Document:

Confidential treatment has been requested for portions
      of this
      document. This copy of the document filed as an Exhibit omits the confidential
      information subject to the confidentiality request. Omissions are designated
      by
      the symbol [...***...]. A complete version of this document has been filed
      separately with the Securities and Exchange Commission.

    DEVELOPMENT
      AGREEMENT

     

    This
      Development Agreement (“Agreement”), dated as of March 30, 2005 (the “Agreement
      Date”), is between M-Systems Flash Disk Pioneers Ltd., an Israeli company having
      its principal place of business at Central Park 2000, 7 Atir Yeda St., Kfar
      Saba, 44425, Israel (“M-Systems”), and PowerHouse Technologies Group, Inc., a
      Delaware corporation having its principal place of business at 2694 Bishop
      Drive, Suite 270, San Ramon CA 94583 (“PowerHouse”). M-Systems and PowerHouse
      may be referred to individually as a “Party” or collectively as
“Parties”.

     

    
      	1.	
              INTRODUCTION

            

    

     

    
      	
            	1.1.	
              PowerHouse
                is engaged in the development of mobile computing
                software;

            

    

     

    
      	
            	1.2.	
              M-Systems
                has developed and sells a “flash based” key chain storage device known as
                the DiskOnKey®
                (“DiskOnKey”);

            

    

     

    
      	
            	1.3.	
              M-Systems
                desires PowerHouse to perform certain development work to modify
                technologies of PowerHouse to operate in and in conjunction with
                M-Systems
                USB Drives (as such term is defined below);
                and

            

    

     

    
      	
            	1.4.	
              M-Systems
                further desires to receive and PowerHouse desires to grant to MSystems
                the
                right to use and distribute the Migo Products (as such term is defined
                below) to be used in, together and in conjunction with M-Systems
                USB
                Drives subject to the terms and conditions of this
                Agreement.

            

    

     

    ACCORDINGLY,
      in
      consideration of the mutual covenants and promises contained herein, the Parties
      agree as follows:

     

    
      	2.	
              DEFINITIONS

            

    

     

    As
      used
      in this Agreement, the following capitalized terms shall have the following
      meanings:

     

    
      	
            	2.1.	
              Associated
                Company means
                any corporation, company or other legal entity, where more than fifty
                percent (50%) of the voting power of which is, now or hereafter,
                owned or
                controlled, directly or indirectly by a Party hereto, or jointly
                by the
                Parties hereto; provided, however, that any corporation, company
                or other
                legal entity shall be an Associated Company of a Party only for as
                long as
                such ownership or control exists.

            

    

     

    
      	
            	2.2.	
              Intellectual
                Property Rights means
                rights in patents (including reissues, divisions, continuations,
                continuation-in-part, and extensions thereof), utility models, and
                registered and unregistered designs including copyrights, trade secrets
                and any other form of protection afforded by law to inventions, models,
                designs or other Information, and applications therefor including
                without
                limitation, patents, trademarks, copyrights and trade secrets relating
                to
                the Development Projects and that are: (i) owned or controlled by
                a Party
                or an Associated Company, and (ii) exist prior to the beginning of
                the
                Development hereunder or result from activities that are independent
                from
                said Development, and (iii) developed by each party pursuant to this
                Agreement in the course and as part of the Development Project.
                PowerHouse’s Intellectual Property Rights includes without limitation all
                PowerHouse Technology. M-Systems’ Intellectual Property Rights includes
                without limitation all M-Systems
                Technology.

            

    

    

    
      	
              PowerHouse-M-Systems
                Agreement 30.3.05

            	
               Page
                1

            

    

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      	
            	2.3.	
              Business
                Day means
                any day other than a Saturday, a Sunday or any day,  which
                is otherwise an official bank holiday in the United States of America.
                

            

    

     

    
      	
            	2.4.	
              Confidential
                Information
                means all Information disclosed to one Party by  the
                other Party that is marked or designated Confidential or Proprietary
                or,
                in the case of verbal disclosures, which are summarized in a writing,
                marked or designated Confidential or Proprietary and furnished within
                thirty days to the  Party
                receiving such Confidential Information; provided that the lack of
                such
                summary in writing shall not derogate from the qualification of oral
                information as a Confidential Information hereunder.
                

            

    

     

    
      	
            	2.5.	
              Development
                Projects
                means the development work to be performed by each Party in accordance
                with the work allocation and time schedule as set forth in a Statement
                of
                Work, and any mutually agreed modifications or extensions thereof,
                with
                the aim to develop Software Applications, as defined below.
                

            

    

     

    
      	
            	2.6.	
              Escrow
                Agent
                shall mean such party as agreed upon between the parties.
                

            

    

     

    
      	
            	2.7.	
              Escrow
                Agreement
                shall mean a separate agreement to be executed by PowerHouse, M-Systems
                and the Escrow Agent in the form attached hereto as Exhibit
                E,
                which agreement shall embody the appropriate escrow terms for deposit
                of
                the Source Code. 

            

    

     

    
      	
            	2.8.	
              Information
                means
                circuits, protocols, drawings, specifications, samples, models, processes,
                procedures, instructions, technology, applied development engineering
                data, reports, and all other technical or commercial information,
                data and
                documents excluding any Intellectual Property Rights related to such
                Information, which is (i) owned or controlled by a Party, and existing
                prior to the beginning of the Development under this Agreement, or
                (ii)
                resulting from activities of a Party that are independent from the
                Development under this Agreement or (iii) developed as part of and
                in the
                course of the Development Projects.

            

    

     

    
      	
            	2.9.	
              Migo
                Personal
                shall mean the Migo USB Drive software product offered by PowerHouse
                as of
                the Agreement Date for all currently supported platforms and all
                currently
                provided functionality, with the exception of the Outlook synchronization
                feature. The Migo Personal shall contain an upgrade mechanism which
                shall
                be defined by both parties and fully managed and operated by PowerHouse;
                provided, however, that the upgrade mechanism will permit upgrade
                only to
                the same Migo software and functionality as Migo Professional.
                

            

    

     

    
      
        	
              	2.10.	
                Migo
                  Products
                  shall mean the Migo Personal, the Migo Professional and/or the
                  Migo
                  Upgrade. 

              

      

    

     

    
      
        	
              	2.11.	
                Migo
                  Professional
                  shall mean the Migo USB Drive software product offered by PowerHouse
                  as of
                  the Agreement Date for all currently supported software platforms
                  and all
                  currently provided functionality, including the Outlook synchronization
                  feature. 

              

      

    

     

    
      
        	
              	2.12.	
                Migo
                  Upgrade
                  shall have such meaning as described in Section 3.3.
                  

              

      

    

     

    
      
        	
              	2.13.	
                M-Systems
                  Customers
                  shall mean purchasers or licensees of M-Systems USB Drives and/or
                  technology, as relevant, whether labeled under M- System’s name or under
                  M-Systems partners’, resellers’ or OEM’s names.

              

      

    

    

    
      	
              PowerHouse-M-Systems
                Agreement 30.3.05

            	
               Page
                2

            

    

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      
        	
              	2.14.	
                M-Systems
                  Technology
                  shall mean, without limitation, DiskOnKey designs and technology
                  (as more
                  fully described in Exhibit
                  A).
                  

              

      

    

     

    
      	
            	2.15.	
              M-Systems
                USB Drives shall
                mean USB Drives manufactured by or on behalf of M-Systems or by its
                Associated Companies, partners, resellers or OEM’s utilizing the M-Systems
                Technology. 

            

    

     

    
      	
            	2.16.	
              PowerHouse
                Technology
                shall mean the technology described in Exhibit
                B.
                

            

    

     

    
      	
            	2.17.	
              Statement
                of Work
                means a plan for the Development Projects under this Agreement as
                set out
                in the Product Development Plan and includes product specifications,
                a
                development schedule, deliverables, acceptance criteria.
                

            

    

     

    
      	
            	2.18.	
              U3
                shall mean U3 LLC, a Delaware limited liability company under
                authorization of the members of U3 Group, which includes M-Systems
                and
                SanDisk Corporation, and has developed a next generation USB flash
                drive
                technology. 

            

    

     

    
      	
            	2.19.	
              U3 Drives
                shall mean a USB Drive which complies fully with the U3 specifications.
                

            

    

     

    
      	
            	2.20.	
              U3 Software
                shall mean software products, solely to the extent such software
                products
                run on a U3 Drive, where such software products comply with all portions
                of the Software and U3 Related Products Agreement to be entered into
                by a
                software provider and U3.

            

    

     

    
      	
            	2.21.	
              USB
                Drive means
                any removable data storage products comprised of a nondetachable
                fixed USB
                connector (i.e., not connected via a cable of any length) and embedded
                flash, or other, memory for data storage, contained within a single
                integrated shell package. 

            

    

     

    
      	
            	2.22.	
              Migo
                EULA
                means the End User License Agreement included with each Migo Product.
                

            

    

     

    
      	3.	
              BUSINESS
                COLLABORATION 

            

    

     

    M-Systems
      shall promote the Migo Products in accordance with the following guidelines:
      

     

    
      	
            	3.1.	
              PowerHouse
                will develop the Migo Products and will adapt them to run as U3 Software
                in accordance with U3 guidelines and pursuant to the terms of the
                Software
                and U3 Related Products Agreement to be entered into by PowerHouse
                and U3.
                

            

    

     

    
      	
            	3.2.	
              PowerHouse
                hereby grants M-Systems and its Associated Companies a worldwide,
                transferable license to market, distribute, promote, offer for sale,
                offer
                for re-sale and sell the Migo Products as an integrated part of M-Systems
                USB Drives only, and to use and display the trademarks, names, service
                marks, and logos of PowerHouse related to the Migo Products or in
                connection with such M-Systems USB Drives only. In consideration
                for such
                license, PowerHouse shall be entitled to receive and M-Systems shall
                pay
                to PowerHouse a fee of [ * * * ] per unit of Migo Professional
                bundled with an M-Systems USB Drive sold to an M-Systems Customer.
                For the
                avoidance of doubt, the right and license for the Migo Personal and
                Migo
                Upgrade as provided in this Agreement shall be at no cost to M-Systems.
                

            

    

    
      

      
        	
                PowerHouse-M-Systems
                  Agreement 30.3.05

              	
                 Page
                  3

              

      

      

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

    

     

    
      	
            	3.3.	
              M-Systems
                shall offer Migo Products to M-Systems Customers. The Migo Professional
                may be offered to M-Systems Customers in the initial form of the
                Migo
                Upgrade. The Migo Upgrade shall contain full functionality of the
                Migo
                Professional; however, the version will degrade to the Migo Personal
                version at the end of a 45-day period. During such 45-day period,
                the
                end-user shall have the option to purchase a license directly from
                PowerHouse in order to maintain the full functionality of the Migo
                Professional. Such upgrade mechanism shall be fully managed and operated
                by PowerHouse. The purchase by end-users may be made by way of a
                link to
                designated web site owned or hosted by PowerHouse (“Custom Landing Page”).
                Such Custom Landing Page shall not be available to the general public
                or
                to other PowerHouse customers or potential customers and shall be
                designated solely to M-Systems Customers. 

            

    

     

    
      	
            	3.4.	
              M-Systems,
                to the extent commercially practicable, will promote the Migo Upgrade
                as
                the primary Migo Product to M-Systems Customers. Furthermore, M-Systems
                will actively
                promote PowerHouse’s interests with M-Systems’ Customers, aiming at
                allowing PowerHouse
                to market its Migo Product upgrades directly to M-Systems’
                Customers
                end-user base. PowerHouse will provide M-Systems with its recommended
                marketing messages in order to promote the bundling of the Migo Products
                with the M-Systems USB Drives. 

            

    

     

    
      
        	
              	3.5.	
                PowerHouse
                  will make such changes to the trademark labeling included in the
                  Migo
                  Products as an M-Systems Customer reasonably deems necessary for
                  such
                  M-Systems Customer to promote the Migo Products. M-Systems Customers’
                  promotional and packaging materials which include the Migo brand
                  name must
                  be submitted to PowerHouse for approval, which approval shall not
                  be
                  unreasonably withheld. 

              

      

    

     

    
      	
            	3.6.	
              PowerHouse
                will provide first level support for all Migo Products directly to
                M-Systems and M-Systems Customers and their end-users, for 30 days
                from
                the date of the first use of the software by the end user. With respect
                to
                any M-Systems Customer who chooses to provide first level support
                itself
                to its end-users, PowerHouse will provide training and second level
                support as may be required by such M-Systems Customer and accepted
                by
                PowerHouse. PowerHouse will provide training 3 times per year at
                PowerHouse’s location. If the training is requested at other locations,
                there will be charges associated with the training in amounts determined
                by PowerHouse and which will be borne by the M-Systems Customer.
                In the
                case where PowerHouse is providing the level-1 support, if it is
                determined that the problem is not related to Migo Products, M-Systems
                will pay PowerHouse for providing such first line of support. A process
                and the fee structure will be established prior to the product launch.
                Without derogating from the preceding sentence, PowerHouse shall
                provide
                M-Systems and M-Systems Customers with such upgrades, features, technical
                support and maintenance services as it provides to its other customers
                generally and without special negotiation of terms and conditions.
                Upgrades for this purpose shall be considered fixes and enhancements
                to
                the existing product and will not include new features or functionality
                that may be marketed and sold by PowerHouse as value added products.
                

            

    

     

    
      	
            	3.7.	
              Exclusivity.

            

    

    
      

      
        	
                PowerHouse-M-Systems
                  Agreement 30.3.05

              	
                 Page
                  4

              

      

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      	
            	 	
              3.7.1.
                Other
                than for those customers and with respect to those products listed
                next to
                their names in Exhibit F, during the Term of this Agreement, PowerHouse
                shall not provide any other party and any other party’s customers with
                services or applications for USB Drives provided or similar to those
                provided to M-Systems Customers as set forth in this Agreement, and
                shall
                not bundle, or allow to be bundled. The Migo Products (or variations
                thereof) with any other USB Drive other than M-Systems’ USB Drives.
                Exhibit F may be amended upon the mutual written agreement of the
                parties.
                

            

    

     

    
      	
            	 	
              
                Notwithstanding
                  anything to the contrary contained elsewhere in this Agreement
                  or any
                  exhibit or schedule hereto, the exclusivity set forth above shall
                  not be
                  deemed to restrict or limit in any manner the full and complete
                  right of
                  PowerHouse to market, sell, license and distribute Migo
                  Products:
                  

              

            

    

     

    
      	
            	(a)	
              for
                use in connection with (1) MP3 players, (2) Cell/smart phones, (3)
                PDAs,
                (4) SIM cards, (5) USB watches and/or (6) memory cards in devices
                marketed
                by PowerHouse or others (other than standalone USB Drives), if PowerHouse
                offers M-Systems a 30-day right of first refusal to acquire the rights
                for
                any such device on the terms offered to the first third party acquiring
                rights for any such device from PowerHouse and M-Systems does not
                exercise
                such right; and 

            

      	 	 	 

    

    
      	
            	(b)	
              to
                PowerHouse customers who or which acquire Migo Products (including
                USB
                Drives on which Migo Products are installed) directly from PowerHouse.

            

       

      
        	
              	 	
                
                  3.7.2.
                    For the avoidance of any doubt M-Systems shall be entitled in
                    its sole and
                    absolute discretion to market and sell the M-Systems USB Drives,
                    either
                    directly or indirectly, without the Migo Products, and, except
                    as
                    expressly provided herein, PowerHouse shall have no right or
                    claim under
                    this Agreement or otherwise for loss of profit, loss of revenues
                    or the
                    like.
                    

                

              

         

      

    

    
      
        	
              	3.8.	
                Beginning
                  on the date (the “English Language Start Date”) which is two months after
                  the Migo Products have been approved for English Language Gold
                  Release
                  pursuant to section 4.5, M-Systems shall bundle with M-Systems
                  USB Drives,
                  a minimum of [ * * * ] Migo Products (without regard to product mix)
                  per month. 

              

        	 	 	 

        	 	 	
                Beginning
                  on the date (the “International Start Date”) which is the date on which
                  Migo Products have been approved for International Gold Release
                  pursuant
                  to section 4.5 (a) the schedule in the preceding sentence shall
                  no longer
                  be applicable and the following schedule shall
                  apply:

              

      

       

    

    
      
        	
              	
                (a)

              	
                During
                  the first 90-day period following the International Start Date,
                  M-Systems
                  shall bundle with M-Systems USB Drives an average of at least [
                  * * *
                  ] Migo Products (without regard to product mix) per
                  month.

              

        	 	 	 

        	 	(b)	
                During
                  the second 90-day period following the International Start Date,
                  M-Systems
                  shall bundle with M-Systems USB 

              

      

      	 	 	 

      
        	
              	 	
                 

              

      

    

     

    
      	
              PowerHouse-M-Systems
                Agreement 30.3.05

            	
               Page
                5

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    Drives
      an
      average of at least [ * * * ] Migo Products (without regard to product mix)
      per month.

     

    
      	
            	(c)	
              During
                the third 90-day period following the International Start Date and
                during
                each subsequent 90-day period, M-Systems shall bundle with M-Systems
                USB
                Drives an average of at least [ * * * ] Migo Products (without regard
                to product mix) per month. 

            

    

     

    In
      the
      event the M-Systems fails to meet the commitment in this Section 3.9 and does
      not cure such failure after 30 days written notice, the exclusivity provisions
      in Section 3.8 shall cease until such time as M-Systems meets the commitment
      herein. 

     

    
      	
            	3.9.	
              Notwithstanding
                anything else to the contrary in this Agreement (other than the last
                paragraph of this Section), and without derogating from Section 3.7
                above,
                in no event shall PowerHouse sell any Migo Product to any third party
                or
                any third party’s customers (collectively, a “PowerHouse Customer”) at
                price lower than M-Systems’ price under this Agreement, regardless of
                sales volume, use or application, including without limitation those
                customers listed on Exhibit F. If the price that PowerHouse
                charges/charged a PowerHouse Customer is less than the prices charged
                to
                M-Systems pursuant to the terms herein, then PowerHouse will make
                those
                prices available to M-Systems, after the time of availability of
                those
                prices to the PowerHouse Customer PowerHouse will inform M-Systems
                in
                writing within ten (10) working days after the end of each month
                whether
                any PowerHouse Customer has purchased any Migo Product from PowerHouse
                at
                a price lower than the price for the same Migo Product acquired by
                M-Systems during the relevant month M-Systems shall be entitled to
                a price
                adjustment equal to the difference between the price of Migo Product
                sold
                to M-Systems minus the price Migo Product sold to the other PowerHouse
                Customer multiplied by number of units purchased by M-Systems during
                the
                relevant month. Such price adjustment by PowerHouse due to M-Systems
                shall
                be made in the form of a credit against future purchases of Migo
                Product
                to be made at any time Buyer’s
                discretion.

            

    

     

    Notwithstanding
      anything to the contrary contained elsewhere in this Agreement or any exhibit
      or
      schedule hereto, the restrictions and price adjustments set forth above shall
      not be deemed applicable to or with respect to any sales or licenses of Migo
      Products: 

     

    
      	
            	(a)	
              for
                use in connection with (1) MP3 players, (2) Cell/smart phones, (3)
                PDAs,
                (4) SIM cards, (5) USB watches and/or (6) memory cards in devices
                marketed
                by PowerHouse or others (other than standalone USB Drives), if PowerHouse
                offers M-Systems a 30-day right of first refusal to acquire the rights
                for
                any such device on the terms offered to the first third party acquiring
                rights for any such device from PowerHouse and M-Systems does not
                exercise
                such right; and 

            

    

     

    
      	PowerHouse-M-Systems Agreement
              30.3.05	
              Page
                6 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
            	(b)	
              to
                PowerHouse customers who or which acquire Migo Products (including
                USB
                Drives on which Migo Products are installed) directly from PowerHouse.
                

            

    

     

    
      	4.	
              DEVELOPMENT
                

            

    

     

    
      	
            	4.1.	
              The
                parties will appoint technical representatives to coordinate technological
                cooperation between the parties (the “Technical Team”). The Technical Team
                will be responsible for discussing and overseeing the integration
                between
                Migo Products and M-Systems USB
                Drives.

            

    

     

    
      	
            	4.2.	
              PowerHouse
                and M-Systems will disclose to each other Information to the extent
                necessary for implementing Development Projects in accordance with
                a
                Product Development Plan. The Product Development Plan and any amendments
                thereof, once mutually agreed upon by the Parties will be incorporated
                by
                reference into this Agreement as an Addendum and shall constitute
                a part
                hereto. The initial Product Development Plans is attached as Exhibit
                C
                of
                this Agreement. 

            

    

     

    
      	
            	4.3.	
              The
                specific goal of the Development Project is to develop software
                applications required to bundle the Migo Products with M-Systems
                USB
                Drives and to provide M-Systems Customers with the Migo Products
                as set
                forth herein (the “Software
                Applications”).

            

    

     

    
      	
            	4.4.	
              In
                implementing Development Projects, PowerHouse and M-Systems will
                cooperate
                fully to accomplish the work allocated to each party within the time
                schedule as set forth in the Product Development Plan. The parties
                acknowledge that the time schedules of a Statement of Work in a Product
                Development Plan are best estimates as of the time of its preparation
                and,
                unless otherwise agreed in writing, neither Party shall be liable
                for any
                delays in accomplishing the development work therein. Each of PowerHouse
                and M-Systems will be responsible for their respective development
                responsibilities and bear its own development costs, in accordance
                with a
                Product Development Plan. Each Party will complete its development
                responsibilities and achieve its milestones in accordance with the
                schedule. For each day a Party is late in achieving a milestone,
                then the
                deadlines for the other Party’s outstanding milestones will be extended
                one day. If for any reason the development does not proceed in accordance
                with the schedule, either Party may request a meeting to discuss
                the
                delay. If such a meeting is requested, the Parties shall meet and
                discuss
                in good faith mechanisms to expedite development and avoid further
                delays,
                and will make necessary adjustments to the Product Development schedule.
                

            

    

     

    
      	
            	4.5.	
              Without
                derogating from the preceding section, it is the intent of the parties
                that PowerHouse shall deliver a final (post QA) U3 compliant version
                of
                each of the Migo Products by no later than 3 weeks following release
                of
                final U3 LaunchPad software. M-Systems shall confirm to PowerHouse
                when
                each Migo Product has passed M-Systems’ internal acceptance tests and is
                U3 compliant. Versions M-Systems approves for release shall be known
                as
                “Gold Releases”. Initially, the Migo Products will be prepared for release
                in the English Language (the “English Language Gold Release”). The English
                Language Gold Release shall be completed by no later than 3 weeks
                following release of final U3 LaunchPad software. Subsequently, a
                version
                

            

    

     

    
      	PowerHouse-M-Systems Agreement
              30.3.05	
              Page 7 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    will
      be
      prepared for international release in English, French, German, Italian and
      Spanish Languages (the “International Gold Release”). 

     

    
      
        	
              	4.6.	
                Each
                  Party shall be responsible for its respective expenses and liabilities
                  arising in connection with the Development Project(s) including
                  any travel
                  or other expenses incurred by employees of that Party in connection
                  therewith. 

              

      

    

     

    
      	5.	
              REFERRAL
                FEE 

            

    

     

    
      	
            	5.1.	
              For
                any upgrade purchased by an end-user of M-Systems or an M-Systems
                Customers
                through the Custom Landing Page as described in Section 3.3, M-Systems
                shall be entitled to [ * * * ] of all fees collected by PowerHouse
                net of expenses from the e-commerce provider and taxes charged and
                passed
                through. 

            

    

     

    
      	6.	
              AUDIT
                RIGHTS 

            

    

     

    
      	
            	6.1.	
              Exchange
                of Report; Audit Rights. Within no later than 30 days after the end of
                each month, each party shall provide the other with a written report
                in
                the form attached as Exhibit
                D
                of
                this Agreement and which will include the calculation of all Referral
                and
                License Fees due to the other, as applicable. PowerHouse’s written report
                shall include a breakdown of upgrades per M-Systems Customer. Based
                on the
                report each party shall invoice the other for the Referral or License
                Fees,
                as applicable (“Invoice”). If the Parties do not agree with any of the
                reports, the Parties will use all reasonable efforts to settle disputes
                by
                mutual agreement. If any dispute is not so settled, the disputing
                party
                may exercise its right to audit as set forth in sub-section 6.5 below.
                In
                the event such audit verifies an underpayment error, the audited
                party
                shall promptly pay the auditing party for the full amount of any
                underpayment verified in the audit. Any such discrepancy discovered
                as a
                result of such audit, will be reflected in the following report and
                rectified and payment shall be made net within 30 days from receipt
                of
                audit report.

            

    

     

    
      	
            	6.2.	
              Payment
                of Referral and License Fees. Referral Fees based on upgrades through
                the Custom Landing Page shall accrue upon each successful download
                of the
                upgrade. Such Referral Fee shall be non-refundable regardless of
                the
                length of subscription to such upgrade. Payment of Referral and License
                Fees shall be made by the relevant party net within thirty (30) days
                of
                the Invoice. If there is any discrepancy in the report for any month,
                as
                described in Section 6.1, any required reconciliation in payments
                shall be
                made within 15 Business Days of the resolution of any disputes.
                

            

    

     

    
      	
            	6.3.	
              Late
                Payments. Payments not received in accordance with this Section 6
                shall be subject to a late payment charge of one and one-half percent
                (1.5%) per month or the highest amount permitted by law, whichever
                is
                less, commencing on the date such payment became
                due.

            

    

     

    
      	
            	6.4.	
              Taxes.
                All fees payable by one party to the other under this Agreement are
                on an
                exclusive basis and do not include all current and future applicable
                taxes
                and duties, including, but not limited to, Value Added Tax, sales
                tax, if
                applicable to such payments, which shall be added to such fees, or
                paid
                directly by the party paying such fees, as applicable. Notwithstanding
                the
                aforesaid, any income or other tax which a party is required by law
                to pay
                or withhold on behalf of the other party with respect to any amounts
                payable to such other party under this Agreement may be deducted
                from the
                amount of 

            

    

     

    
      	PowerHouse-M-Systems Agreement
              30.3.05	
              Page 8 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    payments,
      provided, however, that in regard to any such deduction, the deducting party
      shall upon request furnish to the other party such certificates and other
      evidence of deduction and payment thereof as such other party may properly
      require. Stamp tax, if any, shall be borne equally by the parties. 

     

    
      	
            	6.5.	
              Each
                party shall keep complete and accurate records pertaining to any
                license
                fee pursuant to Section 3.2 or upgrade purchased pursuant to Section
                3.3,
                as relevant, which will be sufficient to verify full compliance with
                this
                Agreement. Each party shall be entitled to have the books and records
                of
                the other party audited by one of the “nationally recognized independent
                public accountants qualified under PCAOB guidelines”. Any such audit shall
                be conducted during normal business hours and shall include the right
                to
                review and copy all records that contain information bearing upon
                the
                audited party’s compliance with the terms of this Agreement. Such records
                shall be maintained for at least five years after their date of creation.
                The cost of such audit shall be paid by the auditing party provided
                that
                if the audit shows an underpayment of more than 5% by the audited
                party,
                the audited party shall bear the costs of such audit.
                

            

    

     

    
      	7.	
              INTELLECTUAL
                PROPERTY RIGHTS 

            

    

     

    
      	
            	7.1.	
              Ownership.
                PowerHouse owns the PowerHouse Technology and the PowerHouse
                Intellectual Party Rights. M-Systems owns the M-Systems Technology
                and the
                M-Systems Intellectual Property Rights. Without derogating from the
                preceding sentences, to the extent that any improvements are made
                in the
                course of development of the Software Applications to either M-Systems
                Technology or PowerHouse Technology, such improvements shall be owned
                solely by the party who owns the relevant
                Technology.

            

    

     

    
      	
            	7.2.	
              No
                Implied Licenses. No license or right is granted by either Party to
                the other, by implication or by estoppel, or otherwise to any patents,
                inventions, or other property right, other than the licenses and
                rights
                expressly granted in this Section. 

            

    

     

    
      	8.	
              CONFIDENTIAL
                INFORMATION 

            

    

     

    
      	
            	8.1.	
              Each
                Party agrees not to use Confidential Information disclosed to it
                by the
                other Party for its own use or for any purpose except the Development
                Projects as set forth in this Agreement. Confidential Information
                shall
                not be disclosed to third parties or to either Party’s employees or
                consultants except employees or consultants who are required to have
                the
                Confidential
                Information in order to carry out the Development Projects, management
                associated with the employees carrying out the Development Projects,
                attorneys and accountants, and senior management of the Parties,
                provided
                that such parties are subject to written confidentiality obligations.
                Each
                Party agrees that it will take all reasonable steps which are customary
                in
                the industry in which the Parties operate to protect the secrecy
                of and
                avoid disclosure or use of Confidential Information in order to prevent
                the Confidential Information from falling into the public domain
                or the
                possession of unauthorized persons. Each Party agrees to notify the
                other
                

            

    

     

    
      	PowerHouse-M-Systems Agreement
              30.3.05	
              Page 9 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Party
      in
      writing of any misuse or misappropriation of Confidential Information which
      may
      come to the Party’s attention.

     

    
      	
            	8.2.	
              The
                confidentiality obligations imposed under Section 8.1 shall not apply
                to
                Information which: 

            

    

     

    
      	
            	8.2.1.	
              is
                generally available to the public prior to disclosure under this
                Agreement; or 

            

    

     

    
      	
            	8.2.2.	
              is
                generally known to the receiving Party prior to the disclosure under
                this
                Agreement as evidenced by written and dated material;
                or

            

    

     

    
      	
            	8.2.3.	
              through
                no fault of the receiving Party becomes part of the public domain
                after
                disclosure under this Agreement; or

            

    

     

    
      	
            	8.2.4.	
              is
                disclosed to the receiving Party by any third party having a bona
                fide
                right to do so; or

            

    

     

    
      
        	
              	8.2.5.	
                is
                  approved for release by the written authorization of the disclosing
                  Party;
                  or

              

      

    

     

    
      	
            	8.2.6.	
              is
                disclosed pursuant to the requirement of a government agency or by
                operation of law after the disclosing Party has been given at least
                thirty
                (30) days notice and an opportunity to object to such
                disclosures.

            

    

     

    
      	
            	8.2.7.	
              is
                independently developed by the receiving Party without use of the
                disclosing Party’s Confidential
                Information.

            

    

     

    
      	
            	8.3.	
              Each
                Party shall immediately notify the other Party of any private or
                governmental request for the Confidential Information or any other
                information or documents relating to this Agreement.
                

            

    

     

    
      	
            	8.4.	
              Each
                Party shall have the right to participate in any other Party’s response to
                any such request. In the event that a Party receives any subpoena
                or other
                legal process requiring the production of information, documents,
                data,
                work papers, reports, or other materials relating to Confidential
                Information or to this Agreement, then the Party
                shall:

            

    

     

    
      	
            	8.4.1.	
              give
                the other Party, if possible, the opportunity to participate in quashing,
                modifying, or otherwise responding to any compulsory process in an
                appropriate and timely manner; and

            

    

     

    
      	
            	8.4.2.	
              cooperate
                fully with the other Party’s efforts to narrow the scope of any such
                compulsory process, to obtain a protective order limiting the use
                or
                disclosure of the information sought, or in any other lawful way
                to obtain
                continued protection of the Confidential
                Information.

            

    

     

    
      	
            	8.5.	
              If
                either Party becomes aware of the loss, theft, or misappropriation
                of the
                other Party’s Confidential Information which is in its possession, such
                Party shall notify the other Party in writing within ten (10) Business
                Days of its discovery of the loss, theft, or misappropriation of
                such
                Confidential Information. 

            

    

    
       

      
        
          	9.	
                  TERM
                    AND TERMINATION 

                

        

         

      

    

    
      	PowerHouse-M-Systems Agreement
              30.3.05	
              Page 10

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	9.1.	
                This
                  Agreement shall have a term of three years and may not be terminated
                  for
                  the convenience of either Party. However, either Party may terminate
                  this
                  Agreement in the event of a breach or default by the other Party
                  (the
                  “breaching Party”). The Party alleging a breach or default (the
                  “non-breaching Party”) shall provide a written notice of termination to
                  the breaching Party specifying the facts and circumstances relating
                  to the
                  alleged breach or default as set forth above; provided; however,
                  that this
                  Agreement shall not be terminated if the specified breach or default
                  is
                  remedied or cured within thirty (30) days after notice of breach
                  or
                  default is provided. If such specified breach or default is not
                  remedied
                  or cured within thirty (30) days after notice of breach or default
                  is
                  provided, and the breaching Party does not dispute that it has
                  breached or
                  defaulted and that the breach or default is material, then termination
                  shall take effect upon expiration of the thirty-day period.
                  Notwithstanding anything to the contrary in this Section 9.1, breaches
                  for
                  non-payment of any fees due and payable must be cured within 10
                  days of
                  notice of such breach. 

              

      

       

      
        	
              	9.2.	
                If
                  at any time during the term of this Agreement, (i) a Party becomes
                  insolvent; or (ii) a Party admits in writing its insolvency or
                  inability
                  to pay its debts or perform its obligations as they mature; or
                  (iii) a
                  party becomes subject to any voluntary or involuntary proceedings
                  in
                  bankruptcy, liquidation, dissolution, receivership, attachment
                  or
                  composition or general attachment for the benefit of creditors,
                  provided
                  that if such condition is assumed involuntarily it has not been
                  dismissed
                  with prejudice within thirty (30) days after it begins; the other
                  Party
                  may terminate this Agreement upon thirty days advanced written
                  notice.
                  

              

      

       

      
        	
              	9.3.	
                In
                  the event of termination of this Agreement by either Party, each
                  Party
                  shall immediately discontinue use of the Confidential Information
                  received
                  from the other Party, and within five (5) days after termination,
                  each
                  Party shall provide to the other Party a certification that the
                  originals
                  and all copies of such Confidential Information, regardless of
                  form, have
                  been returned to the disclosing Party or else destroyed.
                  

              

      

       

      
        	
              	9.4.	
                Sections
                  5, 6, 7, 8, 9.4, 10, 11, 12 and 13 shall survive the termination
                  of this
                  Agreement for any reason
                  whatsoever.

              

      

       

      
        	10.	
                LIABILITY
                  AND INDEMNITY 

              

      

       

      
        	
              	10.1.	
                Each
                  party shall, at its own expense, indemnify, defend and hold the
                  other
                  party and its Associated Companies (“Indemnified
                  Parties”)
                  harmless from any and all claims, allegations, demands, liabilities,
                  losses, damages, awards, judgments or settlements, including all
                  reasonable costs and expenses related thereto including attorney’s fees
                  (“Claims”),
                  that may be asserted, granted, imposed or brought against any Indemnified
                  Party directly arising from or in connection with any Claims that
                  the
                  indemnifying party’s technology or products infringe any copyright,
                  patent, trade mark, trade secret or other intellectual property
                  right.
                  

              

      

       

      
        	
              	10.2.	
                As
                  between M-Systems, PowerHouse and each M-Systems Customer, M-Systems
                  will
                  not be responsible for anything related to the Migo Products or
                  of any
                  losses, damages or expenses incurred by M-Systems Customers in
                  

              

      

      

      
        	
                PowerHouse-M-Systems
                  Agreement 30.3.05

              	
                Page
                  11 

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	 	connection with the use of the Migo
                Products.
                PowerHouse shall be the sole party responsible for such losses damages
                or
                expenses.

        	 	 	 

        	
              	10.3.	
                As
                  between M-Systems, PowerHouse and each M-Systems Customer, PowerHouse
                  will
                  not be responsible for anything related to the products or technology
                  of
                  M-Systems or of any losses, damages or expenses incurred by M-Systems
                  Customers in connection with the use of the M-Systems products
                  or
                  technology. M-Systems shall be the sole party responsible for such
                  losses
                  damages or expenses. 

              

      

       

      
        	
              	10.4.	
                PowerHouse
                  shall, at its own expense, indemnify, defend and hold M-Systems
                  and its
                  Associated Companies harmless from any and all Claims, that may
                  be
                  asserted, granted, imposed or brought against M-Systems and its
                  Associated
                  Companies arising from or in connection with any Claims brought
                  by
                  M-Systems Customers in connection with the Migo Products, excluding
                  claims
                  for loss of data or loss of profits.

              

      

       

      
        	
              	10.5.	
                M-Systems
                  shall, at its own expense, indemnify, defend and hold PowerHouse
                  and its Associated Companies harmless from any and all Claims,
                  that may be
                  asserted, granted, imposed or brought against PowerHouse and its
                  Associated Companies arising from or in connection with any Claims
                  brought
                  by third parties in connection with the M-Systems products, excluding
                  claims for loss of data or loss of profits.

              

      

       

      
        	11.	
                REPRESENTATIONS
                  AND WARRANTIES 

              

      

       

      
        	
              	11.1.	
                PowerHouse
                  represents and warrants that it has all the rights necessary to
                  enter into
                  this Agreement and to perform its obligations hereunder.
                  

              

      

       

      
        	
              	11.2.	
                PowerHouse
                  represents and warrants that to the best of its knowledge it has
                  all
                  necessary rights in, and to, all copyrights, patents and other
                  proprietary
                  rights associated with the PowerHouse Technology.
                  

              

      

       

      
        	
              	11.3.	
                M-Systems
                  represents and warrants that it has all the rights necessary to
                  enter into
                  this Agreement and to perform its obligations hereunder.
                  

              

      

       

      
        	
              	11.4.	
                M-Systems
                  represents
                  and warrants that to the best of its knowledge it has all necessary
                  rights
                  in, and to, all copyrights, patents and other proprietary rights
                  associated with the M-Systems Technology.

              

      

       

      
        	
              	11.5.	
                Warranty
                  Disclaimers. EXCEPT AS EXPRESSLY WARRANTED IN THIS AGREEMENT, THE
                  PARTIES DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, ORAL
                  OR
                  WRITTEN, INCLUDING, WITHOUT LIMITATION, (A) ANY WARRANTY THAT THE
                  ANY
                  TECHNOLOGY IS ERROR-FREE, WILL OPERATE WITHOUT INTERRUPTION, OR
                  IS
                  COMPATIBLE WITH ALL EQUIPMENT AND SOFTWARE CONFIGURATIONS; (B)
                  ANY
                  WARRANTY OF MERCHANTABILITY; AND, (C) ANY WARRANTY OF FITNESS FOR
                  A
                  PARTICULAR PURPOSE. NEITHER PARTY IS LIABLE TO THE OTHER FOR ANY
                  INDIRECT,
                  INCIDENTAL,
                  SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING THE LOSS OF PROFITS,
                  REVENUE,
                  DATA, OR USE OR COST OF PROCUREMENT OF SUBSTITUTE GOODS INCURRED
                  BY ANY
                  PARTY OR ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT
                  OR
                  BASED ON A WARRANTY, EVEN IF ANY 

              

      

      
        

        
          	
                  PowerHouse-M-Systems
                    Agreement 30.3.05

                	
                  Page
                    12 

                

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      PARTY
        OR
        THIRD PARTY HAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 

       

      
        	
              	11.6.	
                LIMITATION
                  OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, IN NO
                  EVENT SHALL EITHER PARTY’S LIABILITY TOWARDS THE OTHER PARTY CAUSED BY ANY
                  BREACH OF ANY WARRANTY IN THIS AGREEMENT EXCEED THE GREATER OF
                  (i) THE
                  AGGREGATE CONSIDERATION PAYABLE BY M-SYSTEMS TO POWERHOUSE HEREUNDER;
                  OR
                  (ii) US$ 1,000,000. 

              

      

       

      
        	12.	
                SOURCE
                  CODE ESCROW 

              

      

       

      
        	
              	12.1.	
                The
                  Parties agree to appoint within sixty (60) days of the date the
                  software
                  applications are delivered
                  pursuant to the Statement of Work an Escrow Agent or such other
                  escrow
                  agent as is a mutually acceptable and to execute the Escrow
                  Agreement.

              

      

       

      
        	
              	12.2.	
                The
                  parties agree that the Escrow Agent must be independent and located
                  outside of the USA and Israel. 

              

      

       

      
        	
              	12.3.	
                M-Systems
                  and PowerHouse acknowledge and accept the terms of the Escrow Agreement
                  and agree on behalf of themselves to be bound by the provisions
                  therein.
                  

              

      

       

      
        	
              	12.4.	
                Any
                  breach
                  of
                  this Section 12 by the Parties shall be considered a material breach
                  of
                  this Agreement. 

              

      

       

      
        	
              	12.5.	
                If
                  the Deposit Materials, as defined in the Escrow Agreement, are
                  not
                  deposited with the Escrow
                  Agent according to the terms of the Escrow Agreement within ten
                  (10) days
                  from the Agreement Date (provided that the Escrow Agreement was
                  signed
                  during such period), M-Systems shall have the right to terminate
                  this
                  Agreement forthwith without any liability and without limitation
                  to any
                  other rights M-Systems may have.

              

      

       

      
        	
              	12.6.	
                Without
                  limitation to any terms of the Escrow Agreement, PowerHouse shall,
                  within
                  thirty
                  (30) days of the date of signature of the Escrow Agreement, provide
                  to the
                  Escrow Agent one copy of the Deposit Materials and shall thereafter
                  during
                  the term of this Agreement, simultaneously with the delivery of
                  Updates to
                  M-Systems, also provide to the Escrow Agent in source code format
                  (1) copy
                  of such Update. 

              

      

       

      
        	
              	12.7.	
                The
                  Escrow Agent will deliver the Deposit Materials to M-Systems only
                  under
                  the circumstances defined in the Escrow Agreement.
                  

              

      

       

      
        	
              	12.8.	
                The
                  costs of the Escrow Agent shall be borne by M-Systems.
                  

              

      

       

      
        	
              	12.9.	
                The
                  provisions of the Escrow Agreement shall survive the termination
                  or
                  expiration of this Agreement regardless of the reasons therefor,
                  and shall
                  terminate upon termination of the Escrow Agreement according to
                  its terms.
                  

              

      

       

      
        	13.	
                GENERAL
                  PROVISIONS 

              

      

       

      
        	
              	13.1.	
                Choice
                  of Law. This Agreement shall be construed under, and interpreted
                  in
                  accordance with, the laws of the State of California and of the
                  United
                  States of America without giving
                  effect to the principles of conflicts laws. In the event of any
                  lawsuit or
                  other proceeding to enforce the provisions of this Agreement, the
                  prevailing Party shall be entitled to recover its reasonable
                  

              

      

      
        
          

          
            	
                    PowerHouse-M-Systems
                      Agreement 30.3.05

                  	
                    Page
                      13 

                  

          

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	 	
                attorney’s fees and expenses. Whenever
                  possible, each provision of this Agreement will be interpreted
                  so as to be
                  effective and valid under applicable law, but if any provision
                  is held to
                  be invalid under applicable law, either in whole or in part, the
                  provision
                  will be ineffective only to the extent of such invalidity, and
                  the
                  remaining provision of this Agreement shall remain in full force
                  and
                  effect. The failure by either Party to enforce any of the terms
                  and
                  conditions of this Agreement shall not constitute a waiver of such
                  Party’s
                  right thereafter to enforce that or any other terms and conditions
                  of this
                  Agreement.

              

        	 	 	 

        	
              	13.2.	
                Limitation
                  on Liability. Neither Party shall be liable to each other in contract,
                  tort or otherwise, whatever
                  the cause thereof, for any loss of profit, business or goodwill
                  or any
                  indirect, special, consequential, incidental or punitive cost,
                  damages or
                  expense of any kind, howsoever arising under or in connection with
                  this
                  Agreement. 

              

      

       

      
        	
              	13.3.	
                Assignment.
                  Neither M-Systems nor PowerHouse shall assign any of its rights
                  or
                  privileges hereunder
                  without the prior written consent of the other party, such consent
                  not to
                  be unreasonably withheld. 

              

      

       

      
        	
              	13.4.	
                Independent
                  Contractors. The relationship of M-Systems and PowerHouse shall be
                  that of independent contractors. There is no relationship of agency,
                  partnership, joint venture, employment or
                  franchise between the Parties. Neither Party has the authority
                  to bind the
                  other or to incur any obligation on behalf of the other Party or
                  to
                  represent itself as the other’s agent or in any way that might result in
                  confusion as to the fact that the Parties are separate and distinct
                  entities. 

              

      

       

      
        	
              	13.5.	
                Non-Solicitation.
                  Each of PowerHouse and M-Systems agree that during the term of
                  this
                  Agreement, and for a period of 12 months thereafter, it shall not
                  induce
                  or solicit any employee of the other or its Associated Companies
                  to leave
                  his or her employment therewith. 

              

      

       

      
        	
              	13.6.	
                Notices.
                  All communications relating to and notices required under this
                  Agreement
                  shall be directed as: 

              

      

       

      Communications
        and Notices to PowerHouse: 

       

      PowerHouse
        Technologies Group, Inc. 

      555
        Twin
        Dolphin Drive, Suite 650, Redwood City, CA 94065 USA 

      Attn:
        General Counsel 

      Fax:
        1-650-232-2699 

       

      Communications
        and Notices to M-Systems: 

       

      M-Systems
        Flash Disk Pioneers Ltd. 

      Central
        Park 2000, 7 Atir Yeda St., Kfar Saba, 44425, Israel 

      Attention:
        General Counsel 

      Fax:
        011-972-3-548-0575 

       

      Unless
        specifically set forth otherwise, all notices or communications of any kind
        made
        or required to be given pursuant to this Agreement shall be in writing and
        delivered to the other Party at the address set forth above, unless either
        Party
        gives notice to the other party of a change of address. All notices or
        communications shall be made by hand delivery, established overnight courier
        service, facsimile or prepaid certified mail return receipt 

      
        
          

          
            	
                    PowerHouse-M-Systems
                      Agreement 30.3.05

                  	
                    Page
                      14 

                  

          

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	 	
                requested. Notices shall be
                  deemed
                  delivered upon receipt if delivered by hand, overnight courier
                  service or
                  facsimile, or five Business Days after dispatch if by certified
                  mail.

              

        	 	 	 

        	
              	13.7.	
                Integration.
                  This Agreement contains the entire agreement of the Parties. No
                  promise,
                  inducement, representation or agreement, other than as expressly
                  set forth
                  herein, has been made to or by the Parties hereto. All prior agreements
                  and understandings related to the subject matter hereof, whether
                  written
                  or oral, including without limitation the LOI, are expressly superseded
                  hereby and are of no further force or effect.

              

      

       

      
        	
              	13.8.	
                Binding
                  Agreement. This Agreement shall be binding upon and inure to the
                  benefit of PowerHouse and M-Systems, and their respective Associated
                  Companies. 

              

      

       

      
        	
              	13.9.	
                Publicity.
                  Neither party shall issue any press release relating to this Agreement
                  or the transactions contemplated hereby without prior notice to,
                  consultation with, and the consent of the other party. Concurrently
                  with
                  the execution of this Agreement, the Parties shall issue a joint
                  press
                  release to be mutually agreed upon.

              

      

       

      
        	
              	13.10.	
                Amendment.
                  This Agreement cannot be altered, amended or modified in any respect,
                  except by a writing duly signed by both Parties.
                  

              

      

       

      
        	
              	13.11.	
                No
                  Strict Construction. The normal rule of construction to the effect
                  that any ambiguities are to be resolved against the drafting Party
                  shall
                  not be employed in the interpretation of this Agreement.
                  The headings contained in this Agreement are intended solely for
                  ease of
                  reference and shall be given no effect in the construction of
                  interpretation of this Agreement. 

              

      

       

      
        	
              	13.12.	
                Execution.
                  This Agreement may be executed in counterparts by the Parties,
                  each of
                  which shall be deemed an original, and which together shall constitute
                  one
                  and the same instrument, having the same force and effect as if
                  a single
                  original had been executed by all the Parties.

              

      

       

      
        	
              	13.13.	
                Currency.
                  All payments required under this Agreement shall be made in the
                  currency
                  of the United States of America. 

              

      

       

      
        	
              	13.14.	
                Jurisdiction.
                  Any litigation arising out of or relating to this Agreement shall
                  be
                  conducted
                  in
                  the Superior Court of the State of California in and for San Mateo
                  County
                  or the United States District Court for the Northern District of
                  California. Each of the parties consents to the exclusive jurisdiction
                  of
                  such courts and to venue in such courts.

              

      

       

      
        	
              	13.15.	
                Export
                  Restrictions. M-Systems will not export or re-export the Migo
                  Products, any part thereof, or any process or service that is the
                  direct
                  product of the Migo Products (the foregoing collectively referred
                  to as
                  the “Restricted Components”) to any country, person or entity
                  subject to U.S. export restrictions. M-Systems specifically agrees
                  not to
                  export or re-export any of the Restricted Components (i) to any
                  country to
                  which the U.S. has embargoed or restricted the export of goods
                  or
                  services, which currently include, but are not necessarily limited
                  to
                  Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria, or to any
                  national
                  of any such country, wherever located, who intends to transmit
                  or
                  transport the Restricted Components back to such country; (ii)
                  to any
                  person or entity who you know or have reason to

              

      

      
        
          
            

            
              	
                      PowerHouse-M-Systems
                        Agreement 30.3.05

                    	
                      Page
                        15 

                    

            

          

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

    

    

    know
      will
      utilize the Restricted Components in the design, development or production
      of
      nuclear, chemical or biological weapons or (iii) to any person or entity who
      has
      been prohibited from participating in U.S. export transactions by any federal
      agency of the U.S. government. M-Systems warrants and represents that neither
      the U.S. Bureau of Export Administration nor any other U.S. federal agency
      has
      suspended, revoled or denied its export privileges.

    

    IN
      WITNESS WHEREOF,
      the
      parties have caused this Agreement to be signed by their duly authorized
      representatives as of the Agreement Date.

     

    
      
        	M-Systems
                Flask Disk Pioneers Ltd.	 	Power
                House Technologies Group Inc.
	 	 	 	 	 
	 By: 	
                /s/
                  Illegible

              	 	 By:
                	
                /s/
                  Jay Elliot

              
	
                Its:

              	
                VP

              	 	
                Its:

              	
                CEO

              
	
                Date:

              	
                30/03/05

              	 	
                Date:

              	
                3/29/05

              

      

EXHIBITS

    Exhibit
      A
      - M-Systems Technology 

    Exhibit
      B
      - Power House Technology

    Exhibit
      C
      - Product Development Plan

    Exhibit
      D
      - License/Referral Fee Report

    Exhibit
      E
      - Escrow Agreement

    Exhibit
      F
      - Exclusivity Exceptions

     

    ________________________________________________

    ________________________________________________

    ________________________________________________

    ________________________________________________

    ________________________________________________

    ________________________________________________

    

    Page
      16

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A - M-SYSTEMS TECHNOLOGY

    

    EXHIBIT
      B - POWERHOUSE TECHNOLOGY

    

    
      	
              TRADEMARKS

            
	
              Trademark

            	 	
              Reg.
                Date

            	 	
              Reg.
                No.

            
	
              MIGO

            	 	
              Filed
                on August 18, 2003

            	 	
              Application
                No. 78/288,619

              (applicant:
                Forward Solutions,
                Inc.)

            
	
              POCKETLOGIN

            	 	
              September
                17, 2003

            	 	
              78/219,213
                (applicant:
                First

              Person
                Software, Inc.)

            

    

     

    
      
        	
                PATENTS

              
	
                Title

              	 	
                Date
                  Issued

              	 	
                Patent
                  No.

              
	
                System
                  and method
                  for transferring
                  personalization
                  information
                  among
                  computer

                systems.

              	 	
                Filed
                  May 8, 2003 by David Brett Levine and

                Christopher
                  Jason Neumann

              	 	
                Serial
                  No.

                10/435,070

              

      

    

    

    
      	
              COPYRIGHTS

            
	
              None.

            	 	 	 	 

    

     

    EXHIBIT
      B

    Page
      1

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C - PRODUCT DEVELOPMENT PLAN

     

    SEE
      MRD

     

    EXHIBIT
      C 

    Page
      1

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      D - LICENSE/REFERRAL FEE REPORT

     

    EXHIBIT
      D

    Page
      1

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      E - ESCROW AGREEMENT

    

    EXHIBIT
      E 

    Page
      1

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    SOFTWARE ESCROW
      AGREEMENT 

     

      This
      Escrow Agreement (“Agreement”) is made as of this day of ________ by and between
      PowerHouse Technologies Group, Inc., a Delaware corporation, with offices at
      2694 Bishop Drive, Suite 270, San Ramon CA 94583 (“Producer”),
      ______________________ (“Escrow Agent”) and M-Systems Flash Disk Pioneers
      Limited, an Israeli corporation with offices at Central Park 2000, 7 Atir Yeda
      St., Kfar Saba, 44425, Israel (“Licensee”). 

     

      Preliminary
      Statement. This Agreement is made pursuant to the Development Agreement
      attached thereto between Producer and Licensee (the “Development Agreement”)
      dated __________________, a copy of which is attached hereto. Capitalized terms
      not defined in the Agreement shall have the meaning ascribed to them in the
      Development Agreement. Producer intends to deliver to Escrow Agent a sealed
      package containing magnetic tapes, disks, disk packs, or other forms of media,
      in machine readable form, and the written documentation prepared in connection
      therewith (the “Deposit Materials”) for the Producer Product(s). Producer
      desires Escrow Agent to hold in strict confidence the Deposit Materials, and,
      upon the occurrence of one or more events as provided in Paragraph 4 hereof,
      deliver the Deposit Materials (or a copy thereof) to Licensee, in accordance
      with the terms hereof. 

     

      Now,
      therefore, in consideration of the foregoing, of the mutual promises hereinafter
      set forth, and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, the parties agree as follows:
      

     

    1.  
         Delivery
      by Producer. Producer shall be solely responsible for delivering to Escrow
      Agent the Deposit Materials as soon as practicable after the execution of the
      Development Agreement. Escrow Agent shall hold the Deposit Materials in
      accordance with the terms hereof and shall have no obligation to verify the
      completeness or accuracy of the Deposit Materials. Escrow Agent shall deposit
      and preserve all Deposit Materials in a locked, secured, and environmentally
      safe location within its facilities. Escrow Agent shall, at all times, retain
      the Deposit Materials in strictest confidence and shall not open, release or
      disclose the Deposit Materials, except as expressly set forth in this Escrow
      Agreement. 

     

    
      
        2.        
            Duplication;
          Updates. 

      

    

     

    
      	
            	(a)	
              Escrow
                Agent may duplicate the Deposit Materials by any means in order to
                comply
                with the terms and provisions of this Agreement, provided that Licensee
                shall bear the expense of duplication. Alternatively, Escrow Agent,
                by
                notice to Producer, may reasonably require Producer to promptly duplicate
                the Deposit Materials. 

            

    

     

    
      	
            	(b)	
              Deposit
                Updates. Updates to the Deposit Materials will take place when the
                original Deposit Materials are updated with new versions or major
                revision
                releases which are required to be delivered to Licensee or a customer
                or
                end-user of Licensee as set forth in the Development Agreement. All
                Deposit Updates shall be listed on a new Exhibit B and the new
                Exhibit B shall be signed by Producer. Each Exhibit B will
                be held and maintained separately within the escrow account. All
                references in this Agreement to the Deposit Materials shall include
                the
                initial Deposit Materials and any updates.

            

    

     

    3.          Notification
      of Deposits. Simultaneous with the delivery to Escrow Agent of the Deposit
      Materials and each update thereto, as the case may be, Producer shall deliver
      to
      Escrow Agent and to Licensee a written statement specifically identifying all
      items so deposited and stating that the Deposit Materials, so deposited have
      been inspected by Producer and are complete and accurate in all material
      respects. Escrow Agent shall, within ten (10) business days of receipt of any
      Deposit Materials or updates, send notification to Producer and Licensee that
      it
      has received from Producer such Deposit Materials or updates.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.       
        Delivery
      by Escrow Agent

    

    4.1       
       Release by Escrow Agent to Licensee. Escrow Agent shall release the
      Deposit Materials, or a copy thereof, to Licensee in the event of one (1) or
      more of the following events: 

     

    (a)
       The
      CEO
      or Chairman of Producer notifies Escrow Agent in writing, accompanied by a
      Board
      Resolution of Producer authorizing the same, to effect such release and delivery
      to Licensee at a specific address, the notification being accompanied by a
      check
      payable to Escrow Agent in the amount of one hundred dollars ($100.00); or
      

     

    (b)
       Escrow
      Agent receives from Licensee, with a copy sent to Producer written notification,
      a written statement that (a) Producer has ceased all business operations,
      voluntarily or involuntarily, (b) Producer has been adjudicated as bankrupt,
      or;
      has had a receiver or trustee appointed for all or substantially all of its
      property and such receiver has not been dismissed within sixty (60) days of
      appointment; and as a result thereof ceases to perform its maintenance and
      support obligations in accordance with the Development Agreement as a result
      thereof, (c) Producer has filed a voluntary petition for reorganization,
      arrangement or bankruptcy and as a result thereof ceases to perform its
      maintenance and support obligations in accordance with the Development Agreement
      as a result thereof, (d) Producer has made an assignment for the benefit of
      creditors all or substantially all of its assets; provided, however, that at
      least ten (10) days prior to Escrow Agent’s anticipated release of the Deposit
      Materials to Licensee, Escrow Agent shall provide written notice of such
      intention to Producer specifying (i) the intended date of release to Licensee
      and (ii) a copy of Licensee’s written statement under this Section 4.1(b); or

     

    (c)  A
      written
      order from a court of appropriate jurisdiction that the Deposit Materials be
      released and delivered to Licensee. 

     

    4.2     
        For
      any
      release of Deposit Materials to Licensee, Licensee will provide Escrow Agent
      with specific delivery instructions and an initial check payable to Escrow
      Agent
      in the amount of one hundred dollars ($100) (collectively a “Delivery Demand”).

     

    4.3         If
      the provisions of Paragraph 4.1 (a) or 4.1 (c) are satisfied, Escrow Agent
      shall, within two (2) business days after receipt of the notification or order,
      deliver the Deposit Materials in accordance with the Delivery Demand.

     

    4.4     
        If
      the
      provisions of Paragraph 4.1(b) are met, Producer shall have ten (10) days from
      the date on which Producer receives the written notice from Escrow Agent
      described in such section (“Objection Period”) to notify Escrow Agent of its
      objection (“Objection Notice”) to the release of the Deposit Materials to
      Licensee and to request that the issue of Licensee’s entitlement to a copy of
      the Deposit Materials be submitted to an expedited arbitration in accordance
      with the following provisions: 

     

    
      
        (a) 
          If
          Producer shall send an Objection Notice to Escrow Agent during the Objection
          Period, the matter shall within ten (10) days of Producer’s Objection Notice, be
          submitted to, and settled by arbitration by, a panel of three (3) arbitrators
          in
          accordance with the rules of the American Arbitration Association. The
          arbitrators shall apply California Law and
          render their decision in writing. At least one (1) arbitrator shall be
          reasonably familiar with the computer software industry. The decision of
          the
          arbitrators shall be confidential, binding and conclusive on all parties
          involved, and judgment upon their decision may be entered in a court of
          competent jurisdiction. All costs of the arbitration incurred by Escrow
          Agent,
          including reasonable attorneys’ fees and costs, shall be paid by the party which
          does not prevail in the arbitration; provided, however, if the arbitration
          is
          settled prior to a decision by the arbitrators, the Producer and Licensee
          shall
          each pay 50% of all such costs unless the withdrawing party shall otherwise
          agree. As between Producer and Licensee all costs of the arbitration incurred
          by
          the prevailing party, including 

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    reasonable
      attorneys’ fees and costs, shall be paid by the party which
      does not prevail in the arbitration unless the arbitrators shall otherwise
      dictate in their written arbitration decision. 

     

    (b)
       Producer
      may, at any time prior to the commencement of arbitration proceedings, notify
      Escrow Agent that Producer has withdrawn the Objection Notice. Upon receipt
      of
      any such notice from Producer, Escrow Agent shall reasonably promptly deliver
      the Deposit Materials to Licensee in accordance with the instructions specified
      in the Delivery Demand. 

     

    (c)
       If,
      at
      the end of the Objection Period, Escrow Agent has not received an Objection
      Notice from Producer, then Escrow Agent shall reasonably promptly deliver the
      Deposit Materials to Licensee in accordance with the instructions specified
      in
      the Delivery Demand. Both Producer and Licensee agree that Escrow Agent shall
      not be required to deliver such Deposit Materials until all such fees then
      due
      Escrow Agent have been paid. 

     

    (d)
       If,
      prior
      to the end of the Objection Period, Escrow Agent has received an Objection
      Notice from Producer, then Escrow Agent shall not release the Deposit Materials
      to Licensee unless (i) Producer consents thereto or (ii) the arbitration has
      been completed and the arbitrators have issued an order authorizing the release
      of the Deposit Materials. Both Producer and Licensee agree that Escrow Agent
      shall not be required to deliver such Deposit Materials until all such fees
      then
      due Escrow Agent have been paid. 

     

    4.5       
       Escrow
      Agent shall release and deliver the Deposit Materials to Producer upon
      termination of this Agreement in accordance with Paragraph 7 hereof.

     

    4.6     
        Licensee
      acknowledges and agrees that, in the event that the Deposit Materials are
      released to Licensee under this Agreement, Licensee’s sole right to the Deposit
      Materials shall be to use the Deposit Materials to the extent necessary to
      internally (within Licensee) perform the maintenance and support required of
      Producer under the Development Agreement. Without limiting the generality of
      the
      foregoing, Licensee shall have no right to license, sublicense, sell, assign
      or
      otherwise distribute the Deposit Materials in any manner. In addition, Licensee
      agrees to hold the Deposit Materials in strict confidence, to protect the
      Deposit Materials to the same extent as Licensee protects its most sensitive
      and
      proprietary information and not to permit the use or disclosure of any of the
      Deposit Materials to any person or entity or for any purpose other than for
      the
      internal uses provided in this Paragraph 4.5. 

     

    5.       
        Indemnity.
      With the exception of misrepresentation, negligence or intentional misconduct
      on
      the part of Escrow Agent, its directors, officers, agents, employees or
      stockholders, Producer and Licensee shall, jointly and severally, indemnify
      and
      hold harmless Escrow Agent and each of its directors, officers, agents,
      employees and stockholders (“Escrow Agent Indemnities”) absolutely and forever,
      from and against any and all claims, actions, damages, suits, liabilities,
      obligations, costs, fees, charges, and any other expenses whatsoever, including
      reasonable attorneys’ fees and costs, that may be asserted against any Escrow
      Agent Indemnitee in connection with this Agreement or the performance of Escrow
      Agent or any Escrow Agent Indemnitee hereunder. IN NO EVENT SHALL PRODUCER
      OR
      LICENSEE BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
      DAMAGES EVEN IF PRODUCER OR LICENSEE SHALL HAVE BEEN ADVISED OF THE POSSIBILITY
      OF SUCH DAMAGES. 

     

    
      
        6.        
            Disputes
          and Interpleader. 

      

    

     

    (a)
       Escrow
      Agent may submit any dispute under this Agreement to any court of competent
      jurisdiction in an interpleader or similar action.

     

    (b)
       Escrow
      Agent shall perform any acts ordered by any court of competent jurisdiction,
      without any liability or obligation to any party hereunder by reason of such
      act. 

     

    
      
        7.        
           Term
          and Renewal. 

         

        
          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

        

         

      

    

    (a)  The
      term
      of this Agreement shall be identical to the term of the Development Agreement
      and shall terminate upon the termination of the Development Agreement unless
      earlier terminated by the parties pursuant to this Section 7. 

     

    (b)  Licensee
      and Producer may agree to terminate this Agreement, at any time, by mutual
      written agreement. 

     

    (c)  Escrow
      Agent may terminate its obligations under this Agreement upon ninety (90) days
      prior written notice to Licensee. 

     

    (d)
       In
      the
      event of termination of this Agreement in accordance with Paragraph 7 hereof,
      Producer shall pay all fees due to Escrow Agent. Upon such termination, Escrow
      Agent shall return all Deposit Materials in its possession to Producer by no
      later than 10 days from the termination date of this Agreement. 

     

    8.          Fees.
      Licensee shall pay to Escrow Agent the applicable fees in accordance with
      Exhibit A as compensation for Escrow Agent’s services under this Agreement. The
      first year’s fees are due upon receipt of the signed Agreement or Deposit
      Materials, whichever comes first, and shall be paid in U.S. Dollars.

     

      (a)
       Payment.
      Escrow Agent shall issue an invoice to Licensee following execution of this
      Agreement (“Initial Invoice”) and in connection with the performance of any
      additional services hereunder. Payment is due upon receipt of invoice. All
      fees
      and charges are exclusive of, and Licensee is responsible for the payment of,
      all sales, use and like taxes. Escrow Agent shall have no obligations under
      this
      Agreement until the Invoice has been paid in full by Licensee. 

     

    9.         
      Ownership
      of Deposit Materials. The parties recognize and acknowledge that ownership
      of the Deposit Materials shall remain with Producer at all times. 

     

    10.        Notices.
      The parties hereto acknowledge that notices and service of legal process shall
      be considered to be validly delivered if received by the appropriate party
      by
      personal hand delivery, overnight mail service or certified or registered mail,
      return receipt requested, postage prepaid, at the addresses set forth below,
      unless a party notifies the others in writing of a different address.

     

    To
      Licensee:            

     

    M-Systems
      Flash Disk Pioneers Limited 

    Central
      Park 2000, 7 Atir Yeda St. 

    Kfar
      Saba, 44425, Israel

    Attn:
      General Counsel 

     

    To
      Producer:

     

    PowerHouse
      Technologies Group, Inc. 

    555
      Twin
      Dolphin Drive, Suite 650 

    Redwood
      City, CA 94065 

     

    To
      Escrow Agent:

     

    ___________
      

    ___________
      

     

    11.     
        Miscellaneous.
      

     

      (a)
       Remedies.
      Except for material breach, misrepresentation, negligence or intentional
      misconduct, Escrow Agent shall not be liable to Producer or to Licensee for
      any
      act, or failure to act, by Escrow Agent in connection with this Agreement.
      Any
      liability of Escrow Agent regardless of the cause shall be limited to the fees
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    exchanged
      under this Agreement. Escrow Agent will not be liable for special, indirect,
      incidental or consequential damages hereunder. 

     

    (b)
       Natural
      Degeneration; Updated Version. In addition, the parties acknowledge that as
      a result of the passage of time alone, the Deposit Materials are susceptible
      to
      loss of quality (“Natural Degeneration”). It is further acknowledged that Escrow
      Agent shall have no liability or responsibility to any person or entity for
      any
      Natural Degeneration provided Escrow Agent complies with this Escrow Agreement.
      

     

    (c)
       Permitted
      Reliance and Abstention. Escrow Agent may rely and shall be fully protected
      in acting or refraining from acting upon any notice or other document believed
      by Escrow Agent in good faith to be genuine and to have been signed or presented
      by the proper person or entity. Escrow Agent shall have no duties or
      responsibilities except those expressly set forth herein. 

     

    (d)
       Independent
      Contractor. Escrow Agent, Producer and Licensee are independent contractors,
      and are not employees or agents of the other. 

     

    (e)
       Amendments.
      This Agreement shall not be modified or amended except by another agreement
      in
      writing executed by the parties hereto. 

     

    (f)
       Entire
      Agreement. This Agreement, including all exhibits hereto, supersedes all
      prior discussions, understandings and agreements between the parties with
      respect to the matters contained herein, and constitutes the entire agreement
      between the parties with respect to the matters contemplated herein. All
      exhibits attached hereto are by this reference made a part of this Agreement
      and
      are incorporated herein. 

     

    (g)
       Counterparts;
      Governing Law. This Agreement may be executed in counterparts, each of which
      when so executed shall be deemed to be an original and all of which when taken
      together shall constitute one and the same Agreement. This Agreement shall
      be
      construed and enforced in accordance with the laws of the State of California
      without regard to its conflict of law principles. 

     

    (h)
       Confidentiality.
      Escrow Agent will hold and release the Deposit Materials only in accordance
      with
      the terms and conditions hereof, and will maintain the confidentiality of the
      Deposit Materials. In the event of release of the Deposit Materials to Licensee
      in accordance with this Agreement, Licensee undertakes to maintain the
      confidentiality of the Deposit Materials in accordance with the license granted
      in this Agreement and in accordance with the confidentiality undertaking
      contained in the Development Agreement. 

     

    (i)
       Notices.
      All notices, requests, demands or other communications required or permitted
      to
      be given or made under this Agreement shall be in writing and shall be delivered
      by hand or by commercial overnight delivery service which provides for evidence
      of receipt, or mailed by certified mail, return receipt requested, postage
      prepaid. If delivered personally or by commercial overnight delivery service,
      the date on which the notice, request, instruction or document is delivered
      shall be the date on which delivery is deemed to be made, and if delivered
      by
      mail, the date on which such notice, request, instruction or document is
      received shall be the date on which delivery is deemed to be made. Any party
      may
      change its address for the purpose of this Agreement by notice in writing to
      the
      other parties as provided herein. 

     

    (j)
       Survival.
      Paragraphs 5, 6, 8, 9, and 11 shall survive any termination of this Agreement.
      

     

    (k) No
      Waiver. No failure on the part of any party hereto to exercise, and no delay
      in exercising any right, power or single or partial exercise of any right,
      power
      or remedy by any party will preclude any other or further exercise thereof
      or
      the exercise of any other right, power or remedy. No express waiver or assent
      by
      any party hereto to any breach of or default in any term or condition of this
      Agreement shall constitute a waiver of or an assent to any succeeding breach
      of
      or default in the same or any other term or condition hereof. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (l) Severability.
      All terms and conditions of this Agreement are severable. If any term or
      provision, or any portion thereof, of this Agreement is held to be invalid,
      illegal or unenforceable, the remaining portions shall not be affected.

     

    IN
      WITNESS WHEREOF each of the parties has caused its duly authorized officer
      to
      execute this Agreement as of the date and year first above written.

     

    
      	
              Escrow
                Agent

            	              
              	 	 	 
	 	 	 	 	 
	 	
              By:

            	 	 	
              Title:

            	 
	 	 	 	 	 	 
	 	
              Print
                Name:

            	 	 	 	 
	 	 	 	 	 	 
	 	
              Address:
                

            	 	 	 	 
	 	 	 	 	 	 
	
              Producer

            	PowerHouse
              Technologies Group, Inc.	 	 	 
	 	 	 	 	 	 
	 	
              By:

            	 	 	
              Title:

            	 
	 	 	 	 	 	 
	 	
              Print
                Name:

            	 	 	 	 
	 	 	 	 	 	 
	 	
              Address:
                

            	 	 	 	 
	 	 	 	 	 	 
	
              Licensee

            	M-Systems
              Flash Disk Pioneer Limited	 	 	 
	 	 	 	 	 	 
	 	
              By:

            	 	 	
              Title:

            	 
	 	 	 	 	 	 
	 	
              Print
                Name:

            	 	 	 	 
	 	 	 	 	 	 
	 	
              Address:
                

            	
              Central
                Park 2000, 7 Atir Yeda St., Kfar Saba, 44425, Israel

            	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ESCROW
      EXHIBIT A

     

    FEE
      SCHEDULE 

     

    [TO
      BE COMPLETED]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ESCROW
      EXHIBIT B

     

    B1.
      Product Name:
      ___________ 

     

    Prepared
      and Confirmed by: ________________________________________________ 

     

    Title:
      _________________________________________  Date:
      ___________________ 

     

    Signature:
      _______________________________________________________________ 

     

    Type
      of deposit: 

    X
      Initial
      Deposit 

     

    Special
      Instructions: ___________________________________________ 

     

    Items
      Deposit:     

     

    
      	 	
              Quantity

            	 	
              Media
                Type

            	 	
              Description
                of Material

            
	 	 	 	 	 	 
	
              A)

            	 	 	 	 	 
	
              B)

            	 	 	 	 	 
	
              C)

            	 	 	 	 	 
	
              D)

            	 	 	 	 	 
	
              E)

            	 	 	 	 	 
	 	 	 	 	 	
              (please
                copy page as necessary)

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      F - EXCLUSIVITY EXCEPTIONS 

     

     

     [
      * * * ] 

     

     EXHIBIT
      F

     

    
      	
              PowerHouse-M-Systems
                Agreement 30.3.05

            	
              Page
                2Exhibit
      4.22 

     

    NONQUALIFIED
      STOCK
      OPTION
      CONTRACT

    

    THIS
      NONQUALIFIED STOCK OPTION CONTRACT
      is
      entered into effective as of the __day of ____, ____, by and between
INTER
      PARFUMS, INC.,
      a
      Delaware corporation (the "Company") and _______
      ("Optionee").

    

    WITNESSETH:

    

    1. The
      Company, in accordance with the resolutions adopted by the Stock Option
      Committee effective as of _____, and the terms and subject to the conditions
      of
      the Company’s ____ Stock Option Plan (the "1999 Plan"), hereby grants to the
      Optionee as of the date hereinabove set forth, a nonqualified option to purchase
      an aggregate of _____ shares (the "Shares") of the common stock, $.001 par
      value
      per share, of the Company (the "Common Stock"), at $_____ per share.

    

    2. The
      term
      of this option shall be five (5) years from the date hereof, subject to earlier
      termination as provided in the 1999 Plan. This option may be exercised in whole
      or in part and from time to time as to the Shares but prior to the end of the
      term of the option, by giving written notice to the Company at its principal
      office, presently 551 Fifth Avenue, New York, New York 10176, stating that
      the
      Optionee is exercising this nonqualified stock option, specifying the number
      of
      shares purchased and accompanied by payment in full of the aggregate purchase
      price therefor (i) in cash or certified check, or (ii) with previously acquired
      shares of Common Stock or a combination of the foregoing if permitted in the
      discretion of the Committee. This option shall not be exercisable at any time
      in
      an amount less that 100 Shares (or the remaining Shares then covered and
      purchasable under this option if fewer that 100 Shares). In no event may this
      option be exercised with respect to a fractional Share. In addition, upon the
      exercise of this option, the Company may withhold cash and/or Shares to be
      issued with respect thereto, having an aggregate fair market value equal to
      the
      amount which it determines is necessary to satisfy its obligation to withhold
      federal, state and local income taxes or other taxes incurred by reason of
      such
      exercise. Alternatively, the Company may require the holder to pay to the
      Company such amount, in cash, promptly upon demand. The Company shall not be
      required to issue any Shares pursuant to this option until all required payments
      have been made.

    

    3. Nothing
      in the 1999 Plan or herein shall confer upon the Optionee any right to continue
      in the employ of, or be associated with, the Company, its Parent or any of
      its
      Subsidiaries, or interfere in any way with the right to employment or
      association of the Optionee with the Company, its Parent or any of its
      Subsidiaries.

    

    4. The
      Optionee represents and agrees that in the event of any exercise of this option,
      unless the Shares received upon such exercise shall have been registered under
      an effective registration statement under the Securities Act of 1933, as amended
      (the "Act"), or there is an exemption from registration, the Shares will be
      acquired for investment and not with a view towards distribution thereof, and
      agrees that the Shares shall not be sold except in compliance with the
      applicable provisions of the Act.

    

    5. Notwithstanding
      anything to the contrary, if at any time the Board of Directors or the Committee
      shall determine it its discretion that the listing or qualification of the
      Shares on any securities exchange, with national securities association or
      under
      any applicable law, or the consent or approval of any governmental regulatory
      body, is necessary or desirable as a condition of, or in connection with, the
      granting of an option, or the issue of Shares thereunder, this option may not
      be
      exercised in whole or in part unless such listing, qualification, consent or
      approval shall have been effected or obtained free of any conditions not
      acceptable to the Board of Directors or the Committee.

    

    6. The
      Company and the Optionee further agree that they will both be subject to and
      bound by all of the terms and conditions of the 1999 Plan, which is incorporated
      by reference herein and made a part hereof as if fully set forth herein. In
      the
      event the Optionee's employment by, or association with, the Company, its Parent
      or any of its Subsidiaries terminates, or in the event of the death or
      disability of the Optionee, the rights hereunder shall be governed by, and
      made
      subject to, the provisions of the 1999 Plan. In the event of a conflict between
      the terms of this Contract and the terms of the 1999 Plan, then in such event,
      the terms of 1999 Plan shall govern. Except as otherwise provided herein, all
      capitalized terms used herein shall have the same meaning ascribed to them
      in
      the 1999 Plan.

    

    7. This
      option is not transferable otherwise than by will or the laws of descent and
      distribution and may be exercised, during the lifetime of the Optionee, only
      by
      the Optionee or his legal representatives.

    

    8. The
      Optionee agrees that the Company may amend the 1999 Plan and the options granted
      to the Optionee under the 1999 Plan, subject to the limitations contained in
      the
      1999 Plan.

    

    9. This
      Contract shall be binding upon and inure to the benefit of any successor or
      assign of the Company and to any executor, administrator or legal representative
      entitled by law to the Optionee's right hereunder.

    

    10. This
      Contract shall be governed by and construed in accordance with the laws of
      the
      State of New York, without regard to the principles of conflicts of
      laws.

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have entered into this Contract effective as of the date first
      above written.

    
      	 	 	 
	 	
              INTER
                PARFUMS, INC.

            
	 
 	 
 	 
 
	
            	By:

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