time of providing the commitment:

       6.1    A proposal and/or issue of the Company's equities and/or those of
              a related company in Israel and/or abroad to the public and/or to
              individuals, pursuant to a forecast and/or a private placement,
              including the details which shall be included in the aforesaid
              executable instruments;

       6.2    Actions and/or reports stemming from the Company's and/or a
              related company's being and/or should the Company and/or a related
              company be in future a public company the shares of which shall be
              issued to the public and shall be traded in the Israeli Stock
              Exchange or in a stock exchange abroad;

       6.3    Actions and/or decisions related to the making of investments in
              the company and/or in subsidiaries and/or in related companies
              and/or for the acquisition of properties, including the
              acquisition of companies and/or businesses and/or investments in
              companies and/or investment of funds in traded equities and/or in
              any other form, and/or the sale of assets and/or sale of holdings
              in related companies;

       6.4    Events related to the terms of employment of employees and
              employer-employee relations, including and without derogating from
              the promotion of employees, handling of pension arrangements,
              insurance funds, options and other benefits to the Company's
              employees and/or those of a related company;






       6.5    Decisions and/or actions related to the Company's engagements
              and/or those of a related company with others, and/or between
              themselves in the frame of the Company's ongoing business
              (including with clients, suppliers, contractors);

       6.6    Actions and/or decisions designated in this paragraph 6, connected
              with related companies, including decisions and/or actions as
              functionaries in the Company and/or in related companies;

       6.7    Actions and/or decisions connected with the distribution of
              dividends in the Company and/or in a related company and/or the
              acquisition of the Company's shares;

       6.8    An action and/or a decision connected with the provision of a
              statement of opinion in a proposal for acquisition or any other
              action connected with and/or related to a proposal for acquisition
              in the company and/or a related company;

       6.9    An action and/or a decision connected with a change in the
              Company's structure and or that of a related company or the
              reorganization or any decision with respect thereof, including,
              but without derogating from the generality of the aforesaid, the
              merger, splitting, change in the Company's capital, the
              dissolution of companies or their sale, allocation or division;

       6.10   Any legal proceeding in Israel or abroad, in matters that are
              connected, either directly or indirectly, to trade restrictions
              and including binding arrangements, mergers and monopolies in the
              Company and/or in a related company;

       6.11   Any action which has brought  about a default in carrying out
              proper insurance arrangements by the Company;

       6.12   An action and/or a decision connected with the approval of
              transactions with functionaries and/or with a controlling
              shareholder in the Company and/or in a related company;

       6.13   Any action which has caused damage including damage to property
              including the loss of its use and which is connected to the
              actions designated in this paragraph and/or to the Company's
              products, or those of






              its subsidiaries and/or related companies or to other activities
              in the frame of the Company's ongoing business or that of related
              companies.

7.       DEALING WITH THE SUIT

         In any case in which you will be entitled to compensation in accordance
         with this statement, the following instructions will apply:

         7.1    You will notify the company in writing of any legal procedure
                taken against you and any chance and/or threat that a legal
                procedure will be taken against you and circumstances brought to
                your knowledge that may lead to a legal procedure against you
                (hereinafter: "THE PROCEDURE"), this as soon as possible to the
                time it becomes known to you, and you will transfer without
                delay to the company, or to whoever the company decides, a copy
                of any document regarding the procedure.

         7.2    You will fully cooperate with the company and with anyone it
                decides, including the insurer, and you will transfer any
                information required regarding the procedure and you will follow
                the rest of the instructions of the insurance policy of the
                employees of the company (at the time) regarding the defense
                from the procedure.

         7.3    The company will be entitled to take upon itself your defense in
                the procedure and to transfer the defense in the case to a
                lawyer to be determined by the company, according to its
                judgment, and while taking into consideration the company's
                obligations according to the policy and the option to appoint a
                lawyer on behalf of the insurer (hereinafter: "the company's
                advocate").

         7.4    Despite the mentioned in section 7.3 above, you will be entitled
                to object to the representation by the company's advocate due to
                reasonable reasons and/or under circumstances that in your
                opinion and/or the opinion of the company's advocate there is a
                conflict of interests between your defense and the defense of
                the company.


         7.5    If within 14 days from accepting the notice as mentioned in
                section 7.1 above, the company and the insurer did not take your
                defense upon themselves in the procedure, or if you or the
                company's advocate object to the representation by the company
                according to the mentioned above in section 7.4, you will be
                entitled to appoint an advocate of your choice (hereinafter:
                "the other advocate"), providing the sum of the professional
                fees of the advocate will be approved by the inspection
                committee that will examine the reasonableness. The professional
                fee determined for the company's advocate will be considered a
                reasonable basis in order to examine the fee of the other
                advocate. You will be given the opportunity to appear and argue
                before the committee and it will explain its decision. You will
                de entitled to appeal to the directorate and you will be given
                the opportunity to appear and argue before them. If the entire
                sum of the fee is not approved by the company and you decide not
                to concede the advocate, you will be entitled to receive the
                amount approved, and to pay the rest on your known.

         7.6    Despite the mentioned above in sections 7.4 and 7.5, if the
                policy refers to the matter, the company will act according to
                the instructions of the mentioned policy regarding disagreements
                with the insurer regarding the identity of the advocate
                representing according to the instructions of the policy when
                the case is transferred to the other advocate under the
                circumstances will enable the insurer to be released of its
                obligation or to minimize it and the instructions of the policy
                will override any agreement between you and the company, the
                company will however make every reasonable effort to honor your
                wish.

         7.7    If the company decides to take upon itself the defense in the
                procedure and you did not object under the circumstances
                mentioned in section 7.4 above, you will sign, to the request of
                the company, an authorization authorizing the company (as well
                as its advocate), to deal with the defense in your name and to
                represent you in any thing regarding the defense and the company
                and its advocate will be entitled to deal with the mentioned
                above exclusively (while reporting to you) and will be






                entitled to end the procedure as they see right, this subject to
                mentioned in section 7.15.

         7.8    You will cooperate with the company and its advocate in any
                reasonable way required by them regarding the procedure,
                including signing requests, depositions and any other document.

         7.9    If the company decided to take upon itself to deal with the
                defense in the procedure and you did not object under the
                circumstance mentioned in 7.4, the company will bear the
                expenses up to the maximum compensation (subject to the
                instructions of section 5.2), so that you will not have to pay
                them yourself, and the company will not be liable for any legal
                expenses including the lawyer's professional fees spent during
                the procedure.

         7.10   To your request, the company will pay an advance payment to you
                that you need to cover the reasonable costs you will be due to
                pay and/or are due to pay, including the lawyer fees, this
                according to the estimate made by the company and at the time
                decided by it, compensation to which you are entitled according
                to this statement, providing the total sum will not be more than
                the maximum compensation (subject to the instructions of section
                5.2 above).

         7.11   If the company should pay you any amount from the power of this
                statement, as an advance or otherwise, and it then becomes clear
                that you are to return it, all or part, due to the fact that you
                were not entitled to compensation, for any reason, you will
                return it to the company bearing linkage differences of the
                consumer price index (as it is publicized from time to time by
                the CBS) as well as interest determined by the Finance minister,
                approved by the finance committee of the Knesset, according to
                section 3 (i) of the Tax Law (new version), 1961.






         7.12   If the company paid any amount of this statement, and then the
                obligation due to which the payment was made was cancelled or
                was reduced for any reason, you will write a check to return the
                sum from the plaintiff in the procedure and you will do what
                ever is necessary so that the check is valid and the company can
                cash it, and once you do this you will not be obligated to
                return the sum that was cancelled. If you do not do so- you will
                have to return the sum to the company, or its part, according to
                the matter, plus linkage differences and interest accordingly.

         7.13   If the company's advocate represented you and the company in the
                procedure, and it later became clear that you are not entitled
                to compensation, for any reason, and a disagreement rises
                regarding your obligation to return the trial expenses or the
                amount to be returned, the disagreement will be transferred to
                an arbitrator to be agreed upon according to section 7.14. The
                company will bear the expense of the arbitrary, including lawyer
                fees, unless the arbitrator decides that you used the arbitrary
                not in good faith.

         7.14   In signing this statement, you are obligated to do all you can,
                within the framework of the law, to reduce the amount of
                compensation you are entitled to as much as possible. You will
                not agree to compromise and/or to arbitrary, unless the company
                agreed in advance and in writing, and if it is necessary the
                agreement of the insurer, that it was received. The company will
                not agree to compromise unless the compromise does not expose
                the company to other suits on part of the plaintiff and that the
                agreement will not be considered admission and/or recognizing of
                liability regarding the causes of the procedure. The company
                will bring to the knowledge of the employees the details of the
                agreement. In case there is disagreement between the company and
                employees, regarding if the agreement answers to the
                instructions of this section, it will be brought before an
                arbitrator for a quick decision to be appointed by the company.
                The arbitrator will be appointed within 7 days from the time one
                side demanded arbitrary agreed upon the sides and if there is no







                agreement, the identity of the arbitrator (that will be a former
                district or high court judge) by the head of the lawyer's
                chamber in Israel, unless the arbitrator decides that the
                arbitrary was used not in good faith.

         7.15   The company, as well as the company's advocate, will not agree
                to compromise if the sum is more than the compensation you will
                be entitled to, unless you agree in advance in writing and if
                there is need for the agreement of the insurer- with the
                advanced agreement of the insurer.

         7.16   In case you appeal the decision of a court in the procedure, you
                will have to receive the approval of the company in advance and
                in writing. The company will be entitled to refuse a request as
                mentioned due to relevant considerations regarding the incident.



8.       THE VALIDITY OF THE  OBLIGATION

         8.1    The obligation for compensation will be valid according to this
                statement regarding procedures against you during your work or
                office as well as procedures afterwards, providing they refer to
                actions you took from the time you were appointed to a position
                in the company, while you were in the position or as a result.
                The compensation obligation will stand for your inheritors
                and/or replacements according to law.

         8.2    The company will not be required to pay any sum paid to you for
                yourself or in your place, in any way, in the framework of
                insurance acquired by the company or in the framework of
                insurance acquired by a company controlled by the company or a
                connected company (if you have a position in them) or an
                obligation to any compensation of a company controlled by the
                company or anyone else.





         8.3    This statement does not cancel or concede or reduce any other
                compensation the position holder is entitled to from any other
                source according to any law and/or obligation.

         8.4    This statement does not prevent or limit the company from giving
                you additional special compensations, providing it does not harm
                the compensation obligation of this statement.

         8.5    This statement does not prevent or limit the company from
                increasing the maximum compensation due to the incidents
                regarding the compensation, providing the decision is reached
                according to law.

         8.6    The company's obligations will be interpreted according to this
                statement at length and in order to fulfill them, as permitted
                by law. In case of a contradiction between any instruction in
                this statement and any law that cannot be changed, added to or
                conditioned, the mentioned law will override, but this will not
                reduce the validity of the other instructions in this statement.

         8.7    This statement is not a contract for a third party and cannot be
                conceded.

         8.8    This statement of compensation cancels any other statement of
                compensation, compensation obligation and/or compensation
                agreements granted to you as a bearer of a position in the
                company.

         8.9    It is hereby agreed that the court authorized to deal with
                conflicts and/or disagreements regarding this statement, is the
                Tel Aviv-Jaffa court alone. The laws of the state of Israel
                alone will apply to this statement.

9.       THE PAYMENT

         9.1    To any payment paid to you, VAT will be added, when it applies.







         9.2    Any payment the company has to pay according to this statement
                will be paid within 30 days from the day it was requested.


                                                                   Respectfully,
                                                Ituran Location and Control Ltd.


Date:

CONFIRMATION:
-------------

I hereby confirm that I received the above statement and agree to everything in
it and am obligated to act according to its conditions.

Name:
      -------------------------

Signature:
          ---------------------

Date:
     --------------------------










                                                                    EXHIBIT 21.1
                         SUBSIDIARIES OF THE REGISTRANT



Telematics Wireless Ltd.
Ituran Beheer B.V.
Ituran-Network Ltd.
Ituran Cellular Communication Ltd.
Hotas Holding Ltd.
Ituran U.S.A. Inc.
Ituran NY Corporation
Ituran Florida Corporation
Ituran License Corporation
Ituran de Argentina S.A.
Teleran Holding Ltda.
Teleran Localizacao e Controle Ltda.
Ituran Servicios Ltda.











Certified Public Accountants

                            [Grant Thornton Fahn Kanne & Co. Letterhead Omitted]





            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


         We hereby consent to the reference to our firm under the caption
"Experts" and to the use of our report dated August 12, 2005, in the
Registration Statement on Form F-1 of Ituran Location and Control Ltd. dated
September 1, 2005.






/s/ Fahn Kanne & Co.
-------------------------------------
Fahn Kanne & Co
Certified Public Accountants (Isr.)
Member firm of Grant Thornton International


Tel-Aviv, Israel
September 1, 2005





Head Office:
Levinstein Tower
23 Menachem Begin Road
Tel-Aviv 66184, ISRAEL
P.O.B. 36172, 61361
Tel. 972-3-7106666
Fax. 972-3-7106660
info@gtfk.co.il
www.ftfk.co.i1








            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            --------------------------------------------------------

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated May 29, 2005 in the Registration Statement on Form F-1
and related Prospectus of Ituran Location & Control Ltd.



                                                         Ziv Haft

                                                       /s/ Ziv Haft

                                            Certified Public Accountants (Isr.)

                                                      BDO Member Firm

Tel-Aviv, August 29, 2005