EXECUTIVE OFFICERS

         The following table sets forth certain information regarding the executive officers of the Company as of October 23, 2002.December 31, 2003.

         The biography for Mr. Reinschmidt isbiographies of Messrs. Sheetrit and Balot are included in the previous section with the otherregarding proposed director nominees.

David Sheetrit, Chief Operating Officer, has served as the Company's Acting Chief Executive Officer and Chief Operating Officer during 2001, and also served as Director of Marnetics Ltd. Mr. Sheetrit serves also as a Director of Marnetics Inc. During 2000 Mr. Sheetrit served as the Chief Operating Officer of Linkware Ltd. Before joining Marnetics, Mr. Sheetrit was Headnominees of the Tel Aviv Branch of the College of Management since 1995. In this capacity he supervised the operations, investments, marketing activities and academic programs of the College, which is comprised of 3,000 students and 200 faculty and staff. Mr. Sheetrit has lectured at various colleges and academies and served as an independent organizational and business consultant to various organizations and institutions. Mr. Sheetrit has expressed his will to serve in the Company until December 31, 2002.Company.

Ilan Hadar, Chief Financial Officer of the Company, is responsible for financial management and control and has been with the Company since May 2002. Mr. Hadar possesses ten years of experience in financial management positions with particular expertise in facilitating initial public offerings, merger and acquisitions, and maintaining shareholder and investor relationships. Additionally, Mr. Hadar has extensive experience in managing the operations of publicly traded enterprises in various operating sectors. Prior to joining the Company, Mr. Hadar served as the Chief Financial Officer of Kardan Technologies Ltd (TASE: KRTC) where he participated in the team that led the initial public offering of the company. Mr. Hadar was also a member of the investment activities team of the company in the e-commerce sector. Prior to Kardan Technologies Mr. Hadar spent several years with Nessuah Zannex Ltd. (TASE: NESU), a leading Israeli full service brokerage house, the Israeli representative of US Bancorp Piper Jaffray and Invesco. Mr. Hadar led the merger between Nessuah and Zannex to form the current structure of that company. Mr. Hadar is a Certified Public Accountant (Israel and USA) and holds M.B.A. in Finance and B.A. in Economics & Accounting from the Hebrew University in Jerusalem.

Hanoch Newman, Vice President Research and Development, joined Marnetics in June 2000 as its Vice President of Research and Development. He is a specialist in real-time systems, embedded systems, UNIX/WIN, C++/C communication, and device drivers. He also has vast experience in computer programming, with expertise in TCP/IP and other Internet and Communication protocols, as well as system management. His past experience includes serving as Project Manager at Elron Software NCC from 1999 to 2000, R&D Manager at CT Motion (start-up) from 1998 to 1999, and CTO and MIS in the Israeli Air Force for five years prior thereto. He holds a B.A. in Computer Sciences.

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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

Compensation of Executive Officers

and Directors

         For the year ended December 31, 2001,2002, the aggregate amount of compensation paid by the Company to all directors and officers, as a group, and directors, including former officers and directors, was approximately $799,761$452,000, including amounts set aside or accrued to provide pension, retirement or similar benefits on behalf of all of the Company's directors andCompany’s executive officers during the year 2001. The company expects that the amount of compensation paid by the Company to all directors and officers as a group during 2002 will be lower significantly, and will be further lowered during 2003.directors.

Employment Agreements

        On July 30, 2001, the Company entered into an Agreement, which provides, in part, that beginning on September 1, 2001, Mr. Shlomo Harari will be the Company's Chief Executive Officer during the term of the agreement, in consideration for the following:

• The NIS equivalent of US $12,000 per month.
  
  
• Options for the purchase of up to 50,000 Ordinary Shares of the Company with an exercise price of $0.02 per share which will vest in eight (8) biannual installments beginning on March 1, 2002, and additional options for the purchase of up to 50,000 Ordinary Shares upon achievement of certain sales and Company financing milestones in 2002. Such options will be subject to the 2001 Stock Option Plan of the Company.

            The term of the Agreement was for 6 months, following which Mr. Harari and the Company parties agreed to terminate the relationship.

            As detailed in Proposal No. 7 (b), effectiveEffective December 2, 2001, Marnetics Ltd. entered into a services agreementServices Agreement with Netlogic Ltd., a company under the control of Menachem Reinschmidt, a major shareholder and providesActive Chairman of the Board of Directors of the Company, for the provision, on a non-exclusive basis, of executive managerial and other related services with respect to the Company, Marnetics Ltd. and any of itstheir affiliated companies, as may be prescribed from time to time by the boardBoard of directorsDirectors of Marnetics, in consideration for the following:

• To pay a monthly amount in NIS equivalent to US$11,000 (the “Service Fee”), plus value added tax, if applicable, and subject to withholding of taxes at source. Such amount shall be paid within seven (7) days of the submission of a valid tax receipt with respect to services rendered in the previous calendar month. The “NIS equivalent” shall be determined in accordance with the Representative Rate known as of the last day of the month prior to payment. Due to the high level of personal trust and the substantial management skills and discretion required with respect to rendition of the Services, the parties agree that no additional amounts shall be payable to the Representative apart from those detailed below.
  
  
• To provide an automobile (the “Vehicle”) for use by the Representative in accordance with the prevailing procedures of the Company. The Representative shall ensure that the Vehicle shall be driven cautiously with due concern for persons and properties. The use of the Vehicle shall be in accordance with all traffic laws and regulations. The Representative shall ensure the proper maintenance of the Vehicle. The Company shall reimburse all actual expenses incurred by the Representative directly in connection with use of the Vehicle, excluding any fines, which are the sole obligation of the Representative to pay in a timely fashion. All tax consequences of the benefits of use of the Vehicle pursuant to this provision shall be borne by the Consultant. The Company is authorized to withhold at source such amounts of income tax, as it deems appropriate in connection therewith.

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• The Consultant shall not be entitled to any additional payments with respect to medical, life or disability insurance, Managers Insurance, retirement benefits, or any amounts with respect to severance, recuperation, sickness or vacation or any other amounts whatsoever.

            The term of this Agreement shall terminate in December 2002, unless terminated earlier in accordance with this Agreement. One month prior to the expiration of this Agreement, the parties shall commence negotiations with respect to any future relationship.

            Either party may terminate this Agreement without cause upon an advance written notice of at least 30 days. In such event, the Consultant shall be entitled to all compensation due for such period and the Consultant shall assist as necessary with respect to the transfer of responsibilities to a person designated by the Company.Marnetics.

        The Board of DirectorDirectors, after receiving the approval of the Audit Committee, decidedapproved an Addendum to approve the extension of the agreement with Netlogic Ltd. Services Agreement (effective December 2, 2002) extending the Services Agreement for another six (6) months, startingfrom December 2, 2002 as detailedto June 2, 2003. The Addendum was approved by the shareholders of the Company in Proposal No. 7 (c).the Annual Meeting held on November 26, 2002. The roleposition of Mr. Reinschmidt duringwith the extension period will be to holdCompany, under the officeAddendum, is that of Active Chairman of the Board of Directors on a fifty percent basis part time position. The duties of the Active Chairman will be to run the Company's strategic issues such as: partnerships, investments and selling the Company's technology and intellectual property.basis. The compensation for such duties will beis a monthly gross fee of $5,000 (five thousand dollars) plus ValueVAT (Value Added Tax.Tax). In addition, the Company will supplysupplies Mr. Reinschmidt with a leased car and cell phone.cellular phone for the duration of the extension of the Netlogic Ltd. Services Agreement.

        A Second Addendum to this Services Agreement, effective as of December 2, 2002, was signed on June 2, 2003, for the extension of the Services Agreement for an additional period beginning June 3, 2003 and ending on December 31, 2003, subject to shareholder approval which is being sought under Proposal No. 5(a). Under such Proposal, the Company is also seeking approval of an additional extension of the Services Agreement up to March 31, 2004 for the continued rendition of services of two days per week. The monthly compensation payable under such additional extension shall be $2,000. See“Proposal No. 5(a).”

Director Compensation

        Under the Companies Law, External directorsDirectors are entitled to annual compensation, plus a per meeting attendance fee. The Company currently pays its External directorsDirectors an annual fee of NIS 14,42013,800 (US $3,100)$ 3,100) and a per meeting attendance fee of NIS 900 (US $ 200). In addition, the Company proposes to pay Mr. George Balot, a director, a per meeting attendance fee of NIS 915 (US $200). Other than its External directors,$ 200) for his attendance at meetings held prior to and up until his becoming Acting Chief Financial Officer of the Company'sCompany (see“Proposal No. 5(c).” The remaining Company’s directors do not currently receive any compensation for their services as directors.directors, with the exception of Mr. Menachem Reinschmidt under the Services Agreement with Netlogic Ltd., a company wholly owned by Mr. Reinschmidt.

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PROPOSAL NO. 2
RATIFICATION OF THE SELECTION OF AUDITORS

         The Board of Directors has selected Deloitte Touche Tohmatsu Brightman Almagor & Co. as independent public auditors of the Company for the year ending December 31, 2002,2003, subject to ratification by shareholders at the General Meeting. If the shareholders do not approve the selection of Deloitte Touche Tohmatsu Brightman Almagor & Co., the Board of Directors will reconsider the matter.

Independent Auditors Fees

         Deloitte Touche Tohmatsu Brightman Almagor & Co. billed Marnetics Ltd. an aggregate of $27,384$12,389 in fees for professional services rendered in connection with the audit of the Company and Marnetics Ltd.'s financial statements for the recent fiscal year 2001. Deloitte Touche Tohmatsu Brightman Almagor & Co.ended 2002. Of this total amount billed, $5,000 of the Company an aggregate of $4,370 in fees for other services renderedwas applicable to the Company and its affiliates for the fiscal year ended December 31, 2001.$7,389 was applicable to Marnetics Ltd..

Recommendation of Board of Directors

The Board of Directors believes that approval to ratify the selection of Deloitte Touche Tohmatsu Brightman Almagor & Co. as the auditors is in the best interest of the Company and its shareholders and therefore, unanimously recommends that the shareholders vote "FOR"“FOR” the approval of the auditors and authorization of the Board of Directors to fix their compensation.

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The Board of Directors of the Company unanimously recommends that the shareholders of the Company vote FOR“FOR” the approval of the Company to indemnify the directors and officers, including the newly elected directorsofficers and officers,directors, to the maximum extent permitted under the Israeli Company lawCompanies Law or any other successor law or applicable law.

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(b)Services Agreement with Netlogic Ltd., which is controlled by Mr. Menachem Reinschmidt, a major shareholder and Chairman of the Board of Directors of the Company.

(b) Balot Services Agreement.Agreement

        Effective December 2, 2001,June 15, 2003, Marnetics Ltd. entered into a services agreementServices Agreement with Netlogic Ltd.,Mr. George Balot, a company under the control of Menachem Reinschmidt, a major shareholder, director and CEO of the Company, for the provision of services as Chief Financial Officer of both the Company and providesMarnetics Ltd., on a non-exclusivepart-time basis, executive managerialthrough to September 30, 2003, and other related services with respectin October 2003 for an additional period through December 31, 2003.

        The Board of Directors, after receiving the approval of the Audit Committee, approved the Balot Services Agreement and Extension Agreement subject to shareholder approval, which is required under the Israeli Companies Law, as Mr. Balot serves as a member on the Board of Directors of the Company.

        The compensation payable to Mr. Balot under the Services Agreement and Extension Agreement is a monthly fee of $2,000 (two thousand dollars) plus VAT (Value Added Tax).

        The Company Marnetics Ltd. and any of its affiliated companies, as mayproposes that following December 31, 2003, the Balot Services Agreement be prescribed from timeextended for an additional period up to time by the board of directors of Marnetics, in considerationMarch 31, 2004, for the following:

• To pay a monthly amount in NIS equivalent to US$11,000 (the “Service Fee”), plus value added tax, if applicable, and subject to withholding of taxes at source. Such amount shall be paid within seven (7) days of the submission of a valid tax receipt with respect to services rendered in the previous calendar month. The “NIS equivalent” shall be determined in accordance with the Representative Rate known as of the last day of the month prior to payment. Due to the high level of personal trust and the substantial management skills and discretion required with respect tocontinued rendition of services which will also include the Services, the parties agree that no additional amounts shall be payable to the Representative apart from those detailed below.
  
  
• To provide an automobile (the “Vehicle”) for use by the Representative in accordance with the prevailing proceduresbookkeeping needs of the Company. The Representative shall ensure that the Vehiclemonthly compensation payable under such additional extension shall be driven cautiously with due concern$2,500 (two thousand five hundred dollars) plus VAT (Value Added Tax).

          It should be noted that Balot and the Company have ceased their negotiations in regard to a finder’s fee agreement for persons and properties. The usethe sale of the Vehicle shall be in accordance with all traffic laws and regulations. The Representative shall ensure the proper maintenance of the Vehicle. The Company shall reimburse all actual expenses incurred by the Representative directly in connection with use of the Vehicle, excluding any fines, which are the sole obligation of the Representative to pay in a timely fashion. All tax consequences of the benefits of use of the Vehicle pursuant to this provision shall be borne by the Consultant. The Company is authorized to withhold at source such amounts of income tax, as it deemsCompany’s technology and/or finding an appropriate in connection therewith.

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• The Consultant shall not be entitled to any additional payments with respect to medical, life or disability insurance, Managers Insurance, retirement benefits, or any amounts with respect to severance, recuperation, sickness or vacation or any other amounts whatsoever.

The term of this Agreement shall terminate in December 2002, unless terminated earlier in accordance with this Agreement. One month priormerger partner, due to the expirationoffer put forward by Magal Ltd. for the purchase of this Agreement, the parties shall commence negotiations with respect to any future relationship.

Either party may terminate this Agreement without cause upon an advance written notice of at least 30 days. In such event, the Consultant shall be entitled to all compensation due for such periodMarnetics Ltd. and the Consultant shall assist as necessary with respect to the transfer of responsibilities to a person designated by the Company.ensuing negotiations.

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Summary of Expenses for the year 2003:
Expert-NetQA team maximum cost              $120,000
Management expenses                         $150,000
G&A and M&S expenses                        $380,000
Budget for Market Research                  $ 50,000
Total Expenses                              $700,000

Amount and Nature of Beneficial Ownership(1)Ownership (1)Name and Address of Beneficial OwnerNumberPercent(2)

         Linkware Ltd.
         3 Hadror Street
         P.O. Box 73
         Hod Hasharon 45100 Israel                                   1,740,575(3)             18.7%



         Dov Strikovsky
         83 Akiva Street
         Ra'anana, Israel
                                                                     1,015,714(4)             10.9%


         ECI Telecommunications Ltd.
         34 Hasivim Street
         Kiryat Aryeh Industrial Park
         Petach Tikva Israel                                         1,187,439(5)             12.8%



         STI Ventures Investments No. 2 B.V
         Hullenbergweg 379
         1101 Cr. Amsterdam
         Zuide - Oost
         The Netherlands                                             1,180,907                12.7%



         Prime Technology Ventures NV
         Stroombaan 6-8
         1181 VX Amstelveen,
         The Netherlands                                                630,550               6.8%

Amount and Nature of Beneficial Ownership(1)Ownership (1)
                                                           Number of             Percent
         Name of Beneficial OwnerSharesof Class(2)
Menachem Reinschmidt, Director and CEO                1,740,575(3)               18.7%

Pekka Roine, Director                                   630,550(4)                6.8%

Moshe Rubin, External Director                             --                      --

David Sheetrit, Director and COO                         27,803(5)                  *

Ilan Hadar, CFO                                          17,000(6)                  *

Hanoch Newman, VP R&D                                    35,428 (7)                 *

All Officers and Directors as a Group
(6 individuals)                                          2,451,356               26.4%
*Less than 1%