MATTERS SUBMITTED TO SHAREHOLDERS

PROPOSAL 1

ELECTION OF A CLASS I DIRECTOR

Background

        Following the Annual Meeting, our board of directors shall consist of seven directors. Our Articles of Association provide that we may have up to nine directors.

        Under our Articles of Association, our directors (other than our outside directors) are divided into three classes. Each class of directors consists, as nearly as possible, of one-third of the total number of directors constituting the entire board of directors (other than our outside directors). At each annual meeting of our shareholders, the election or reelection of directors following the expiration of the term of office of the directors of that class of directors is for a term of office that expires on the third annual meeting following such election or reelection, such that from 2006 and thereafter, each year the term of office of one class of directors expires.

        The term of our Class II directors, consisting of Dr. Eyal Kishon and Shai Saul, expires at this Annual Meeting. Our Class III directors, consisting of Yigal Jacoby and Rami Hadar, will hold office until the annual meeting of our shareholders in 2009. In addition, we have two outside directors who serve on the board of directors for fixed periods in accordance with the Israeli Companies Law.

        Our shareholders elected Yossi Sela at the annual meeting of shareholders held on August 15, 2007 to serve until the annual meeting of our shareholders in 2010. Mr. Sela advised us that he will resign from his position as Class I director immediately following the election of a new Class I director. Mr. Sela has confirmed to the Company that his decision to resign did not result from, and that there does not exist, any disagreement between the Company and Mr. Sela relating to the Company’s operations, policies or practices.

        Shraga Katz, who currently provides advisory services to the Company, is proposed for election as a Class I director by the shareholders. If elected at the Annual Meeting, Mr. Katz will serve until the 2010 annual meeting of our shareholders and until his successor has been elected and qualified, or until his office is vacated in accordance with our Articles of Association and the Israeli Companies Law. Mr. Katz has advised the Company that he is willing to serve as a director if elected, that he has the qualifications, and time required for the performance of his duties as a director and that there are no legal restrictions preventing him from assuming such office.

        Subject to Shraga Katz’s election as a Class I director, our board of directors intends to name Mr. Katz as the Chairperson of the board of directors, succeeding Yigal Jacoby, who will remain a member of the board of directors.

        Shraga Katz is a Venture Partner of Magma Venture Partners, a leading venture capital firm specializing in early-stage investments in communication, semiconductors, internet and media. Mr. Katz has over 30 years of experience in the technology sector and has specialized for over 20 years in the communications industry. In 1996, Mr. Katz founded Ceragon Networks Ltd. (NASDAQ: CRNT), a global provider of high capacity wireless networking solutions for mobile and fixed operators and private networks, and served as its President and CEO until mid 2005. Prior to founding Ceragon, Mr. Katz served in the Israeli Defense Forces for 17 years. Mr. Katz was head of the Electronic Research and Development Department of the Israeli Ministry of Defense. Mr. Katz is a two-time winner of the Israel Defense Award, Israel’s most prestigious recognition for research and development. Mr. Katz serves as director on the Board of Siverge Networks. Mr. Katz holds a B.Sc. from the Technion – Israel Institute of Technology and an M.B.A. from Tel Aviv University.

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Proposed Resolution

        You are requested to adopt the following resolution:

        “RESOLVED, that Shraga Katz be elected as a Class I director, to serve until the 2010 annual meeting of shareholders and until his successor has been elected and qualified, or until his office is vacated in accordance with the Company’s Articles of Association and/or the Israeli Companies Law-1999.”

        The affirmative vote of the holders of a majority of the voting power represented at the Annual Meeting in person or by proxy and voting thereon is required to adopt this resolution.

Board Recommendation

        THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADOPTION OF THIS RESOLUTION.

PROPOSAL 2

REELECTION OF CLASS II DIRECTORS

Background

        The term of our Class II directors, consisting of Dr. Eyal Kishon and Shai Saul, expires at this Annual Meeting.

        Each of Dr. Eyal Kishon and Shai Saul is proposed for reelection by the shareholders. If reelected at the Annual Meeting, each of the above named nominees will serve until the 2011 annual meeting of our shareholders and until his successor has been elected and qualified, or until his office is vacated in accordance with our Articles of Association and the Israeli Companies Law. Each of the above named nominees has advised the Company that he is willing to continue serving as a director if re-elected, that he has the qualifications, and time required for the performance of his duties as a director and that there are no legal restrictions preventing him from assuming such office.

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        Dr. Eyal Kishon has served as a director since 1998. In 1996, Dr. Kishon co-founded Genesis Partners, an Israeli technology-driven venture capital fund, and currently serves as Founder and Managing Partner. From 1993 to 1996, Dr. Kishon served as the Associate Director of the Polaris Fund, now Pitango. Prior to that, Dr. Kishon served as Chief Technology Officer at Yozma Venture Capital from 1992 to 1993. From 1991 to 1992, he worked at the IBM Research Center, and from 1989 to 1991 he worked at the AT&T Bell Laboratories’ Robotics Research Department. Dr. Kishon also serves as a director of AudioCodes Ltd. (NASDAQ: AUDC) and Celtro Inc. He holds a Ph.D. in Computer Science and Robotics from the Courant Institute of Mathematical Sciences at New York University and a B.A. in Computer Science from the Technion – Israel Institute of Technology. Dr. Kishon has written a number of scientific publications and holds a patent for signature verification for interactive security systems.

        Shai Saul has served as a director since 2000. Mr. Saul is currently Managing General Partner of Tamir Fishman Ventures. During 2001, he acted as interim-CEO for CopperGate Communications Ltd. From 1994 to 1999, Mr. Saul acted as Executive Vice President for Aladdin Knowledge Systems Ltd. (NASDAQ: ALDN), a leading provider of digital security solutions. From 1993 to 1994, he served as Chief Executive Officer of Ganot Ltd. Mr. Saul also serves as Chairman of the Board of CopperGate Communications and as member of the board of Lanoptics Ltd. (NASDAQ: LNOP). Mr. Saul holds an LL.B. from Tel Aviv University.

Proposed Resolution

        You are requested to adopt the following resolution:

        “RESOLVED, that each of Dr. Eyal Kishon and Shai Saul be reelected as a Class II director, to serve until the 2011 annual meeting of shareholders and until his successor has been elected and qualified, or until his office is vacated in accordance with the Company’s Articles of Association and/or the Israeli Companies Law-1999.”

        The affirmative vote of the holders of a majority of the voting power represented at the Annual Meeting in person or by proxy and voting thereon is required to adopt this resolution.

Board Recommendation

        THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADOPTION OF THIS RESOLUTION.

PROPOSAL 3

TERMS OF SERVICE OF THE NEW DIRECTOR

Background

        Under the Israeli Companies Law-1999, arrangements regarding the compensation of a director of a public company require the prior approval of the Company’s audit committee, board of directors and shareholders, in that order. As a result of Shraga Katz’s proposed election as a director of the Company, his proposed terms of service require approval by the Company’s audit committee, board of directors and shareholders.

        The Company currently engages Shraga Katz to provide advisory services in accordance with an agreement that was signed on June 6, 2008. In accordance with that agreement, Mr. Katz is entitled to an annual salary of approximately $2,500. In addition, the Company granted to Mr. Katz in May 2008 options to purchase 50,000 ordinary shares of the Company at an exercise price of $3.20 per share, the then fair market value of the Company’s ordinary shares, vesting over a period of three years, with 1/12 of the options vesting at the end of each 3-month period from the date of grant. The vesting of said options accelerates upon certain mergers and acquisitions involving the Company.

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        The board of directors proposes that in his capacity as the Chairperson of the board of directors, Shraga Katz’s compensation shall be as follows (the “Recommended Compensation Plan”):

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annual compensation, in addition to social benefits and reimbursement of any and all reasonable business expenses, of NIS 180,000, or approximately $52,000, to be paid in equal monthly installments; and

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additional options to purchase 200,000 ordinary shares of the Company with an exercise price equal to the closing sale price of the Company’s ordinary shares on the date of grant, vesting over a period of four years, with 1/16 of the options vesting at the end of each 3-month period from the date of their grant (which shall be the first trading day after the date of approval of the grant by the Annual Meeting). The vesting of said options would accelerate upon certain mergers and acquisitions involving the Company.

        The Company also wishes to enter into an agreement with Mr. Katz exculpating him, to the fullest extent permitted by law, from liability to it for damages caused to it as a result of a breach of duty of care, and undertaking to indemnify him to the fullest extent permitted by law. This indemnification is limited to events determined as foreseeable by the board of directors based on the Company’s activities, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances. The current maximum amount set forth in such agreements is the greater of (1) with respect to indemnification in connection with a public offering of our securities, the gross proceeds raised by us and/or any selling shareholder in such public offering, and (2) with respect to all permitted indemnification, including a public offering of our securities, an amount equal to 50% of the Company’s shareholders’ equity on a consolidated basis, based on its most recent financial statements made publicly available before the date on which the indemnity payment is made. The agreement shall be in substantially the form approved at the special meeting of shareholders held on October 26, 2006 and in substantially the same form entered into with other directors.

Proposed Resolution

        You are requested to adopt the following resolutions:

        “RESOLVED, that the Recommended Compensation Plan for Shraga Katz, is hereby approved.

        RESOLVED, that the Company be authorized to enter into an agreement with Shraga Katz exculpating him, to the fullest extent permitted by law, from liability to the Company for damages caused to the Company as a result of a breach of duty of care, and undertaking to indemnify him to the fullest extent permitted by law, in the form approved at the special meeting of shareholders held on October 26, 2006 and the same form entered with other directors.”

        The affirmative vote of the holders of a majority of the voting power represented at the Annual Meeting in person or by proxy and voting thereon is required to adopt these resolutions.

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Board Recommendation

        THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADOPTION OF THESE RESOLUTIONS.

PROPOSAL 4

AMENDMENT OF THE COMPENSATION PLAN OF YIGAL JACOBY

Background

        Yigal Jacoby, the Company’s current chairperson of the board of directors, is employed by the Company under the terms of an employment agreement entered into between Mr. Jacoby and the Company on October 26, 2006 (the “Existing Employment Agreement”). The Existing Employment Agreement governs the provision of management and consulting services with respect to our strategy, long-term vision and key objectives. Under the terms of the agreement, Mr. Jacoby is required to devote 75% of his time to his position with us and he is entitled, in addition to social benefits and reimbursement of any and all reasonable business expenses, to monthly compensation of NIS 43,000, or approximately $12,300. As of February 2008, Mr. Jacoby waived approximately 65% of his salary under the Existing Employment Agreement.

        Yigal Jacoby advised the Company of his intention, subject to the election of Shraga Katz as a Class I director and his appointment as the chairperson by the board of directors, to resign from his current office as the chairperson of the board of director and to continue to serve as a member of the board of directors. In this capacity, Mr. Jacoby will continue to provide management and guidance services to the Company. At the Annual Meeting, shareholders will be asked to approve the following amendments of the Existing Employment Agreement:

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to reduce the scope of engagement from 75% to 12.5% of a full time position; and

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to amend the monthly compensation paid to Mr. Jacoby under the Existing Employment Agreement to NIS 7,500 per month, or approximately $2,200.

Proposed Resolution

        You are requested to adopt the following resolution:

        “RESOLVED, that the Existing Employment Agreement entered into between the Company and Yigal Jacoby on October 26, 2006 shall be amended to provide for a reduction in (i) the scope of engagement to 12.5% of a full time position and (ii) Mr. Jacoby’s monthly compensation to NIS 7,500, and that all other terms of the Existing Employment Agreement shall remain in effect without any change.”

        The affirmative vote of the holders of a majority of the voting power represented at the Annual Meeting in person or by proxy and voting thereon is required to adopt this resolution.

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Board Recommendation

        THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADOPTION OF THIS RESOLUTION.

PROPOSAL 5

COMPENSATION OF OTHER DIRECTORS

Background

        The Company, based upon the recommendation of its audit committee and the authorization of its board of directors, is submitting for approval the compensation of each of Dr. Eyal Kishon, Shai Saul and Rami Hadar as described herein. The audit committee and the board of directors considered market practices in Israel with respect to compensation of directors in Israeli companies whose shares are traded in the United States, as well as the scope of service required, the responsibilities involved, the need to retain highly-qualified candidates and other relevant factors.

Proposed Resolution

        You are requested to adopt the following resolution:

        “RESOLVED, to grant to each of Dr. Eyal Kishon, Shai Saul and Rami Hadar options to purchase 15,000 ordinary shares of the Company with an exercise price equal to the closing sale price of the Company’s ordinary shares on the date of grant, vesting over a period of three years, with 1/12 of the options vesting at the end of each 3-month period from the date of their grant (which shall be the first trading day after the date of approval of the grant by the Annual Meeting). Vesting of the options shall accelerate upon certain mergers and acquisitions involving the Company.”

        The affirmative vote of the holders of a majority of the voting power represented at the meeting in person or by proxy and voting thereon is required to adopt this resolution.

Board Recommendation

        THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE ADOPTION OF THIS RESOLUTION.

PROPOSAL 6

EXTENSION OF THE EXPIRATION DATE OF YIGAL JACOBY’S PURCHASE RIGHT

Background

        Yigal Jacoby was granted a right to purchase 246,479 ordinary shares in connection with the Company’s Series A financing (the “Escrow Shares”). The shares are issued, but are held in trust for the benefit of the Mr. Jacoby pursuant to an escrow agreement entered into on January 28, 1998, amended on October 26, 2006, by and among the Company, Mr. Jacoby and an escrow agent. Pursuant to the terms of this agreement, the escrow agent is holding the Escrow Shares for which Mr. Jacoby has paid nominal value. While these Escrow Shares are held in trust, neither Mr. Jacoby nor the trustee has voting or economic rights with respect to such shares. Mr. Jacoby may exercise his right to purchase the Escrow Shares in trust, in whole or in part, by paying any portion of the full $600,000 purchase price (less $475 previously paid in respect of the nominal value of the shares) for the respective portion of the shares. Mr. Jacoby has the right to pay any portion of the purchase price for the respective portion of the Escrow Shares by “net payment” of his right to purchase. Mr. Jacoby’s right to purchase expires upon November 15, 2008. At the Annual Meeting, shareholders will be asked to approve, in addition to the approvals of the audit committee and board of directors, an extension of the exercise period of Yigal Jacoby’s right to purchase the Escrow Shares until November 15, 2010. All other terms of the Escrow Shares will remain the same. If this proposal is approved, the Company will record a non-cash expense which is currently estimated to be approximately $250,000 to be amortized over length of the extended exercise period.

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Proposed Resolution

        You are requested to adopt the following resolutions:

        “RESOLVED, that the extension of the exercise period of Yigal Jacoby to purchase 246,479 ordinary shares, to November 15, 2010, be, and it hereby is, approved.

        RESOLVED, to authorize the Company to enter into an amendment of the escrow agreement reflecting the extension of the exercise period until November 15, 2010.”

        The affirmative vote of the holders of a majority of the voting power represented at the Annual Meeting in person or by proxy and voting thereon is required to adopt these resolutions.

Board Recommendation

        THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADOPTION OF THESE RESOLUTIONS.

PROPOSAL 7

APPROVAL OF DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE

Background

        On December 31, 2007, the Company renewed its directors’ and officers’ liability insurance policy. Under the Israeli Companies Law-1999, the procurement of insurance coverage for the Company’s directors and those executive officers who also serve as directors requires approval of the Company’s audit committee, board of directors and shareholders, in that order.

        The audit committee and the board of directors recommend that shareholders ratify and approve the decision to renew and continue to maintain each year directors’ and officers’ liability insurance covering potential liability of senior officers and directors of the Company, as permitted under the Companies Law, with the fundamental terms described herein. To date, no claims for directors’ and officers’ liability insurance have been filed under this policy.

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        The policy provides coverage to the Company’s directors and senior officers for claims made (including defense costs) and judgments rendered against such insured persons arising from acts connected to their service as directors or officers of the Company, and also contains standard exclusions. The policy also covers security claims made by shareholders in respect of alleged wrongful acts of the Company.

Proposed Resolution

        You are requested to adopt the following resolutions:

        “RESOLVED, that the procurement and maintenance of the directors’ and officers’ liability insurance for the period beginning December 31, 2007 and ending December 30, 2008, is hereby ratified and approved.

        RESOLVED, that the Company will continue thereafter on a year-to-year basis to obtain directors’ and officers’ liability insurance.”

        The affirmative vote of the holders of a majority of the voting power represented at the Annual Meeting in person or by proxy and voting thereon is required to adopt these resolutions.

Board Recommendation

        THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADOPTION OF THESE RESOLUTIONS.

PROPOSAL 8

REAPPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Background

        Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, was our independent registered public accounting firm for the year ended December 31, 2007. At the Annual Meeting, shareholders will be asked to approve the reappointment of Kost Forer Gabbay & Kasierer as our independent registered public accounting firm for the year ending December 31, 2008 and until the next annual meeting of shareholders and to authorize the board of directors, upon the recommendation of the audit committee, to fix the remuneration of the independent registered public accounting firm in accordance with the volume and nature of its services.

Audit Committee Pre-Approval Policies and Procedures

        Our audit committee pre-approves audit and non-audit services rendered by our independent registered public accounting firm, Kost Forer Gabbay & Kasierer, a Member of Ernst & Young Global, and its affiliates. This pre-approval is designed to insure that such engagements do not impair the independence of our independent registered public accounting firm.

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        The following table sets forth, for each of the years indicated, the fees billed by our independent registered public accounting firm.

				Year ended December, 31,
				2006			2007
				(in thousands of U.S. dollars)
	Audit Fees(1)			$	426		$	265
	Audit-Related Fees(2)				-			15
	Tax Fees(3)				11			29
	All Other Fees(4)				5			25
	Total			$	442		$	334

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(1)

“Audit fees” include fees for services performed by our independent public accounting firm in connection with our annual audit for 2007 (including the audit required by Section 404 of the Sarbanes-Oxley Act), certain procedures regarding our quarterly financial results submitted on Form 6-K and consultation concerning financial accounting and reporting standards.

(2)	“Audit-Related fees” include fees for the performance of due diligence investigations.

(3)	“Tax fees” include fees for professional services rendered by our independent registered public accounting firm for tax compliance and tax advice on actual or contemplated transactions.

(4)	“Other fees” include fees for services rendered by our independent registered public accounting firm with respect to government incentive programs.

Proposed Resolution

        You are requested to adopt the following resolution:

        “RESOLVED, that the reappointment of Kost Forer Gabbay & Kasierer (a member of Ernst & Young Global) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2008 and until the next annual meeting of shareholders be approved, and that the board of directors, upon recommendation of the audit committee, be authorized to fix the remuneration of said independent registered public accounting firm in accordance with the volume and nature of their services.”

        The affirmative vote of the holders of a majority of the voting power represented at the Annual Meeting in person or by proxy and voting thereon is required to adopt this resolution.

Board Recommendation

        THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADOPTION OF THIS RESOLUTION.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

        The aggregate compensation paid to, or accrued on behalf of, our directors and executive officers as a group during 2007 was approximately $2.3 million, consisting of salary, fees, bonus, commissions and directors’ fees, and approximately $377,000 consisting of amounts set aside or accrued to provide pension, retirement or similar benefits, but excluding amounts expended for automobiles made available to our officers, expenses, including dues for professional and business associations, business travel and other expenses, and other benefits commonly reimbursed or paid by companies in Israel.

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        During 2007, our officers and directors received, in the aggregate, options to purchase 440,000 ordinary shares under our equity compensation plans. These options have a weighted average exercise price of approximately $8.76 and the options will expire ten years after the date the options were granted. As of October 14, 2008, our directors and executive officers hold options to purchase an aggregate of 1,542,970 ordinary shares issuable pursuant to exercise of such options.

AUDIT COMMITTEE REPORT

        The audit committee is comprised solely of independent directors, as defined by the rules of the SEC and the Nasdaq National Market, and operates under a written charter which is available on the Company’s website.

        The audit committee includes at least one independent director who is determined by the board of directors to meet the qualifications of an “audit committee financial expert” in accordance with SEC rules. Ms. Nurit Benjamini is the independent director who has been determined to be an audit committee financial expert. Shareholders should understand that this designation is an SEC disclosure requirement related to Ms. Benjamini’s experience and understanding with respect to certain accounting and auditing matters. The designation does not impose on Ms. Benjamini any duties, obligations or liability that are greater than are generally imposed on her as a member of the audit committee and the board of directors, and her designation as an audit committee financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the audit committee or the board of directors.

        The primary focus of the audit committee is to assist the board of directors in its general oversight of the Company’s financial reporting, internal controls and audit function. Management has the primary responsibility for preparation, presentation and integrity of the Company’s financial statements, accounting and financial reporting principles, internal controls and procedures designed to ensure compliance with applicable accounting standards, and applicable laws and regulations. The Company’s independent registered public accounting firm is responsible for performing an audit of the consolidated financial statements in accordance with generally accepted auditing standards in the United States. Members of the audit committee are not auditors, and their functions are not intended to duplicate or certify the activities of management and the independent registered public accounting firm, nor can the audit committee certify that the independent registered public accounting firm is “independent” under applicable rules.

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        In this context, the audit committee has met and held discussions with management, the Company’s internal auditor and the independent registered public accounting firm. Management represented to the audit committee that the audited financial statements of the Company included in the Company’s annual report to shareholders for the year ended December 31, 2007, were prepared in accordance with generally accepted accounting principles in the United States, and the audit committee has reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm. The audit committee reviewed with the Company’s independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles, its judgments as to the acceptability as well as the appropriateness of the Company’s application of accounting principles and such other matters required to be discussed with the independent registered public accounting firm by PCAOB Rule 3200T regarding “Communication with Audit Committees.” The audit committee’s discussions with the independent registered public accounting firm were held both with and without management present, and included the scope of their respective audits, their evaluation of the Company’s internal controls and the overall quality of the Company’s financial reporting.

        In addition, the audit committee has discussed with the independent registered public accounting firm the auditors’ independence from management and the Company, including the matters in the written disclosures required the Public Company Accounting Oversight Board (PCAOB) in Rule 3600T regarding “Independence Discussions with Audit Committees,” and approved the fees for audit, audit-related, tax and non-audit services provided by the independent registered public accounting firm, and evaluated the types of tax services performed, including whether or not those services were compatible with the independent registered public accounting firm’s independence.

        Based on the reviews and discussions referred to above, the audit committee recommended to the board of directors, and the board of directors approved, that the audited consolidated financial statements be included in the annual report on Form 20-F for the year ended December 31, 2007, as filed with the Securities and Exchange Commission. The audit committee has recommended (which recommendation was adopted by the board of directors) the selection of the Company’s independent registered public accounting firm, subject to shareholder approval.

        Submitted by the audit committee of the Company’s board of directors:

Nurit Benjamini
Dr. Eyal Kishon
Steven D. Levy

REPORT OF THE BOARD OF DIRECTORS

        At the Annual Meeting, the board of directors will provide a management report which will include a discussion of the Company’s consolidated financial statements for the year ended December 31, 2007.

OTHER BUSINESS

        The board of directors is not aware of any other matters that may be presented at the Annual Meeting other than those mentioned in the attached Company’s Notice of Annual Meeting of Shareholders. If any other matters do properly come before the Annual Meeting, it is intended that Yigal Jacoby, Rami Hadar and Doron Arazi, or any of them, the persons named as proxies, will vote, pursuant to their discretionary authority, according to their best judgment, in the interest of the Company.

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MAILING OF PROXY STATEMENT; EXPENSES; SOLICITATION

        The Company expects to mail this proxy statement and the enclosed form of proxy to shareholders on or about October 22, 2007. All expenses of this solicitation will be borne by the Company. In addition to the solicitation of proxies by mail, directors, officers, and employees of the Company, may solicit proxies by telephone, in person, or by other means. Such directors, officers and employees will not receive additional compensation for such solicitation, but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. Brokerage firms, nominees, fiduciaries, and other custodians have been requested to forward proxy solicitation materials to the beneficial owners of ordinary shares of the Company held of record by such persons, and the Company will reimburse such brokerage, nominees, fiduciaries, and other custodians for reasonable out-of-pocket expense incurred by them in connection therewith.

ADDITIONAL INFORMATION

        We are subject to the reporting requirements of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), applicable to “foreign private issuers,” as such term is defined under the rules promulgated under the Exchange Act, and we fulfill the obligations with respect to those requirements by filing reports with the SEC. Our filings with the SEC may be inspected without charge at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. Our SEC filings also are available to the public from the SEC’s website at www.sec.gov. As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements. The circulation of this proxy statement does not signify that we are subject to, or have chosen to comply with, the Exchange Act rules relating to the furnishing or content of proxy statements.

        Copies of the Company’s 2007 annual report on Form 20-F are being mailed to shareholders simultaneously with this proxy statement. The Company’s 2007 annual report, financial statements and financial information appearing in such annual report are not part of the proxy solicitation materials. Shareholders may also obtain a copy of the Form 20-F report without charge at www.allot.com.

By Order of the Board of Directors, /s/ Yigal Jacoby —————————————— Yigal Jacoby Chairman of the Board of Directors

Hod Hasharon, Israel
Date: October 22, 2008

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ANNUAL MEETING OF SHAREHOLDERS OF

ALLOT COMMUNICATIONS LTD.

November 13, 2008

Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.

  Please detach along perforated line and mail in the envelope provided.  

20330303303030000000     8	111308

PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x

	2.	& 5. TO ELECT CLASS II DIRECTORS TO SERVE UNTIL THE 2011 ANNUAL MEETING OF SHAREHOLDERS IN ACCORDANCE WITH THE COMPANY’S ARTICLES OF ASSOCIATION AND TO APPROVE THE GRANT OF STOCK OPTIONS TO DIRECTORS.
					NOMINEES:
	o		FOR ALL NOMINEES			DR. EYAL KISHON - CLASS II
						SHAI SAUL - CLASS II
	o		WITHHOLD AUTHORITY FOR ALL NOMINEES			RAMI HADAR
	o		FOR ALL EXCEPT (See instructions below)
	INSTRUCTIONS:			To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:
	To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.							o

		FOR		AGAINST		ABSTAIN
1.	TO ELECT SHRAGA KATZ AS A CLASS I DIRECTOR TO SERVE UNTIL THE 2010 ANNUAL MEETING OF SHAREHOLDERS IN ACCORDANCE WITH THE COMPANY’S ARTICLES OF ASSOCIATION.	o		o		o
3.	TO APPROVE THE TERMS OF SHRAGA KATZ’S SERVICE, INCLUDING PAYMENT OF ANNUAL COMPENSATION, THE GRANT OF STOCK OPTIONS AND ELIGIBILITY FOR INDEMNIFICATION AND EXCULPATION.	o		o		o
4.	TO APPROVE AN AMENDMENT TO THE COMPENSATION PLAN OF YIGAL JACOBY, CHAIRPERSON OF THE BOARD OF DIRECTORS.	o		o		o
6.	TO APPROVE THE EXTENSION OF THE EXERCISE PERIOD OF YIGAL JACOBY TO PURCHASE 246,479 ORDINARY SHARES UNTIL NOVEMBER 15, 2010.	o		o		o
7.	TO RATIFY AND APPROVE THE RENEWAL AND CONTINUATION OF DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE COVERAGE.	o		o		o
8.	TO APPROVE THE REAPPOINTMENT OF KOST FORER GABBAY & KASIERER, A MEMBER OF ERNST & YOUNG GLOBAL, AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 AND UNTIL THE 2009 ANNUAL MEETING OF SHAREHOLDERS AND TO AUTHORIZE THE BOARD OF DIRECTORS, UPON RECOMMENDATION OF THE AUDIT COMMITTEE, TO FIX THE REMUNERATION OF SAID INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.	o		o		o
	THE PROXY WILL BE VOTED AS SPECIFIED, IF A CHOICE IS NOT SPECIFIED, THIS PROXY WILL BE VOTED “FOR” ALL PROPOSALS AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING AND ANY AND ALL ADJOURNMENTS THEREOF.

Signature of Shareholder		Date:		Signature of Shareholder		Date:

	Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

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PROXY
ALLOT COMMUNICATIONS LTD.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 13, 2008
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

          The undersigned hereby appoints Yigal Jacoby, Rami Hadar and Doron Arazi, and each or any of them, proxies of the undersigned, with full power of substitution to vote all of the shares of Allot Communications Ltd., an Israeli company (the “Company”), which the undersigned may be entitled to vote at the Annual Meeting of shareholders of the Company to be held at the offices of the Company at 22 Hanagar Street, Neve Ne’eman Industrial Zone B, Hod Hasharon, Israel, on Thursday, November 13, 2008, at 5:00 p.m. local time or at any adjournment or postponement thereof, as shown on the voting side of this card.

(Continued and to be signed on the reverse side.)

14475

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