Magic Software Enterprises Establishes an OEM Agreement with IBM for the DB2 Express Database System

Magic will bundle IBM's DB2 Express with its new eDeveloper V10 Composite Applications platform.

July 17, 2006

OR YEHUDA, ISRAEL (July 1 7 , 2006) -- Magic Software Enterprises Ltd. (Nasdaq: MGIC), a leading provider of state-of-the-art business integration and development technology, and IBM yesterday signed a global distribution and OEM agreement in which Magic will bundle IBM's DB2 Express with its new eDeveloper V10 Composite Applications platform.  The agreement is a three-year contract, which was facilitated by Software Route, an IBM software distributor for the OEM community.

eDeveloper V10 is a robust industry-leading environment for designing, developing and deploying composite applications alongside monolithic application solutions on a Service Oriented Architecture (SOA).  Based on 20 years of award-winning technology, eDeveloper V10 allows companies to use their existing business processes and legacy investments, as well as to rapidly customize large-scale and complex distributed applications in order to meet specific enterprise needs. Magic sells thousands of licenses worldwide annually. 

DB2 Express is an advanced version of the leading DB2 database by IBM designed for small and medium enterprises. IBM recently announced significant improvements made in DB2 empowering it with new features and with a more robust performance.

Meir Nissensohn, CEO of IBM Israel, indicated that this agreement is a milestone in the OEM agreements in Israel. “ IBM is in the middle of a global process aimed at encouraging partners and Independent Software Vendors (ISVs) to integrate DB2 into their software solutions. The results of this move are comprehensive OEM agreements, such as the agreement signed today with Magic", Nissensohn added.

David Assia, CEO and chairman of the board of Magic Software Enterprises said, “Magic Softwares’ iBolt and eDeveloper have already earned IBM ServerProven status, and are included as part of the IBM System i5 Tools Innovation Program. The DB2 agreement is a further step in strengthening the relationship and the mutual understanding between IBM and Magic”, he concluded.

About Magic Software Enterprises
Magic Software, a subsidiary of Formula Systems (Nasdaq:FORTY) provides a Service Oriented Platform (Application Integration, Business Process Management and Composite Applications) to rapidly develop, change and deploy solutions integrated with existing and legacy systems. Magic Software enables enterprises to increase their agility and rapidly adapt to business changes by aligning their IT with their business operations, by accelerating the evolution to a Service Oriented Architecture through Application Integration and by Business Process Management. Our customers develop and deploy applications that are rapidly customized and integrated with existing and legacy systems. Our products are built on 20 years of R&D and customer experience. We lead the industry in Composite Application Development. Magic technology, products and professional services are available through a global network of subsidiaries, distributors and over 2500 Magic Solutions Partners in approximately 50 countries. The Company's EMEA HQ offices are located in the Netherlands at Pelmolen 17 3994XX Houten, 0031-30.6566266. The company's North American subsidiary is located at 23046 Avenida de la Carlota Suite 300 Laguna Hills, CA 92653. Ttelephone (800) 345-6244, (949) 250-1718, fax (949) 250-7404.

For additional information, visit: http://www.magicsoftware.com/.

Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. Actual results may vary significantly based upon a number of factors including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product conditions, both here and abroad, release and sales of new products by strategic resellers and customers, and other risk factors detailed in the Company's most recent annual report and other filings with the Securities and Exchange Commission.

Company Contact:
Avigdor Luttinger
VP Marketing and Corporate Strategy
Magic Software Enterprises
(949) 250-1718 X299
Press_relations@magicsoftware.com