Aladdin Knowledge Systems Acknowledges Receipt of Confidential Unsolicited Proposal from Vector Capital

TEL AVIV, ISRAEL – Aug. 20, 2008 – Aladdin Knowledge Systems (NASDAQ: ALDN), an information security leader specializing in authentication, software DRM and content security, in response to press reports, confirmed receipt of a confidential, unsolicited proposal from Vector Capital, a private equity firm, to acquire the Company. Vector Capital's proposal includes a potential alternative transaction of Vector Capital acquiring the Company's DRM business, potentially combined with a repurchase by Aladdin of the shares of Aladdin purchased by Vector Capital, and the sale by SafeNet, Inc., a Vector affiliate, of its authentication business to Aladdin.

Consistent with its fiduciary duties and in consultation with its independent financial advisors and legal counsel, Aladdin's Board of Directors is reviewing the proposal and will thereafter inform Aladdin's stockholders of its position.

Yanki Margalit, Chairman and CEO of Aladdin Knowledge Systems, stated, "The Board of Directors of Aladdin, in consultation with its independent advisors, is carefully considering and reviewing Vector Capital's proposal as part of our ongoing efforts to deliver enhanced shareholder returns. Our Board and management team remains fully committed to enhancing shareholder value and we are continuing to implement our strategic plan, which includes organic growth as well as complementary acquisitions, two of which we announced just this past month, designed to strengthen our portfolio of IT security offerings and increase our global brand recognition."

Vector Capital through its wholly-owned subsidiary, SafeNet, Inc., is a direct competitor of Aladdin. Both Vector Capital and SafeNet, Inc. are headquartered in the United States.

Credit Suisse Securities (USA) LLC is serving as financial advisors to Aladdin, Kramer Levin Naftalis & Frankel LLP is serving as U.S. legal counsel and Herzog, Fox & Ne'eman is serving as Israeli counsel to the Company.

About Aladdin

Aladdin Knowledge Systems (NASDAQ: ALDN) is an information security leader with offices in 12 countries, a worldwide network of channel partners, and numerous awards for innovation. Aladdin eToken is the world's #1 USB-based authentication solution, offering identity and access management tools that protect sensitive data. Aladdin HASP SRM boosts growth for software developers and publishers through strong anti-piracy protection, IP protection, and secure licensing and product activation. Aladdin eSafe delivers real-time intelligent Web gateway security that helps protect data and networks, improve productivity, and enable compliance. Visit www.Aladdin.com.

Safe Harbor Statement

Certain information presented herein constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include general economic and business conditions, risks relating to our recent acquisition of Athena Smartcards and the proposed acquisition of Eutronsec, including the failure to realize expected synergies, failure to effectively integrate these businesses into our business and increasing unexpected liabilities, the loss of market share, changes in the level of business or anticipated business from a large customer or customers, failure to achieve anticipated customer orders, changes in the competitive landscape and other factors over which the company has little or no control. For more information, please refer to the Company's filings with the Securities and Exchange Commission, which are available on the Commission's website at www.sec.gov.

©2008 Aladdin Knowledge Systems, Ltd. All rights reserved. HASP, eToken, eSafe, Aladdin Knowledge Systems and the Aladdin logo are trademarks or registered trademarks of Aladdin Knowledge Systems, Ltd.