[MD1] Aladdin Knowledge Systems Acquires eSafe Technologies
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[MD1] Aladdin Knowledge Systems Acquires eSafe Technologies

For Immediate Release

Aladdin Knowledge Systems Acquires eSafe Technologies, a Leader in Internet
Security Innovation

Aladdin's New Internet Security Unit to Provide Market-Leading Internet
Security Solutions

New York; Tel Aviv, Israel, Dec. 8th, 1998 -- Aladdin Knowledge Systems
Ltd. (NASDAQ: ALDNF), a global leader in the field of software information
security, today announced the signing of an agreement to acquire the assets
of EliaShim Ltd. and its subsidiaries, US-based eSafe Technologies Inc. and
eSafe Europe (together "eSafe"). eSafe is the producer of the award-winning
eSafe Protect suite of Internet security products. As a result of the
acquisition, Aladdin will form an Internet Security Unit with eSafe at the
core focused on developing integrated "desktop-to-gateway" Internet
security solutions.

eSafe will be issued 1,240,000 Aladdin shares and will receive an
additional $6.5 million in cash. Additional amounts not exceeding $5
million may become payable based on eSafe revenue performance in 1999.
Aladdin expects to take a one-time charge for R&D in process and other
transaction related expenses in its coming Q4 financial reports. The
closing of the transaction is subject to customary conditions and
approvals.

eSafe anticipates sales of approximately $5 million in 1998.

Aladdin's newly formed Internet Security Unit will integrate Aladdin's
market-leading technology with eSafe's "Desktop-to-Gateway" security
solutions, enabling companies to make free and unfettered use of the
Internet as a vital business tool, safely and effectively. This will
provide major benefits to present and future customers.

"This is the first stage in our strategy to leverage Aladdin's leadership
position and expertise in software security into the broader Enterprise
Internet Security market," said Yanki Margalit, CEO of Aladdin Knowledge
Systems. "The new Internet Security Unit brings together two industry
players whose market-leading technologies, infrastructural resources and
talent will provide our customers with robust, complete and affordable
Enterprise Internet Security solutions."

Shimon Gruper, founder and president of eSafe, commented, "There is
unquestioned synergy between Aladdin and eSafe. Aladdin's products are
outstanding in the way they facilitate or deny access to digital content,
and eSafe has been acknowledged to be the number one solution for
protecting against unwanted intrusions from hostile data. Together, they
will offer an unrivaled suite of solutions for the safe and secure use of
the Internet."

eSafe - Meeting Internet Security Threats

eSafe's development is directly linked to the Internet which has become the
main focus for many businesses, providing the commercial and communications
framework within which they carry out a wide range of activities such as
data analysis, e-mail and e-commerce. The Internet's rapid growth has
produced enormous benefits, but it also exposes users to a wide range of
new threats. Particularly dangerous are "Vandals" - hostile Java Applets
and malicious ActiveX controls which execute without any user-intervention
- revealing to the initiator of the "vandal" sensitive information such as
passwords or account details, transferring funds or silently dialing high
tariff phone numbers, and other developing Internet-borne threats of a
criminal nature.

eSafe's innovative approach which combines malicious code detection at both
the gateway and the desktop with anti-virus protection, real time access
monitoring and an integrated management system, has been widely recognized
for its leadership, as demonstrated by its recent selection as PC
Magazine's Editor's Choice in the Internet Security Utilities category.

What Partners Say

Internet Security Systems (ISS)::
"We are looking forward to working with eSafe as part of Aladdin in our
Adaptive Network Security Alliance," said Tom Noonan, President and Chief
Executive Officer of Internet Security Systems. "Bringing together
Aladdin's software security expertise with eSafe's award-winning content
security software will be to the advantage of the corporate customer and
will offer interesting possibilities for industry partnerships." What the
Analysts Say

Forrester Research:
Securing Java And ActiveX", published June 1998 concluded with the
following key points:

Hostile Java and ActiveX applets pose serious security risks, which will
become widespread in two years

By year 2000, 72% of Fortune 1,000 companies will be reliant on Java and
ActiveX as part of their intranet and extranet infrastructure, exposing
themselves to malicious code infection that could cause damage that would
bring a business to its knees

Blocking Java and ActiveX at the firewall is impossible as companies come
to rely on these technologies

To catch malicious code, users must deploy solutions that operate at both
the gateway and the desktop level IDC:
"Vandals, Viruses and eSafe", published April 1998 concluded with the
following key points:

Vandals, or malicious code applets, represent a very serious threat to
server and desktop security

Vandals-related risks will increase in 1999

Vandals have a criminal and destructive potential far in excess of viruses

Commenting on the transaction, IDC Analyst Chris A. Christiansen said: "The
Aladdin-eSafe combination offers customers a broad range of Internet
Security tools. Individually, eSafe provides a strong tool set for
pro-actively defending against hostile downloadable executables or
"vandals". Considering the proliferation of Java and ActiveX applications
in corporate environments, I strongly recommend that vendors and users
protect their sites against these risks in the near future."

Tamir-Fishman, the Israeli affiliates of Hambrecht & Quist, and Bank Boston
Robertson Stephens, advised Aladdin and eSafe, respectively, in this
transaction.

Aladdin Knowledge Systems is a global leader in the field of information
security. Aladdin's product lines include HASP and Hardlock, token-based
software security systems that ensure license compliance and provide
innovative licensing, trial and upgrading solutions for software developers
and publishers, and Privilege TM, a suite of Internet-prepared software
licensing and distribution tools. Aladdin has its headquarters in Tel Aviv,
Israel, with 5 international offices and distributors in more than 40
countries serving over 25,000 clients with more than 7 million tokens in
use worldwide. For more information, visit the Aladdin home page at
www.aks.com.

eSafe Technologies Inc., based in Seattle, WA, was founded in April 1997 as
the U.S. division of EliaShim Ltd., a leading supplier of technologically
innovative anti-vandal, anti-virus and security software to corporate and
government sectors worldwide. Formed in 1987, EliaShim provides unique
software solutions to more than four million customers worldwide, including
major banks, financial institutions and Fortune 500 corporations. Having
been recently picked as Editor's Choice by PC Magazine, eSafe Protect is
addressing Internet protection issues for the PC user. To learn more about
eSafe Technologies and its innovative security products, visit the eSafe
web site at http://www.esafe.com/ or call 1-888-772-3372.

 
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