kl07044_ex10-1.htm


    
      

    

     

                                                                                                                                                               Exhibit
      10.1

    


     

    PRELIMINARY
      AGREEMENT

    


    


    


    by
      and
      between

    


    


    


    


    NEW
      WORLD BRANDS, INC.

    


    


    


    and

    


    


    


    TELES
      AG INFORMATIONSTECHNOLOGIEN

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Dated
      as of July 18, 2007

    


    


    


    


    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    PRELIMINARY
      AGREEMENT

    


    PRILIMINARY
      AGREEMENT to form a SALE AND PURCHASE AGREEMENT, dated July 18, 2007 (the
“Preliminary Agreement”), between:

    


    New
      World
      Brands Inc., a corporation organized and existing under the laws of the state
      of
      Delaware, United States, listed on the OTC:BB having its registered office
      at
      340 West Fifth Avenue, Eugene, Oregon 97401, USA (the
“Seller”)

    


    on
      the
      one hand, and

    


    TELES
      AG
      Informationstechnologien, an Aktiengesellschaft organized and existing under
      the
      laws of Germany, listed on Prime Standard, having its registered office at
      Ernst-Reuter-Platz 8, 10587 Berlin, Germany, and represented by Prof. Dr.-Ing.
      Sigram Schindler and Olaf Schulz (the “Purchaser”)

    on
      the
      other hand,

    


    (individually
      a “Party” and together the “Parties”).

    


    RECITALS

    


    WHEREAS,
      IP Gear Ltd. (the “Company”) is an Israeli limited liability company
      limited by shares formed and existing under the laws of Israel, registered
      with
      the Israeli Companies Registrar under number 513765297, having its registered
      office at Yokneam Industrial Zone, POB 256, Yokneam 20692, Israel;

    


    WHEREAS,
      the Company has a registered capital of 1,000 NIS, consisting of 1000 Ordinary
      Shares, 1 NIS par value per share (the "Ordinary Shares"), and an issued capital
      of 100 Ordinary Shares (the "Shares");

    


    WHEREAS,
      as of the date hereof the Seller directly owns 100% of the Shares;

    


    WHEREAS,
      the Parties intend to enter into a Sale and Purchase Agreement regarding all
      of
      the Shares pursuant to the terms and conditions set forth herein;

     

    
 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    WHEREAS,
      the Parties furthermore intend to collaborate in the sales and marketing of
      TELES Group Products to approach the “North American” Market;

    


    NOW,
      THEREFORE, in consideration of the mutual covenants, representations and
      warranties contained herein, the Parties hereby agree as
      follows:


    


    
      	
              A  

            	
              DEFINITIONS
                AND INTERPRETATION

            


    

    


    
      	
              1  

            	
              Certain
                Terms

            


    

    


    Whenever
      used in this Preliminary Agreement (including any annexes or schedules hereto),
      the following terms shall the respective meanings given to them below in the
      Articles indicated below:

    


     “Affiliate”
      means, with respect to any Person, any other Person directly or indirectly
      controlling, controlled by or under common control with, such Person.
      "Control" of any Person shall consist of the power to direct the
      management and policies of such Person (whether through the ownership of voting
      securities, by contract, as trustee or executor, or otherwise) and shall be
      deemed to exist upon the ownership of securities entitling the holder thereof
      to
      exercise more than 50% of the voting power in the election of directors of
      such
      Person (or other persons performing similar functions).

    


    “Aftermarket”
      with respect to resale of third party products means products resold without
      the
      express and specific authorization or license of the manufacturer.

    


    “Agreement”
      means the intended Sale and Purchase Agreement

    


    “Closing”
      means completion of the sale and purchase of the Shares in accordance with
      Article C I. 2.

    


    “Closing
      Consideration” means the “Purchase Price” as set out in Article B 2.1
      payable at the Closing in the manner set forth in Article C I. 2.

     

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
 

    “Closing
      Requirements” has the meaning set forth in Article C I. 2.2.

    


    “Company”
      has the meaning set forth in the Recitals.

    


    “CPE
      Product Line” means the following:

    


    
      	
               

            	
              (i)

            	
              all
                customer premise equipment of the Company, including all products
                in the
                Company’s Claro and Quasar product lines (including product options and
                products in beta and active development
                stage);

            


    

    


    
      	
               

            	
              (ii)

            	
              all
                customer premise equipment of the Purchaser, including all products
                in the
                Purchaser’s VoIPBOX and VoIPGATE product lines for VoIP with H.323 and SIP
                signaling and PSTN interfaces for analog, BRI, & PRI for T1/E1 and
                signaling based on ISDN ITU Q.931 or CAS only (including product
                options
                and products in beta and active development
                stage);

            


    

    


    
      	
               

            	
              (iii)

            	
              VoIP
                gateways between 4 analog/BRI lines and 4 PRI/E-i/T-1
                lines;

            


    

    


    
      	
               

            	
              (iv)

            	
              wireless
                gateways (GSM, CDMA) up to 4 simultaneous calls;
                and

            


    

    


    
      	
               

            	
              (v)

            	
              all
                modifications, enhancements, upgrades, and additional developments
                to and
                of the above.

            


    

    


    
      	
            	
              (vi)

            	
              Excluding
                the iGATE & vGATE product line.

            


    

    


    “Earn
      Out” has the meaning as set forth in Article B I. 2.2.

    


    “Effective
      Date” is on July 1, 2007.

    


    “Financial
      Statements” has the meaning set forth in Article C II. 2.4.

    


    “Indemnities”
      has the meaning set forth in Article C IV. 1 and 2.

    


    “Intellectual
      Property” has the meaning set forth in Article C II. 2.8.1.

    


    “Licenses”
      has the meaning set forth on Article C II. 2.7.2.

     

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    
 

    “Loss”
      has the meaning set forth in Article C IV. 1 and 2.

    


    “Marked
      Materials” has the meaning set forth in Article B II. 3.

    


    “OCS”
      is the abbreviation for the Office of the Chief Scientist, a department of
      the
      Ministry of Industry, Trade and Labour of the State of Israel.

    


    “Partner
      Contract” has the meaning as set forth in Article D 1.1.

    


    “Party”
      has the meaning as set forth in the introduction.

    


    “Person”
      means an individual, corporation, partnership, trust, or other entity, including
      a governmental or political subdivision or an agency or instrumentality
      thereof.

    


    “Revenues”
      means product revenues - reduced by sales reductions - resulting from the
      ordinary activities of the Purchaser as recognized in the profit and loss
      account under International accounting Standards (IFRS).

    


    “Seller”
      has the meaning set forth in the Introduction.

    


    “Seller
      Advances” has the meaning set forth in Article C I. 1.3.

    


    “Shares”
      has the meaning set forth in the Recitals.

    


    “Social
      Charges” has the meaning set forth in Article C II. 2.12.3.

    


     “Taxes”
      has the meaning set forth in Article C II. 2.12.3.

     

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2  

            	
              Interpretation

            


    

    


    In
      this
      Agreement, and unless it is shown from the context of the Article in question
      or
      from its very terms that a different construction must prevail:

    


    
      	
              2.1  

            	
              The
                references made in any document (including the Agreement) are to
                be
                understood as references to the said document as amended, reiterated,
                supplemented, modified or replaced at a given
                time;

            


    

    


    
      	
              2.2  

            	
              The
                references made to the Agreement are to be understood as references
                to
                this Agreement, to its annexes and schedules and any of their respective
                appendices, all of which constitute an integral part of this Agreement
                and
                have the same contractual value;

            


    

    


    
      	
              2.3  

            	
              The
                article headings are for convenience of reference only and are not
                to be
                considered in construing this
                Agreement;

            


    

    


    
      	
              2.4  

            	
              The
                references made to a Party to this Agreement include its successors
                and
                permitted assigns;

            


    

    


    
      	
              2.5  

            	
              The
                references made to the or a law include the references to any
                international treaty, constitutional provision, decree, ordinance,
                regulation, order or judgment, and the term "legal" shall be
                construed in a similar way; and

            


    

    


    
      	
              2.6  

            	
              The
                references made to a law are references to the law as amended,
                supplemented, modified, replaced or construed at a given
                time.

            


    

     

    
      	
              B  

            	
              GENERAL

            


    

    


    
      	
              I.  

            	
              Subject
                of the Sale and Purchase
                Agreement

            


    

    


    
      	
              1  

            	
              Subject

            


    

     

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
 

    The
      Parties agree on their intention to enter into a Sale and Purchase Agreement
      regarding all Shares of the Company.

    


    
      	
              2  

            	
              Consideration

            


    

    


    
      	
              2.1  

            	
              The
                Parties agree on a Purchase Price in the amount of USD
                1,500,000.

            


    

    


    
      	
              2.2  

            	
              The
                Parties agree on an additional payment to the Seller based on the
                performance of the Purchaser following the Closing (“Earn Out”).
                Therefore, the Purchaser shall pay an amount equal to 10% of the
                Purchaser’s worldwide Revenues (including revenues of Purchaser’s
                Affiliates) within the CPE Product Line (the “Purchaser’s CPE
                Revenue”) for a period of 4 years after Closing, but in any event,
                without regard to Purchaser’s Revenues or other qualification, not less
                than a total amount of USD 750,000 (the “Minimum Earn
                Out”).  The Minimum Earn Out payment shall be payable
                quarterly in an amount of USD 46,875, each quarterly payment due
                within 90
                days of the close of the quarter, commencing with the quarter ending
                September 30, 2007. The Purchaser’s CPE Revenues shall be reviewed after
                12 months retrospectively. In case of exceeding the Minimum Earn
                Out, the
                differential amount is due within 90 days after June 30 each (2008,
                2009,
                2010 and 2011).  The Purchaser and the Company shall provide the
                Seller a monthly sales report, not later than 15 days after the end
                of
                each calendar month, detailing CPE Revenues, related sales activity,
                and
                all data necessary or useful in calculating the amount of each Earn
                Out
                payment, for so long as the Earn Out is
                payable.

            


    

     

    
      	
              II.  

            	
              Obligations
                of the Parties

            


    

    


    
      	
              1  

            	
              Continuation
                of the Management

            


    

    


    The
      Seller is obliged to refrain from making any material changes in the operation
      or management of the Company resulting in material adverse affects to the
      management of the Company until the Closing.

    


    
      	
              2  

            	
              Due
                Diligence

            


    

     

     

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
 

    After
      signing of the Preliminary Agreement, the Purchaser and the Seller will conduct
      a Legal, Financial and Business Due Diligence as is standard practice for such
      transaction, as well as management talks. Therefore, after the date hereof
      and
      until Closing, the Seller and the Company will provide the Purchaser with
      requested data, and with a documentation of the Company’s essential legal,
      financial and economic circumstances in form of copies of the corresponding
      documents at the premises of the Company, and the Purchaser shall provide the
      Seller with requested data and documentation (Due Diligence Request List
      attached as Annex 1 and 2 to this Preliminary Agreement).

    


    
      	
              III.  

            	
              Early
                Termination Right

            


    

    


    
      	
              1  

            	
              Contractual
                Basis. The Parties agree that, the financial status of the Company
                as
                indicated in the presented documents as of June 30, 2007 (as attached
                in
                Annex 3 to this Preliminary Agreement, the “Contractual Basis”) is
                the basis of the implementation of this Preliminary
                Agreement.

            


    

    


    
      	
              2  

            	
              Termination
                Right. In the event that during the Due Diligence it turns out that,
                contrary to the Purchaser’s prospects pursuant to the Contractual Basis
                there are any facts which have a material adverse effect on the financial
                condition, business, assets or prospects of the Company, the Purchaser
                is
                entitled to terminate the Preliminary Agreement by written notice
                with
                immediate effect.

            


    

    


    


    
      	
              C  

            	
              CONDITIONS
                OF THE SALE AND PURCHASE
                AGREEMENT

            


    

    


    
      	
              I.  

            	
              Purchase
                and Sale of Shares

            


    

    


    
      	
              1  

            	
              Purchase
                and Sale of Shares

            


    

    


    
      	
              1.1  

            	
              Upon
                the terms and subject to the conditions contained herein, the Purchaser
                intends to buy, and the Seller intends to sell and deliver to the
                Purchaser, all of the Shares, free and clear of all liens and rights
                of
                any third party, for an aggregate purchase price equal to the sum
                of the
                Closing Consideration (as such term is defined in Article A 1) and other
                consideration described herein.

            


    

     

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
 

    
      	
              1.2  

            	
              Title
                to the Shares purchased by the Purchaser, as shall be contemplated
                by the
                Sale and Purchase Agreement, shall be transferred to the Purchaser
                on the
                date thereof, upon payment of the Closing Consideration, all in accordance
                with Article C 2.

            


    

    


    
      	
              1.3  

            	
              With
                effect of the Effective Date, the Purchaser is entitled to profits
                of the
                Company.  Also with effect of the Effective Date, at the Closing
                the Purchaser shall pay to the Seller the sum of amounts advanced
                to the
                Company by Seller, and reflected on the Financial Statements as loans,
                after the Effective Date (the “Seller Advances”).  The
                parties hereby agree that the total amount of the Seller Advances
                payable
                by the Purchaser pursuant to this paragraph is USD
                107,500.

            


    

    


    
      	
              2  

            	
              Closing

            


    

    


    
      	
              2.1  

            	
              Closing.
                The closing of the purchase and sale of the Shares (the "Closing")
                shall take place immediately upon execution of the Sale and Purchase
                Agreement latest on July 24, 2007, at the Premises of the Company
                or
                remotely by exchange of facsimile signatures. The Parties shall confirm
                in
                writing that all Closing Requirements have
                occurred.

            


    

    


    
      	
              2.2  

            	
              Closing
                Requirements. The Closing shall be subject to the fulfillment of the
                following conditions precedent:

            


    

    


    
      	
              2.2.1  

            	
              Formalities.
                The Purchaser and the Seller shall cause the Company to record in
                the
                Company’s shareholders’ registry the name of the Purchaser as the owner of
                all the Shares, as far as necessary according to Israeli
                law.

            


    

    


    
      	
              2.2.2  

            	
              Approvals.
                The Purchaser has provided the written notice of approval of the
                Purchaser’s Supervisory Board to the transaction. The Seller has provided
                the written notice of approval of the Seller’s Board of Directors or
                Shareholders to the transaction if necessary according to the bylaws
                and
                applicable Delaware law, and the consent of Seller’s lender P&S
                Spirit, LLC (an entity controlled by Dr. Selvin Passen and Jacob
                Schorr),
                and any necessary Israel governmental consents relating to the Office
                of
                the Chief Scientist (“OCS”).

            


    

     

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2.2.3  

            	
              Waiver
                of Claims. With effect of close of business on June 30, 2007, the
                Seller shall declare towards the Company a complete waiver of claims
                for
                repayment of all loans, credits, open account terms, receivables
                from
                goods and services, bills of exchanges and any other receivables
                (as
                described in Annex 4 to this Preliminary Agreement), including interest,
                subject to payments otherwise required by this Agreement (including,
                without limitation, by paragraph
                C.I.1.3).

            


    

    


    
      	
              2.2.4  

            	
              Assignment
                and Novation Agreement. With effect of the Effective Date, the Seller
                shall enter into an assignment and novation agreement with the Company
                subject to the following conditions: The Company assigns all rights,
                claims, duties and obligations in, to and under the contracts and
                agreements with PieCom Tech, dated January 12, 2006, April 6, 2006
                and
                January 8, 2007 (“PieCom Agreements”), to the Seller. The Seller
                accepts such assignment. Upon such assignment and novation, Company
                shall
                be released from all rights, duties and obligations with respect
                to the
                PieCom Agreements and the relating Litigation (the “PieCom
                Litigation”) and the Seller agrees to reimburse the Company for and
                hold the Company harmless from and against any obligation to perform
                any
                of the assigned duties and obligations included in the PieCom Agreements
                and against all claims, losses, liabilities and expenses which may
                be made
                or brought against the Company or which the Company may suffer or
                incur as
                a result of or in connection with the PieCom
                Litigation  occurring from the PieCom Litigation. The Seller
                shall be entitled to undertake the conduct of the defense of the
                Company
                in respect of the PieCom Litigation, and to pursue claims arising
                from the
                PieCom Agreements.  At the request of the Seller, the Company
                shall cooperate with the Seller and execute all documents reasonably
                required to enable the Seller to conduct the defense in the name
                of the
                Company, and to pursue claims arising from the PieCom
                Agreements.

            


    

    


    
      	
              2.2.5  

            	
              Partner
                Contract.  The parties shall have executed a Partner
                Contract in form satisfactory to
                both.

            


    

    


    
      	
              2.2.6  

            	
              Subject
                to prior or concurrent receipt of conditions enumerated in clauses
                2.2.1
                to 2.2.3 of this paragraph (2.2), the Purchaser shall pay the Seller
                the
                Closing Consideration, by wire transfer to the
                Seller.

            


    

    


    
      	
              3  

            	
              Cancellation

            


    

     

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
 

    In
      the
      event that the Closing Requirements are not fulfilled by July 24, 2007, either
      Party shall be entitled to cancel this Agreement and the Sale and Purchase
      Agreement by written notice. Such cancellation shall be considered as
      cancellation of all contracts and agreements which the Parties entered into
      pursuant to the covenants of the Sale and Purchase Agreement.


    


    
      	
              II.  

            	
              Representations
                and Warranties

            


    

    


    
      	
              1  

            	
              Representations
                of the Seller and the
                Purchaser.

            


    

    


    Each
      of
      the Seller and the Purchaser represents and warrants to the other Party as
      follows, with effect as of the Closing:

    


    The
      Seller and the Purchaser have full power and authority to enter into this
      Agreement, to perform their respective obligations hereunder, to consummate
      the
      transactions contemplated hereby, and to make the representations and warranties
      herein contained. The sale and delivery of the Shares, the execution and
      performance of this Agreement, and the consummation of the transactions
      contemplated hereby will, as of the Closing, have been duly authorized by all
      requisite actions. The obligations of the Parties under this Agreement
      constitute the legally valid and binding obligations, enforceable against each
      other in accordance with its terms.

     

    Except
      the approvals pursuant to Article C I. 2.2.2, and filing of notice of transfer
      of Shares with the Israeli Registrar of Companies, no consent or other
      authorization of, or filing with or notice to, any person is required by or
      on
      behalf of the Seller or the Company or on behalf of the Purchaser in connection
      with the valid execution or performance of this Agreement or the consummation
      of
      the transactions contemplated hereby.

    


    
      	
              2  

            	
              Representations
                of the Seller

            


    

    


    The
      Seller represents and warrants to the Purchaser as follows, with effect as
      of
      the date hereof:

     

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2.1  

            	
              Corporate
                Existence

            


    

    


    The
      Company is a limited liability company limited by shares duly organized and
      validly existing under the laws of Israel. The Company has full power and
      authority to conduct its business and operations as presently
      conducted.

    


    The
      Company has not been declared to be in judicial recovery or liquidation
      proceedings or been subject to other judicial winding-up proceedings, no
      administrator (court-appointed special administrator) has been appointed in
      respect thereof and no other circumstances that would require the institution
      of
      such proceedings, are existing.

    


    The
      statutory registers, books, accounts, documents and returns, and any and all
      other corporate or accounting records of the Company are up-to-date, maintained
      and, if required, have been filed in accordance with all applicable laws and
      regulations, except for violations or defaults that could not, either
      individually or in the aggregate, have a material adverse effect on the
      financial condition, business, assets or prospects of the Company.

    


    
      	
              2.2  

            	
              Capital
                Stock and Ownership

            


    

    


    The
      Seller assures the Purchaser that the Shares of the Company have been fully
      paid
      up, have not been repaid in whole or in part, are free from supplementary
      contributions and are not encumbered with third-party rights.

    


    
      	
              2.3  

            	
              No
                Conflicts

            


    

    


    The
      execution and performance of this Agreement and the other agreements or
      documents contemplated hereby by the Seller, and the consummation of the
      transactions contemplated hereby will (i) not violate, conflict with or
      result in the material breach of, or constitute a default under, (ia) any
      provision of the memorandum and articles of association of the Company or the
      organizational documents of the Seller, (ib) any provision of any law or
      regulation applicable to the Seller or the Company, or to which any of their
      respective assets are subject, (ic) any order, judgment, award of any court,
      tribunal or governmental or

     

     

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

     

    regulatory
      authority applicable to the Seller or the Company, or to which any of their
      assets are subject, or (id) any agreement or instrument to which the Seller
      or
      the Company, or to which any of their respective assets are subject; and
      (ii) not result in the creation of any lien, encumbrance or any other
      right of any third party upon any assets of the Company.

    


    
      	
              2.4  

            	
              Financial
                Statements

            


    

    


    The
      Purchaser has examined during Due Diligence the audited balance sheets of the
      Company for the fiscal years ended on December 31, 2006 and 2005 and the related
      audited profit and loss statements of the Company for the fiscal years ending
      on
      such dates, and all annexes and notes thereto, and the respective audit reports
      thereto and the not audited year-to-date balance sheet of the Company as of
      March 31, 2007 and the balance sheet presented on June 28, 2007 (to be updated
      as of June 30, 2007) and the related profit and loss statements of the
      Company  (collectively, the "Financial
      Statements").  The Financial Statements (i) are accurate
      and present fairly the financial position and the results of operations of
      the
      Company at the dates and for the periods to which they relate, (ii) have
      been prepared in accordance with all relevant laws and regulations, including
      the rules of the generally accepted accounting principles for the businesses
      of
      the Company ("US-GAAP"), each consistently applied throughout the periods
      presented in the Financial Statements, and (iii) reflect all material
      liabilities and obligations of the Company, of any nature whatsoever, whether
      accrued or not, required to be recorded thereon in accordance with
      US-GAAP.

    


    
      	
              2.5  

            	
              Absence
                of Changes

            


    

    


    
      	
              2.5.1  

            	
              Except
                as set forth in the Financial Statements, and the deterioration of
                the
                financial condition of the Company of which the Purchaser has been
                fully
                informed as a result of both of the conclusions of its due diligence
                and
                the information made available by the Seller, to the best of Seller’s
                knowledge since January 1, 2007, (i) the Company has conducted its
                business and operations only in the ordinary course and in a manner
                consistent with past practice, and (ii) no event or condition has
                occurred or existed, or would reasonably be expected to occur or
                exist,
                that individually or in the aggregate, would have or result in a
                material
                adverse effect on the business or assets of the
                Company.

            


    

     

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
              2.5.2  

            	
              Except
                as set forth in the Financial Statements or in an Annex hereto, to
                the
                best of Seller’s knowledge the Company has (i) not paid any
                dividend (or been the subject of a shareholder decision authorizing
                the
                payment of a dividend), advance on dividend, or other distribution
                of any
                capital stock of the Company, or purchased or redeemed, directly
                and
                indirectly, any shares of its capital stock (or other equity interest),
                (ii) not incurred or committed to incur any indebtedness for
                borrowed money, (iii) not incurred, assumed, guaranteed or
                otherwise become directly or indirectly liable with respect to any
                liability or obligation of the Seller or any of its Affiliates,
                (iv) not forgiven, canceled, waived or released any debt, claim
                or
                right against the Seller or any of its Affiliates, (v) not
                modified, amended or supplemented any agreement or understanding,
                or any
                provision or term of any agreement or understanding, with the Seller
                or
                any of its Affiliates, (vi) not made any payment, in cash or other
                assets, to the Seller or any of its Affiliates, other than ordinary
                compensation in their capacity as officers or employees of the Company
                and
                only in accordance and consistent with past practice, (vii)
                continued to pay its suppliers and receive payments from its clients
                when
                due and in the ordinary course and in accordance with sound business
                practices, (viii) not acquired, transferred or assigned, in any
                manner whatsoever, any securities or other interests, business, real
                estate, assets or contracts, and (ix) not modified the terms of
                employment of any of its employees.

            


    

    


    
      	
              2.6  

            	
              Real
                Property

            


    

    


    
      	
              2.6.1  

            	
              There
                is no real property owned by the
                Company.

            


    

    


    
      	
              2.6.2  

            	
              The
                Company is a party to one lease, dated December 15, 2006, (the “Current
                Lease”), for the premises it uses at its registered
                address.  To the best of Seller’s knowledge, under the Current
                Lease the Company:

            


    

    
      	
              -  

            	
              has
                valid rights, free and clear of any liens and adverse
                claims,

            


    

    
      	
              -  

            	
              enjoys
                peaceful and undisturbed
                possession,

            


    

    
      	
              -  

            	
              is
                not in default, and no event has occurred and is continuing that
                constitutes or would constitute a default in any respect under the
                Current
                Lease,

            


    

    
    

     

     

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    
 

    
      	
              -  

            	
              has
                not received any notification relating to (i) an increase in rent
                or charges other than that resulting from the indexation provision
                referred to in the relevant Lease, or (ii) a non-renewal of the
                Current Lease, and

            


    

     

    
      	
              -  

            	
              has
                not granted any sub-lease relating to the premises (or any portion
                thereof) which are the subject of said
                lease.

            


    

     

    In
      addition, the Company is party to a second lease for premises previously, but
      no
      longer, used by the Company for its business operations.

     

    
      	
              2.7  

            	
              Compliance
                with Law and Other Instruments

            


    

    


    To
      the
      best of Seller’s knowledge:

    


    
      	
              2.7.1  

            	
              Except
                for violations or defaults that could not, either individually or
                in the
                aggregate, have a material adverse effect on the financial condition,
                business or assets of the Company, and except as otherwise disclosed
                in a
                schedule or exhibit to this Agreement, the Company is not in violation
                of
                or default under (i) any provision of its memorandum and articles
                of association or any provision of any applicable law or regulation
                or
                judicial determination or (ii) any agreement or instrument to which
                it is a party.

            


    

    


    
      	
              2.7.2  

            	
              The
                Company has all permits, licenses and other authorizations (the
                "Licenses") that are required for the conduct of its business and
                operations as presently conducted (including Licenses relating to
                health
                and safety matters, environmental protection, pollution control and
                employee matters), and the Company is, and all times has been, in
                material
                compliance with the provisions of the Licenses.  The Licenses
                are valid and subsisting, and the Company has not received any notice
                of
                any proposed withdrawal, revocation, restriction or alteration (in
                particular by imposition of duties) of the
                Licenses.

            


    

    


    
      	
              2.8  

            	
              Intellectual
                Property

            


    

    


    To
      the
      best of Seller’s knowledge:

     

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2.8.1  

            	
              The
                Company has full, valid and enforceable ownership rights, or valid
                rights
                of use as licensee, with respect to, all designs, patents, copyrights,
                trademarks, proprietary technical information, software, know-how
                or any
                other intellectual property rights and all pending applications therefor,
                which are used by it or necessary to the conduct of or otherwise
                material
                to its business and operations, free and clear of all liens or any
                other
                right of third parties, except for the Company's obligations towards
                the
                Office of the Chief Scientist (the “OCS”) of the Israeli Ministry of
                Trade, Industry and Labor, pursuant to the Encouragement of Industrial
                Research and Development Law, 5744-1984 (the "Intellectual
                Property"). The Company has not taken any action or omitted to take
                any action which action or omission would waive, or result in the
                waiver
                of any of its rights with respect to the Intellectual Property of
                the
                Company, including the due registration or filing of all applicable
                Intellectual Property and the maintenance of the secrecy of all
                confidential Intellectual Property. The Seller makes no representation
                or
                warranty regarding infringement claims or rights relating to any
                patent,
                copyright or other intellectual property of the
                Purchaser.

            


    

    


    
      	
              2.8.2  

            	
              There
                has been no notice, claim or other indication that the rights of
                the
                Company in the Intellectual Property are not valid or
                enforceable.  There has been no notice, claim or other
                indication that any third party would be entitled to any additional
                fees
                or compensation in respect of the Intellectual Property as a result
                of the
                consummation of the transactions contemplated by this
                Agreement.  The Intellectual Property is not, to the knowledge
                of the Seller, being infringed or attacked or opposed in writing
                by any
                Person and no infringement proceedings or other similar proceedings
                have
                been commenced nor is there any fact or event which could provide
                a basis
                for such proceedings to be commenced. There has been no notice, claim
                or
                other indication that the carrying on of its business by the Company
                infringes any intellectual property right of any other Person, and
                that
                the Company uses any intellectual property right belonging to a third
                Person.

            


    

    


    
      	
              2.9  

            	
              Contracts
                and Commitments

            


    

    


    To
      the
      best Seller’s knowledge, there does not exist any event or condition that, after
      notice or lapse of time or both, would constitute a default under any material
      Contract by the Company. To the knowledge of the Seller or the Company, none
      of
      the rights of the Company under any material Contract will be subject to
      termination or modification as a result of the transactions contemplated by
      this
      Agreement, and no other party to any material Contract would be entitled to
      any
      additional fees or payments as a result of the consummation of the transactions
      contemplated by this Agreement.

     

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    


    
      	
              2.10  

            	
              Transactions
                with Affiliates

            


    

    


    
      	
              2.10.1  

            	
              Except
                as set forth in the Financial Statements, and to the best of Seller’s
                knowledge:

            


    

    
      	
              -  

            	
              the
                Company has not directly or indirectly, acquired any asset or obtained
                any
                service from, or disposed of any asset or furnished any service to,
                or
                entered into any agreement, commitment or understanding with, (i)
                its Affiliate, or (ii) any director, officer or employee of the Seller
                or
                any of its Affiliates, and

            


    

    
      	
              -  

            	
              none
                of the persons named in clause (i) or (ii) of the preceding sentence,
                directly or indirectly, (x) owns any interest in any asset used or
                held
                for use in connection with the business and operations of the Company,
                (y)
                owns any interest in a supplier, customer or competitor of the Company,
                or
                serves as an officer, director or employee of any supplier, customer
                or
                competitor of the Company, or (z) has received any loan from or is
                otherwise a debtor of, or made any loan to or is otherwise a creditor
                of,
                the Company.

            


    

    


    
      	
              2.11  

            	
              Litigation

            


    

    


    Except
      as
      disclosed in Annex 6 hereto, here are no actions, proceedings and investigations
      pending or, to the knowledge of the Seller or the Company, threatened against
      or
      involving the Company before any court, tribunal or governmental authority,
      that
      involve or would involve the expenditure by the Company of more than $5,000
      or
      are reasonably expected to result in an injunction against the Company. There
      are no outstanding orders, judgments, decrees or injunctions issued by any
      court, tribunal or governmental authority against the Company or any of its
      assets.

    


    
      	
              2.12  

            	
              Taxes
                and Social Charges

            


    

    


    To
      the
      best of Seller’s knowledge:

     

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2.12.1  

            	
              The
                Company has correctly and timely filed all returns or other documents
                relating to Taxes and Social Charges required to be filed by the
                Company,
                and all such returns were correct and complete in all material respects;
                the Company has not requested or obtained any extension of time to
                file
                any such return.  The Company has duly and timely paid all Taxes
                and Social Charges that are or have been due and payable by the Company
                and has duly accrued all Taxes and Social Charges which are not yet
                payable. The Company has established adequate reserves on the balance
                sheet of the Company at the Effective Date included in the Financial
                Statements for payment for Taxes and Social Charges by the Company
                relating to periods (or portions thereof) for which a return was
                required
                to be filed, for Taxes and Social Charges that are not then due or
                payable
                and has established adequate reserves for Taxes and Social Charges
                relating to subsequent periods as of the date
                hereof.

            


    

    


    
      	
              2.12.2  

            	
              The
                Company has duly and timely withheld all Taxes and Social Charges
                required
                to be withheld in connection with its business and operations (including
                regarding the compensation of its employees), and such withheld Taxes
                and
                Social Charges have been either duly and timely paid to the appropriate
                governmental authorities or properly set aside in accounts for such
                purpose. There are no pending claims for Taxes or Social Charges
                for which
                the Company is or may become liable or which may result in a lien
                upon the
                assets of the Company, and to the knowledge of the Seller, no such
                claim
                is threatened. The Company is not currently under examination by
                any
                governmental authority with respect to Taxes or Social
                Charges.  The Company has not been contacted by or is currently
                corresponding with any governmental authority with respect to the
                requirement to file Tax returns and/or pay any Taxes or Social Charges.
                No
                waivers of any statute of limitations have been given to or requested
                by
                any governmental authority for the
                Company.

            


    

    


    
      	
              2.12.3  

            	
              For
                the purpose of this Agreement, "Taxes" means any income, receipts,
                value-added, transfer, registration, business, franchise, profits,
                capital
                withholding, payroll, employment, property or customs tax, duty,
                governmental fee or other like assessment or charge, together with
                any
                interest or penalty, imposed by any governmental authority, or liability
                for the payment of any of the foregoing (including as a result of
                any
                obligation to indemnify any other Person with respect to any of the
                foregoing). "Social Charges" means any social security,
                unemployment, retirement, healthcare, family benefits or other charges
                or
                contributions, to the extent any of the foregoing are required by
                applicable laws, regulations or collective bargaining agreements
                or have
                otherwise become an entitlement of the employees of the Company and
                involve mandatory contributions by the
                employer.

            


    

     

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2.12.4  

            	
              Results
                of Tax Examinations

            


    

    


    In
      the
      event that a tax examination regarding the period until Effective Date will
      result into supplementary claims for Taxes and Social Charges higher than
      already recognized in the balance sheet at the Effective Date, the Seller shall
      be reliable for all such supplementary claims.

    


    
      	
              2.13  

            	
              Labor
                Related Matters

            


    

    


    
      	
              2.13.1  

            	
              During
                the period December 31, 2005 through the date hereof, the Company
                has not
                experienced any collective labor dispute, strike, slowdown, picketing,
                work stoppage, concerted refusal to work overtime or collective
                resignation, and there is no complaint pending or, to the knowledge
                of the
                Seller, threatened against the Company by any of its respective past
                or
                present employees, trade unions or other representative labor bodies,
                which could have or result in an adverse effect on the financial
                condition, business, assets or prospects of the
                Company.

            


    

    


    
      	
              2.13.2  

            	
              The
                Company has complied with all requirements pursuant to applicable
                laws and
                regulations, and the applicable collective labor agreements, with
                respect
                to employee representation, including those provisions relating to
                the
                organization of elections for a workers' council and the election
                of
                employees' representatives.

            


    

    


    
      	
              2.13.3  

            	
              The
                Company employs 23 employees. The terms and conditions of employment
                of
                all such employees do not provide for benefits of any kind to employees,
                including advance notice of departure or departure payments, in excess
                of
                those required by the relevant laws, regulations and the applicable
                collective labor agreements, other than benefits or other terms of
                employment that are described in employment contracts or other materials
                provided to Purchaser in response to Purchaser’s due diligence
                request.

            


    

     

     

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2.13.4  

            	
              The
                Company has not adopted an incentive agreement or a profit sharing
                scheme,
                other than a mandatory scheme, for its employees, legal representatives
                or
                directors and has not entered into any contract with such persons
                which
                would allow them to acquire any rights over shares of the
                Company.

            


    

    


    
      	
              2.13.5  

            	
              The
                Company has no obligations of any nature in connection with the retirement
                (including early retirement) of its employees or former employees
                except
                for those obligations which are (i) fully and adequately covered by
                insurance policies and/or (ii) completely and accurately reflected
                in the Financial Statements as at the respective dates thereof and
                in the
                books of the Company for subsequent periods as of the date
                hereof.

            


    

    


    
      	
              2.14  

            	
              Subsidies

            


    

    


    To
      the
      best of Seller’s knowledge:

    


    The
      Company has applied for, received and used public subsidies only in accordance
      with applicable laws, regulations and orders from governmental or other
      authorities.  No repayment of any such subsidies will become due, and
      none of the rights of the Company under such subsidies will be subject to
      termination or modification, as a result of the consummation of the transactions
      contemplated hereunder.

    


    
      	
              2.15  

            	
              Disclosure

            


    

    


    The
      Purchaser has carried out a technical, financial, business and legal Due
      Diligence prior to Closing. The Seller’s representations and warranties only
      count for those documents, facts or events that have not been disclosed to
      the
      Purchaser during Due Diligence despite his request, unless the Parties expressly
      agreed on exceptions. However, if prior to the Closing the Purchaser discovers
      facts or circumstances during Due Diligence that have not been expressly
      disclosed by the Seller but that would give rise to a breach of representation
      or warranty by the Seller, Purchaser shall promptly, and in any event prior
      to
      Closing, inform the Seller of those facts or circumstances.

     

    
 

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    
 

    
      	
              III.  

            	
              Additional
                Covenants

            


    

    


    
      	
              1  

            	
              Non
                Competition

            


    

     

    
      	
            	
                
                1.1

            	
              Commencing
                on the Closing, and until the second anniversary thereof, the Seller
                shall
                not, and shall not cause its Affiliates to, directly or indirectly
                engage
                in any research and development or manufacturing activities conducted
                by
                the Company on the date hereof relating to all
                products.

            


    

    


    
      	
            	
                
                1.2

            	
              Commencing
                on the Closing the Seller shall not, and shall not cause its Affiliates
                to, directly or indirectly engage in sale, distribution, marketing
                and
                services of products that may compete with the Purchaser’s FWA products
                (iGate and vGate product lines).

            


    

    


    
      	
            	
                
                1.3

            	
              Commencing
                1 year after the Closing the Seller shall not, and shall not cause
                its
                Affiliates to, directly or indirectly engage in sale, distribution,
                marketing and services of products that may compete with the Company’s
                products, in addition to the Purchaser’s FWA products, (the
                “Competitive Products”), provided
                that:

            


    

    


    
      	
            	
              1.3.1

            	
              The
                Seller may sell and distribute Competitive Products as part of a
                customer
                solution based on, or substantially incorporating, products of the
                Purchaser or the Company;

            


    

    


    
      	
            	
              1.3.2

            	
              The
                Seller may sell and distribute Competitive Products that are after-market
                or used equipment manufactured by Cisco Systems or its affiliates
                (the
                “Cisco Equipment”);

            


    

    


    
      	
            	
              1.3.3

            	
              The
                Seller may sell additional Competitive Products with the Purchaser’s prior
                written consent;

            


    

    


    
      	
            	
              1.3.4

            	
              All
                restrictions on competition under this Section 1.3 and Section 1.2
                shall
                terminate upon termination of the Seller’s exclusive distribution and sale
                rights pursuant to the Partner Contract, and shall only be effective
                within the geographic regions of exclusivity as in effect pursuant
                to the
                Partner Contract. The Parties agree that in this case the Marketing
                Subsidy will be terminated.

            


    

     

     

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
              2  

            	
              No
                Solicitation

            


    

    


    Commencing
      on the Closing and until the second anniversary from the date thereof, the
      Seller shall not, and shall cause its Affiliates not to, directly or indirectly,
      (i) induce any employee of the Company to terminate employment with the Company,
      and (ii) either individually or as owner, agent, employee, consultant or
      otherwise, employ or offer employment to any person who is employed by the
      Company, unless such person shall have ceased to be employed by the Company
      at
      least six months prior to the time such offer of employment is
      extended.

    


    
      	
              3  

            	
              Public
                Announcements

            


    

    


    From
      and
      after the date of this Agreement, each Party agrees to obtain the approval
      of
      the other Party prior to issuing any press release, written public statement
      or
      announcement with respect to the transactions contemplated by this Agreement;
      provided, however, that the provisions of this Article 3 shall not prohibit
      either Party from making any such release, statement or announcement if, upon
      advice of counsel, such Party feels confident that it is required to do so
      under
      any applicable law or regulation, and such Party shall use reasonable efforts
      to
      consult with and obtain consent of the other Party with respect to the terms
      and
      conditions of such release, statement or announcement prior to making such
      release, statement or announcement.

    


    
      	
              4  

            	
              Confidentiality
                of Information

            


    

    


    The
      Seller shall not, and shall cause its Affiliates, the Company, and their
      respective employees, representatives and agents not to, use for any purpose
      or
      disclose to any person any proprietary information relating to the Company,
      its
      business and operations, or any of its assets, except as required by applicable
      laws or regulations. In the event the Seller is required to disclose any such
      information under any law or regulation, the Seller shall promptly notify the
      Purchaser of such requirement so that the Purchaser may seek an appropriate
      order in summary proceedings.

    


    
      	
              5  

            	
              Approvals
                and Consents

            


    

     

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    
 

    The
      Seller and the Purchaser shall cooperate to give all notices and obtain as
      soon
      as reasonably practicable all approvals, consents and waivers from governmental
      departments and agencies or from any other third parties required or deemed
      necessary or beneficial for consummation of the transactions contemplated by
      this Agreement. Without derogating from the aforesaid, Purchase shall provide
      Seller with an undertaking towards the OCS, as shall be required in order to
      receive the OCS' consent to the transfer to Shares hereunder.

    


    
      	
              6  

            	
              Right
                to Use Certain Marks, Logos and Corporate
                Name

            


    

    


    The
      ownership of all trademarks, service marks, brand names or trade, corporate
      or
      business names of the Seller or any of its Affiliates bearing the words "IP
      Gear" or the logo currently used by the Company in connection therewith (the
      "Seller's Marks") shall be transferred to the Purchaser, unless it is an
      integral part of the Company’s assets. The Purchaser shall grant an irrevocable,
      license to the Seller, exclusive within North America and any additional
      territory of exclusivity under the Partner Contract, to use the Seller’s Marks
      on stationery, equipment, web, invoices, receipts, forms, packaging, advertising
      and promotional materials, products, software or like materials (the "Marked
      Materials") after Closing, in relation to the sales and marketing of the
      existing IP Gear, Ltd. product lines within the scope of the Partner
      Contract.  In addition, the Purchaser shall grant an irrevocable,
      nonexclusive license to the Seller, effective until such time as the Purchaser
      shall have paid to the Seller all of the Minimum Earn Out payment, to use the
      Seller’s Marks on the Marked Materials in relation to the Seller’s sales and
      marketing of telecommunications and networking equipment and services, without
      restriction based on territory or product.

    


    
      	
              7  

            	
              Payment
                of Increased OCS Royalties

            


    

    


    
      	
              7.1  

            	
              “Penalty”
                means, with respect to any royalty payment due to the OCS by the
                Company
                or the Purchaser, pursuant to the Encouragement of Industrial Research
                and
                Development Law, for amounts granted to the Company prior to the
                Effective
                Date, the increase in the royalty payment resulting from conducting
                product manufacturing activities outside the state of Israel, as
                compared
                to the royalty payment that would have been required if the manufacturing
                activities had not been conducted outside of Israel.  “Penalty”
                shall not include any other amounts, including without limitation
                amounts
                payable as a result of moving intellectual property outside of Israel
                or
                conducting research and development activities outside of
                Israel.

            


    

     

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    
 

    “Prior
      Penalty” means any Penalty which has been caused by contravention of the
      Industrial Research and Development Law prior to the Closing, even though the
      contravention emerges after the Closing.

    


    “Future
      Penalty” means any Penalty which will be caused by contravention of the
      Industrial Research and Development Law after the Closing.

    


    
      	
              7.2  

            	
              As
                to Prior Penalties, the Seller shall reimburse the Purchaser or the
                Company for 100% of any Penalty paid by the Purchaser or the Company
                (a
                “Reimbursement Payment”). The Seller shall not be liable for any
                amounts payable to the OCS as a result of a settlement or compromise
                between the Company or the Purchaser and the OCS unless the Seller
                has
                first approved the terms of the settlement or
                compromise.

            


    

    


    
      	
              7.3  

            	
              As
                to Future Penalties, the Seller shall not be liable for any Reimbursement
                Payments.

            


    

    


    
      	
              7.4  

            	
              The
                parties agree to make best efforts to cooperate in negotiating with
                the
                OCS to minimize or recharacterize any Penalty amounts in order to
                accommodate the Purchaser’s or the Company’s manufacturing
                plans.

            


    

     

     

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    
 

    
      	
              IV.  

            	
              Indemnification

            


    

    


    
      	
              1  

            	
              Seller’s
                Indemnification Obligations

            


    

    


    Unless
      expressly described otherwise in this Agreement, the Seller shall defend,
      indemnify and hold harmless each of the Purchaser, its Affiliates, the Company,
      and their respective officers, directors, employees, agents, advisers and
      representatives (collectively, the "Purchaser’s Indemnities") from,
      against and with respect to any and all claims, liabilities, losses, damages,
      costs and expenses (including interest, penalties and reasonable attorneys'
      and
      accountants' fees and disbursements reasonably incurred in defending any of
      the
      foregoing or in asserting, preserving or enforcing any rights under this
      Agreement), whether or not resulting from third-party claims, as determined
      by a
      final judgment (each of the foregoing a "Loss", and collectively
      "Losses"), arising out of or as a result of:

    


    
      	
              1.1  

            	
              any
                material inaccuracy of any representation or warranty made by the
                Seller
                in this Agreement;

            


    

    
      	 	 


      	
              1.2  

            	
              any
                material breach of any covenant or obligation of Seller in
                this

            


      	 	Agreement;
              and 


    

     

    
      	
              1.3  

            	
              any
                catastrophic warranty or similar warranty claim, action, litigation,
                investigation or proceeding arising out of the sale or service of
                any
                goods or products by the Company prior to the date hereof, to the
                extent
                that, with regard to the foregoing paragraph 1.1 the Seller has acted,
                and
                with regard to the foregoing paragraph 1.2, the Seller has not reflected
                any risk in the Financial Statements, intentionally or with gross
                negligence.

            


    

    


    
      	
              2  

            	
              Purchaser’s
                Indemnification Obligations

            


    

    


    The
      Purchaser shall defend, indemnify and hold harmless each of the Seller, its
      Affiliates, the Company, and their respective officers, directors, employees,
      agents, advisers and representatives (collectively, the "Seller’s
      Indemnities") from, against and with respect to any and all claims,
      liabilities, losses, damages, costs and expenses (including interest, penalties
      and reasonable attorneys' and accountants' fees and disbursements reasonably
      incurred in defending any of the

     

     

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

     

    foregoing
      or in asserting, preserving or enforcing any rights under this Agreement),
      whether or not resulting from third-party claims, and ascertained by an official
      authority (each of the foregoing a "Loss", and collectively
      "Losses"), arising out of or as a result of any material breach of any
      covenant or obligation of the Purchaser in this Agreement or any material
      inaccuracy of any representation or warranty made by the Purchaser in this
      Agreement.

    


    
      	
              3  

            	
              Administration
                of Claims

            


    

    


    In
      the
      case of any claim asserted by a third party against any Indemnitee, notice
      shall
      be given by the Indemnitee to the other Party promptly after such Indemnitee
      has
      actual knowledge of any claim as to which indemnity may be sought, and the
      Indemnitee shall permit the other Party (at the other Party's expense) to assume
      the defense of any claim or any litigation resulting therefrom. In any event,
      the Seller and the Purchaser shall cooperate in the defense of any claim or
      litigation subject to this Article 3 and the records of each shall be available
      to the other with respect to such defense.

    


    
      	
              4  

            	
              Limitation
                on Seller’s Indemnification
                Obligations

            


    

    


    
      	
              4.1  

            	
              Neither
                Party shall make a claim against the other Party for indemnification
                under
                Article V 1 and 2 (except for claims for indemnification with respect
                to
                the representations and warranties set forth in Article II 2.12)
                unless
                and until the amount of each Loss for which indemnification is sought
                exceeds a threshold amount of USD 10,000, it being understood that
                if the
                aggregate amount of Losses exceeds such threshold, the threshold
                shall not
                act as a deductible, and the Seller's indemnification obligation
                shall
                extend to the entire aggregate amount of the
                Loss.

            


    

    


    
      	
              4.2  

            	
              Each
                Party’s aggregate liability under this Article IV shall be limited to the
                amount that is equal to the Closing
                Consideration.

            


    

     

    
      	
              V.  

            	
              Miscellaneous

            


    

    


    
      	
              1  

            	
              Binding
                Effect; No Third Party
                Beneficiaries

            


    

     

     

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    
 

    This
      Agreement shall be binding upon and inure to the benefit of the Parties hereto
      and their respective heirs, successors and permitted assigns.  Except
      as provided in Article V with respect to indemnification of any Indemnitee
      hereunder, nothing in this Agreement shall confer any rights upon any Person
      or
      entity other than the parties hereto and their respective heirs, successors
      and
      permitted assigns.

     

    
      	
              2  

            	
              Notices

            


    

    


    Any
      notice, request, instruction or other document to be given hereunder by any
      Party hereto to any other Party hereto shall be in writing and sent by
      registered mail with return receipt or by fax or by telex confirmed by
      registered mail with return receipt, addressed as follows:

    


    If
      to
      Purchaser:

    TELES
      AG
      Informationstechnologien

    Vorstand

    Ernst-Reuter-Platz
      8

    10587
      Berlin

    Germany

    


    Attention:
      Olaf Schulz

    


    If
      to
      the Seller:

    New
      World
      Brands Inc.

    340
      W.
      5th
      Avenue

    Eugene,
      OR 97401

    


    Attention:
      M. David Kamrat

    


    or
      at
      such other address for a Party as shall be specified by like notice. Any notice
      which is sent in the manner provided herein shall be deemed to have been duly
      given to the Party to whom it is directed upon actual receipt by such Party
      (or
      its agent for notices hereunder).

     

     

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    
 

    
      	
              3  

            	
              Expenses
                and Taxes

            


    

    


    Each
      Party shall pay all its own costs and expenses incident to this Agreement and
      the transactions contemplated by this Agreement, including legal and accounting
      fees and expenses. The Purchaser shall be liable for and pay (and shall
      indemnify and hold harmless the Seller against) all fees, taxes or other
      governmental charges of any nature due in connection with the transactions
      contemplated by this Agreement.

    


    
      	
              4  

            	
              Translation

            


    

    


    If
      this
      Agreement is translated into any language other than English, the English
      version shall control and shall prevail on any question of interpretation.


    


    
      	
              D  

            	
              Further
                Cooperation

            


    

    


    
      	
              1  

            	
              Sales
                Cooperation

            


    

    


    
      	
              1.1  

            	
              Partner
                Contract. At the Closing the Parties shall enter into a separate
                “Partner Contract” regarding the Sale and Marketing of TELES Group
                Products within the “North American” Market (in the form attached as Annex
                7).

            


    

    


    
      	
              1.2  

            	
              Credit
                Line. In connection with the above mentioned Partner Contract the
                Purchaser shall grant the Seller a revolving line of credit in the
                amount
                of USD 200,000. The credit line shall be increased quarterly, to
                an amount
                equal to the revenues made by the Seller during the 60 days preceding
                the
                end of each quarter, but up to a maximum of USD
                500,000.

            


    

    


    
      	
              1.3  

            	
              Marketing
                Subsidy. In consideration of the collaboration between the Parties
                within the above mentioned Partner Contract, the Purchaser shall
                grant to
                the Seller an additional marketing subsidy in the amount of USD 200,000
                per annum for a period of two years, payable at the commencement
                of each
                annum, whereby the payment of any amounts shall be subject to the
                prior
                approval of the Purchaser. A prolongation for a third year shall
                be agreed
                on the basis of the revenues.

            


    

    


     

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2  

            	
              Loan
                Agreement

            


    

    


    
      	
              2.1  

            	
              In
                consideration of the collaboration between the Parties within the
                Partner
                Contract, the Purchaser shall provide a line of credit to the Seller
                of
                USD 1,000,000 pursuant to a separate loan agreement to be signed
                at the
                Closing.  The loan agreement shall have a period of validity of
                four years, in which the Seller is obliged to redeem the loan in
                12
                quarterly installments, starting after the first year. The Parties
                agree
                on a fixed interest rate of 7% per
                annum.

            


    

    


    
      	
              2.2  

            	
              The
                Parties agree that the Purchaser shall under no circumstances be
                treated
                worse than all other current or future lenders (except for revolving
                trade
                credits) regarding reimbursement or the provision of
                securities.

            


    

    


    
      	
              2.3  

            	
              The
                Seller shall be obliged to provide to the Purchaser unaudited preliminary
                monthly information of financial situation (profit and loss statement,
                balance sheet, cash flow), prepared in accordance with GAAP, not
                less than
                15 days after the end of each month. In the event of an important
                deterioration of the financial situation (current debt to equity
                ratio
                less than 30%), the Purchaser shall have a right to demand an adjustment
                of the securities and a loan acceleration
                right.

            


    

     

    
      	
              E  

            	
              Miscellaneous

            


    

     

    
      	
              1  

            	
              Governing
                Law and Jurisdiction

            


    

    


    This
      Preliminary Agreement shall be governed in all respects, including as to
      validity, interpretation and effect by the laws of Germany. The Parties hereby
      submit to the jurisdiction of German courts. Notwithstanding the foregoing,
      the
      Purchaser is also entitled to take the Seller to court at the place of the
      Seller’s registered office.

     

     

     

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2  

            	
              Execution
                Copies

            


    

    


    This
      Agreement shall be executed in two original copies, each of which shall be
      an
      original.

    IN
      WITNESS WHEREOF, the Parties have duly executed this Preliminary Agreement
      as of
      the day and year first above written.

    


    


    


    


    /s/
      Noah
      Kamrat                                                                                                  
/s/ Olaf
      Schulz                                         


    New
      World
      Brands, Inc.                             TELES
      AG
      Informationstechnologien

    Name:
      Noah Kamrat                                
Name:
      Olaf
      Schulz

    Title:
      President                                     
      Title:
      Chief Financial
      Officer

    


    


    


    Enclosures

    


    Annex
      1                      Due
      Diligence Request List to Seller

    Annex
      2                      Due
      Diligence Request List to Purchaser

    Annex
      3                      Financial
      status of the Company as of June 30, 2007

    Annex
      4                      Schedule
      of Seller’s Claims towards the Company as of June 30, 2007

    Annex
      5                      Schedule
      (according to C II. 2.7.1)

    Annex
      6                      Schedule
      of Litigations

    Annex
      7                      Partner
      Contract

     

     

     

    
 

    31