Document:

cryolife8k73007ex10.htm

    Exhibit
      10.1

    AMENDED
      AND RESTATED

    EMPLOYMENT
      AGREEMENT

    

    This
      Amended and Restated Employment
      Agreement ("the Agreement") dated as of the 30th day of July, 2007 (the
      "Effective Date"), is by and between CRYOLIFE, INC., a Florida corporation
      ("CryoLife") and STEVEN G. ANDERSON (the "Employee").

    

    W
      I T N E S S E T H:

    

    WHEREAS,
      the Board of Directors of
      CryoLife (the "Board"), has determined that it is in the best interests of
      CryoLife and its shareholders to enter into this Amended and Restated Employment
      Agreement in order to assure the Employee of CryoLife's commitment and, in
      so
      doing, to motivate the Employee to continue in Employee's dedicated service
      to
      CryoLife even in circumstances such as a possible future threat or occurrence
      of
      a Change of Control (defined below) of CryoLife;

    

    WHEREAS,
      in order to accomplish these
      objectives, the Board has caused CryoLife to enter into this Agreement;
      and

    

    WHEREAS,
      Employee has determined that
      it is in the best interests of Employee to enter into this
      Agreement;

    

    NOW,
      THEREFORE, in consideration of the
      premises, the promises hereinafter set forth and other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged
      by
      both parties, it is hereby agreed as follows:

    

               1.           EMPLOYMENT.

    

    (a)           CryoLife
      hereby employs Employee in the capacity of President, Chief Executive Officer
      and Chairman of the Board and Employee hereby accepts such
      employment.

    

    (b)           CryoLife
      agrees to continue the Employee in its employ, and the Employee hereby agrees
      to
      remain in the employ of CryoLife subject to the terms and conditions of this
      Agreement, for the period commencing on the Effective Date and ending on
      December 31,   2010 (the "EmploymentPeriod").

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.           EMPLOYMENT
      DUTIES.

    

    (a)           Employee
      shall have such duties as are customarily performed and exercised by the
      President, Chief Executive Officer and Chairman of the Board of a public
      company, subject to the supervision of the Board, together with such additional
      duties as are reasonably assigned by the Board.  During the Employment
      Period, (A) the Employee's position (including status, offices, titles and
      reporting requirements), authority, duties and responsibilities shall be at
      least commensurate in all material respects with the most significant of those
      held, exercised and assigned at any time during the 120-day period immediately
      preceding the Effective Date, and (B) the Employee's services shall be performed
      at the location where the Employee was employed immediately preceding the
      Effective Date.

    

    (b)           During
      the Employment Period, and excluding any periods of vacation and sick leave
      to
      which the Employee is entitled, the Employee agrees to devote reasonable
      attention and time to the business and affairs of CryoLife and, to the extent
      necessary to discharge the responsibilities assigned to the Employee hereunder,
      to use the Employee's reasonable best efforts to perform faithfully and
      efficiently such responsibilities.

    

    (c)           During
      the Employment Period, the Employee will not, without the prior written consent
      of CryoLife, directly or indirectly other than in the performance of the duties
      hereunder, render services of a business, professional or commercial nature
      to
      any other person or firm, whether for compensation or otherwise, except with
      respect to any noncompetitive family businesses of the Employee for which the
      rendering of such services will not have an adverse effect upon Employee's
      performance of his duties and obligations hereunder.

    

    3.           COMPENSATION,
      BENEFITS AND BUSINESS EXPENSES.

    

    (a)           For
      all services which Employee renders to CryoLife or any of its subsidiaries
      or
      affiliates during the term hereof, CryoLife agrees to pay the Employee the
      salary and bonus compensation as set by the Compensation Committee of the Board
      of Directors, subject to the following:

    

    (i)  Base
      Salary.  Employee’s annual base salary for the year ending December
      31, 2007 shall be $600,000.   The Employee's base salary shall be
      reviewed annually by the Compensation Committee during the first quarter of
      each
      calendar year, beginning with the year ending December 31, 2008, and the base
      salary for each such year shall be determined by the Compensation Committee,
      which may authorize an increase in the Employee's base salary for such year;
      provided, however, that Employee’s base salary shall be increased, at a minimum,
      by an amount equal to the cumulative cost-of-living percentage increment during
      the prior calendar year, if any, applied to the Employee’s base salary, as such
      increment is reported in the "Consumer Price Index, Atlanta, Georgia, All
      Items," published by the U.S. Department of Labor.  In no event may
      Employee’s base salary be reduced below its then current level at any time
      during the Employment Period other than pursuant to a general wage reduction,
      in
      which event Employee’s base salary may only be reduced to the same extent and up
      to the same percentage amount as the base salaries of all executive officers
      are
      reduced.

    

    (ii)  Bonus.  Employee
      shall be entitled to participate in an annual bonus program which shall provide
      for the payment of an annual bonus to Employee on terms and in amounts no less
      favorable to Employee than those currently contained in the Company’s Executive
      Incentive Plan and the 2007 bonus program for Employee approved thereunder,
      as
      amended below, with such modifications thereto as shall be reasonably imposed
      for all executive officers with the approval of at least 2/3’s of the Company’s
      independent directors; provided, however, that, upon the certification of the
      Company’s Chief Financial Officer (the “CFO”) that payment of cash bonuses would
      materially negatively impact the Company’s cash position, liquidity or
      operations, Employee’s bonus may be paid all or a portion in Company stock, but
      only to the extent that all bonuses to executive officers are similarly
      paid.  Employee’s 2007 bonus program under the Executive Incentive
      Plan is hereby amended to remove any discretion of the Compensation Committee
      to
      materially change the terms of the bonus program or to reduce or otherwise
      refuse to pay any portion of the bonus earned thereunder, subject to the ability
      of the Compensation Committee, upon the certification of the CFO that payment
      of
      cash bonuses would materially negatively impact the Company’s cash position,
      liquidity or operations, to pay all or a portion of the 2007 bonus in Company
      stock, but only to the extent that all bonuses to executive officers are
      similarly paid.

     

    
 

    
      
        
        

      

      
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    (b)           CryoLife
      shall pay all reasonable expenses incurred by the Employee directly related
      to
      performance of his responsibilities and duties for CryoLife hereunder. Employee
      shall submit to CryoLife statements that justify in reasonable detail all
      reasonable expenses so incurred. Subject to such audits as CryoLife may deem
      necessary, CryoLife shall reimburse Employee the full amount of any such
      expenses advanced by Employee.  Reimbursable expenses shall also
      include, with a value of up to 10% of Employee's base salary, monthly car
      payments and auto expenses and dues and business related expenses at the
      Georgian Club, Buckhead Club, Marietta Country Club and Delta Crown
      Room.  The Employee shall also be promptly reimbursed up to a maximum
      of $10,000 for any and all expenses (including, without limitation, legal fees)
      incurred by him in connection with the negotiation, documentation and
      implementation of this Agreement.

    

    (c)           Employee
      shall participate in the standard Company vacation plan, Company medical plan,
      Company life insurance program, and contributory 401K plan, as well as in all
      other standard employee benefit plans; provided, however, that vacations not
      taken shall be cumulative and carried over to a subsequent year.  Upon
      employment termination, Employee shall be paid at a rate per day equal to
      Employee’s base salary then in effect divided by 260 for all accumulated
      vacation days not taken.  Such amount shall be deemed a payment
      obligation accruing through the Date of Termination for purposes of Section
      6 of
      this Agreement.

    

    4.           CHANGE
      OF CONTROL.

    

    (a)           In
      consideration and recognition of the Employee's continued employment and his
      contribution to protecting and enhancing shareholder value in any future sale
      of
      CryoLife that may occur and to provide incentive to Employee as a senior
      executive to remain with the Company through any future sale or merger of the
      Company, CryoLife agrees to pay to Employee a retention payment in addition
      to
      other compensation due pursuant to this Agreement equal to one times the
      aggregate of Employee's annual salary and bonus compensation for the year in
      which a Change of Control occurs (the "Retention Payment").  The
      Retention Payment shall be in addition to sums otherwise payable pursuant to
      Section 3 and shall be earned and become due upon the happening of a Change
      of
      Control (as defined below) provided Employee remains employed by the Company
      at
      such time or, if no longer then employed by the Company, Employee's employment
      was terminated by the Company without Cause within 12 months prior to the Change
      of Control. If the Change of Control occurs before the awarding of bonuses
      in
      the year in which the Change of Control occurs, or if it occurs during a year
      in
      which Employee is not employed by the Company, the bonus compensation component
      of the Retention Payment shall be computed based on the prior year's bonus.
      If
      the Change of Control occurs during a year in which Employee is not employed
      by
      the Company, the salary compensation component of the Retention Payment shall
      be
      computed based on the prior year’s salary.  Bonus compensation shall
      include cash bonus payments and the value of any non-cash bonuses, such as
      options or restricted stock. Any such options will be valued pursuant to the
      Black Scholes valuation method as of the grant date, using the same assumptions
      used by CryoLife in computing the FAS 123R charge for the options, and any
      shares of restricted stock will be valued at the closing price of the CryoLife
      Common Stock on The New York Stock Exchange on the date of
      issuance.  The Company’s annual option and restricted stock grants
      shall not be deemed to be bonus compensation unless they are specifically
      designated as such by the CryoLife Compensation Committee.  For the
      sake of clarification, all cash paid and any shares issued in payment of all
      or
      a portion of the bonus pursuant to the Company’s Executive Incentive Plan shall
      be bonus compensation for purposes of this Agreement for the year in which
      paid
      or issued. The Retention Payment shall be paid within three months after the
      occurrence of a Change of Control.

     

    
 

    
      
        
        

      

      
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    For
      the
      purposes of this Agreement, the term “Change of Control” shall mean a change in
      the ownership or effective control of, or in the ownership of a substantial
      portion of the assets of, Cryolife, to the extent consistent with Section 409A
      of the Code and any regulatory or other interpretive authority promulgated
      thereunder, as described in paragraphs (i) through (iii) below.

     

    (i)           Change
      in Ownership of Cryolife.  A change in the ownership of Cryolife shall
      occur on the date that any one person, or more than one person acting as a
      group
      (within the meaning of paragraph (i)(D)), other than a group of which Employee
      is a member, acquires ownership of Cryolife stock that, together with Cryolife
      stock held by such person or group, constitutes more than 50% of the total
      voting power of the stock of Cryolife.

    

                 (A)           If
      any one person or more than one person acting as a group (within the meaning
      of
      paragraph (i)(D)), other than a group of which Employee is a
      member,  is considered to own more than 50% of the total voting power
      of the stock of Cryolife, the acquisition of additional Cryolife stock by such
      person or persons shall not be considered to cause a change in the ownership
      of
      Cryolife or to cause a change in the effective control of the Cryolife (within
      the meaning of paragraph (ii) below).

    

               (B)           An
      increase in the percentage of Cryolife stock owned by any one person, or persons
      acting as a group (within the meaning of paragraph (i)(D)), as a result of
      a
      transaction in which Cryolife acquires its stock in exchange for property,
      shall
      be treated as an acquisition of stock for purposes of this paragraph
      (i).

    

               (C)           The
      provisions of this paragraph (i) shall apply only to the transfer or issuance
      of
      Cryolife stock if such stock remains outstanding after such transfer or
      issuance.

    

               (D)           For
      purposes of this paragraph (i), persons shall be considered to be acting as
      a
      group if they are owners of an entity that enters into a merger, consolidation,
      purchase, or acquisition of stock, or similar business transaction with
      Cryolife.  If a person, including an entity, owns stock in Cryolife
      and another entity with which Cryolife enters into a merger, consolidation,
      purchase, or acquisition of stock, or similar business transaction, such
      shareholder shall be considered to be acting as a group with the other
      shareholders in a corporation only to the extent of the ownership in that
      corporation prior to the transaction giving rise to the change and not with
      respect to the ownership interest in the other entity.  Persons shall
      not be considered to be acting as a group solely because they purchase or own
      stock of Cryolife at the same time or as a result of the same public offering
      of
      Cryolife’s stock.

     

    
 

    
      
        
        

      

      
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    (ii)           Change
      in Effective Control of Cryolife.

    

    (A)           A
      change in the effective control of Cryolife shall occur on the date that either
      of (1) or (2) below occurs:

    

               (1)           Any
      one person, or more than one person acting as a group (within the meaning of
      paragraph (ii)(D)), acquires (or has acquired during the 12 month period ending
      on the date of the most recent acquisition by such person or persons) ownership
      of stock of Cryolife possessing 35% or more of the total voting power of the
      stock of Cryolife; or

    

               (2)           A
      majority of members of the Cryolife Board of Directors are replaced during
      any
      12 month period by Directors whose appointment or election is not endorsed
      by a
      majority of the Board of Directors prior to the date of the appointment or
      election.

    

    (B)           A
      change in effective control of Cryolife also may occur with respect to any
      transaction in which either of Cryolife or the other entity involved in a
      transaction experiences a Change of Control event described in paragraphs (i)
      or
      (iii).

    

    (C)           If
      any one person, or more than one person acting as a group (within the meaning
      of
      paragraph (ii)(D)), is considered to effectively control Cryolife (within the
      meaning of this paragraph (ii)), the acquisition of additional control of
      Cryolife by the same person or persons shall not be considered to cause a change
      in the effective control of Cryolife (or to cause a change in the ownership
      of
      Cryolife within the meaning of paragraph (i)).

    

    (D)           For
      purposes of this paragraph (ii), persons shall be considered to be acting as
      a
      group if they are owners of an entity that enters into a merger, consolidation,
      purchase, or acquisition of stock, or similar business transaction with
      Cryolife.  If a person, including an entity, owns stock in Cryolife
      and another entity with which Cryolife enters into a merger, consolidation,
      purchase, or acquisition of stock, or similar business transaction, such
      shareholder shall be considered to be acting as a group with the other
      shareholders in a corporation only with respect to the ownership in that
      corporation prior to the transaction giving rise to the change and not with
      respect to the ownership interest in the other entity.  Persons shall
      not be considered to be acting as a group solely because they purchase or own
      stock of Cryolife at the same time, or as a result of the same public offering
      of Cryolife’s stock.

    

    (iii)           Change
      in Ownership of a Substantial Portion of Cryolife’s Assets.  A change
      in the ownership of a substantial portion of Cryolife’s assets shall occur on
      the date that any one person, or more than one person acting as a group (within
      the meaning of paragraph (iii)(C)), other than a group of which Employee is
      a
      member, acquires (or has acquired during the 12 month period ending on the
      date
      of the most recent acquisition by such person or persons) assets from Cryolife
      that have a total gross fair market value (within the meaning of paragraph
      (iii)(B)) equal to or more than 40% of the total gross fair market value of
      all
      of the assets of Cryolife immediately prior to such acquisition or
      acquisitions.

     

    
 

    
      
        
        

      

      
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    (A)           A
      transfer of Cryolife’s assets shall not be treated as a change in the ownership
      of such assets if the assets are transferred to one or more of the
      following:

    

               (1)           A
      shareholder of Cryolife (immediately before the asset transfer) in exchange
      for
      or with respect to Cryolife stock;

    

               (2)           An
      entity, 50% or more of the total value or voting power of which is owned,
      directly or indirectly, by Cryolife;

    

               (3)           A
      person, or more than one person acting as a group (within the meaning of
      paragraph (iii)(C)) that owns, directly or indirectly, 50% or more of the total
      value or voting power of all of the outstanding stock of Cryolife;
      or

    

               (4)           An
      entity, at least 50% of the total value or voting power of which is owned,
      directly or indirectly, by a person described in paragraph (iii)(A)(3).

    

    For
      purposes of this paragraph (iii)(A), and except as otherwise provided, a
      person’s status is determined immediately after the transfer of assets.

    

     (B)           For
      purposes of this paragraph (iii), gross fair market value means the value of
      all
      Cryolife assets, or the value of the assets being disposed of, determined
      without regard to any liabilities associated with such assets.

    

     (C)           For
      purposes of this paragraph (iii), persons shall be considered to be acting
      as a
      group if they are owners of an entity that enters into a merger, consolidation,
      purchase, or acquisition of assets, or similar business transaction with
      Cryolife.  If a person, including an entity shareholder, owns stock in
      Cryolife and another entity with which Cryolife enters into a merger,
      consolidation, purchase, or acquisition of stock, or similar business
      transaction, such shareholder shall be considered to be acting as a group with
      the other shareholders in a corporation only to the extent of the ownership
      in
      that corporation prior to the transaction giving rise to the change and not
      with
      respect to the ownership interest in the other corporation.  Persons
      shall not be considered to be acting as a group solely because they purchase
      or
      own stock of Cryolife at the same time, or as a result of the same public
      offering of Cryolife’s stock.

     

     

    
      
        
        

      

      
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    5.           TERMINATION
      OF EMPLOYMENT.

    

    (a)           Disability
      or Death.  If CryoLife determines in good faith that the
      Disability of the Employee has occurred during the Employment Period (pursuant
      to the definition of Disability set forth below), it may give to the Employee
      written notice in accordance with Section 12(b) of this Agreement of its
      intention to terminate the Employee's employment. In such event, the Employee's
      employment with CryoLife shall terminate effective on the 30th day after receipt
      of such notice by the Employee (the "Disability Effective Date"), provided
      that,
      within the 30 days after such receipt, the Employee shall not have returned
      to
      full-time performance of the Employee's duties. For purposes of this Agreement,
      "Disability" shall mean the absence of the Employee from the Employee's duties
      with CryoLife on a full-time basis for 180 consecutive days as a result of
      incapacity due to mental or physical illness or determination by a physician
      selected by CryoLife or its insurers and acceptable to the Employee or the
      Employee's legal representative that the Employee is unable to perform the
      essential functions of his position as a result of incapacity due to mental
      or
      physical illness. The Employee's employment shall terminate automatically upon
      the Employee's death during the Employment Period.

    

    (b)           Cause.  CryoLife
      may terminate the Employee's employment during the Employment Period for
      Cause.  For purposes of this Agreement, "Cause" shall
      mean:

    

    (i)  the
      willful and
      continued failure of the Employee to perform substantially the Employee's duties
      with CryoLife (other than any such failure resulting from incapacity due to
      physical or mental illness), after a written demand for substantial performance
      is delivered to Employee by the Board of CryoLife which specifically identifies
      the manner in which CryoLife believes that the Employee has not substantially
      performed the Employee's duties, or

    (ii)
      the willful engaging by the
      Employee in illegal conduct or gross misconduct which is materially and
      demonstrably injurious to CryoLife.

    

    For
      purposes of this provision, no act, or failure to act, on the part of the
      Employee shall be considered "willful" unless it is done, or omitted to be
      done,
      by the Employee in bad faith or without reasonable belief that the Employee's
      action or omission was in the best interests of CryoLife. Any act, or failure
      to
      act, based upon authority given pursuant to a resolution duly adopted by the
      Board or based upon the advice of counsel for CryoLife shall be conclusively
      presumed to be done, or omitted to be done, by the Employee in good faith and
      in
      the best interests of CryoLife.

    

    (c)           Good
      Reason.  The Employee's employment may be terminated by the
      Employee for Good Reason.  For purposes of this Agreement, "Good
      Reason" shall mean:

    

    (i)
      the assignment to the Employee of
      any duties inconsistent in any respect with the Employee's position (including
      status, offices, titles and reporting requirements), authority, duties or
      responsibilities as contemplated by Section 2(a) of this Agreement, or any
      other
      action by CryoLife which results in a diminution in such position, authority,
      duties or responsibilities, excluding for this purpose an isolated,
      insubstantial and inadvertent action not taken in bad faith and which is
      remedied by CryoLife promptly after receipt of notice thereof given by the
      Employee;

     

    
 

    
      
        
        

      

      
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    (ii)
      any failure by CryoLife to comply
      with any of the provisions of Section 3(a) or 3(b) of this Agreement, other
      than
      an isolated, insubstantial or inadvertent failure not occurring in bad faith
      and
      which is remedied by CryoLife promptly after receipt of notice thereof given
      by
      the Employee;

    

    (iii)
      any threatened termination by
      CryoLife of the Employee's employment other than for Cause, Death or Disability;
      or

    

    (iv)
      any failure by CryoLife to comply
      with and satisfy Section 11(c) of this Agreement.

    

    For
      purposes of this Section 5(c), any good faith determination of "Good Reason"
      made by the Employee shall be conclusive.  Anything in this Agreement
      to the contrary notwithstanding, a termination by the Employee for any reason
      at
      least 90 but not more than 120 days following consummation of a Change of
      Control or during the 30 day period immediately following the first anniversary
      of a Change of Control shall be deemed to be a termination for Good Reason
      for
      all purposes of this Agreement.

    

    (d)           Retirement.  The
      Employee may voluntarily terminate his employment at any time by reason of
      Retirement.  For purposes of this Agreement, "Retirement" shall mean
      the cessation by Employee of all full-time employment of any kind.

    

    (e)           Notice
      of Termination.  Any termination by CryoLife, or by the Employee
      for Good Reason or Retirement, shall be communicated by Notice of Termination
      to
      the other party hereto given in accordance with Section 12(b) of this
      Agreement.

    

    For
      purposes of this Agreement, a "Notice of Termination" means a written notice
      which (i) indicates the specific termination provision in this Agreement relied
      upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
      and circumstances claimed to provide a basis for termination of the Employee's
      employment under the provision so indicated and (iii) if the Date of Termination
      (as defined below) is to be later than the date of receipt of such notice,
      specifies the termination date (which date shall not, except in the case of
      Retirement, be more than 30 days after the giving of such
      notice).  The failure by the Employee or CryoLife to set forth in the
      Notice of Termination any fact or circumstance which contributes to a showing
      of
      Good Reason or Cause shall not waive any right of the Employee or CryoLife,
      respectively, hereunder or preclude the Employee or CryoLife, respectively,
      from
      asserting such fact or circumstance in enforcing the Employee's or CryoLife's
      rights hereunder.

    

    (f)           Date
      of Termination.  "Date of Termination" means: (i) if the
      Employee's employment is terminated by CryoLife for Cause, or by the Employee
      for Good Reason or Retirement, the date of receipt of the Notice of Termination,
      or any later date specified therein, as the case may be, (ii) if the Employee's
      employment is terminated by CryoLife other than for Cause or Disability, the
      date on which the Employee receives Notice of Termination, and (iii) if the
      Employee's employment is terminated by reason of death or by CryoLife for
      Disability, the date of death of the Employee or the Disability Effective Date,
      as the case may be. Notwithstanding the foregoing, the Date of Termination
      may,
      except in the case of Retirement, be accelerated by the party who receives
      Notice of Termination by providing to the other party written notice of
      acceleration, including the accelerated Date of Termination, within 30 days
      of
      receipt of the Notice of Termination.

     

    
 

    
      
        
        

      

      
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    (g)           Non-Compete
      Commitment.  During the term of this Agreement and for a period of
      two years after any termination of this Agreement, the Employee agrees not
      to
      accept any position as chief executive officer, president or chief operating
      officer with, or provide comparable level executive consultation to, any
      competitors of CryoLife in the cardiac or vascular tissue processing business
      or
      biological glue or protein hydrogel product business within the United States
      or
      the European Union. Payments of amounts owing under any Severance Payment
      (defined in Section 6(d)) obligation, shall be conditioned upon Employee's
      continued compliance with this non-compete commitment.

    

    (h)           Agreement
      Not to Solicit.  During the term of this Agreement and for a
      period of two years after any termination of this Agreement, the Employee agrees
      he will not, without the prior written consent of the Company, either directly
      or indirectly, on his own behalf or in the service or on behalf of others,
      solicit or attempt to solicit, divert or hire away any person employed by the
      Company or any customer of the Company.

    

    6.           OBLIGATIONS
      OF CRYOLIFE UPON TERMINATION.

    

    (a)           Expiration
      of Term; Good Reason; Other Than for Cause, Death or
      Disability.  If the Employee’s employment is terminated by reason
      of expiration of the Employment Period or if during the Employment Period,
      (i)
      CryoLife shall terminate the Employee's employment other than for Cause or
      Death, or (ii) the Employee shall terminate employment for Good Reason or
      Retirement, then CryoLife shall pay to Employee the Severance Payment (defined
      below) and shall, subject to the limitations set forth in (e) below, continue
      to
      provide major medical insurance benefits comparable to those described in the
      schedules attached to this Agreement (collectively, " Major Medical Benefits")
      for Employee and Employee's wife, Ann B. Anderson, for the duration of their
      lives.  Such payment shall be in addition to sums due to Employee
      through the Date of Termination and shall be subject to normal withholding
      requirements of CryoLife.

    

    (b)           Death.  If
      the Employee's employment is terminated by reason of the Employee's death during
      the Employment Period, this Agreement shall terminate without further obligation
      to the Employee's legal representatives under this Agreement, other than for
      (i)
      payment of obligations occurring through the Date of Termination and (ii) for
      CryoLife's agreement to continue the Major Medical Benefits for Employee's
      wife,
      Ann B. Anderson, for the duration of her life.

    

    (c)           Cause.
      If the Employee's employment shall be terminated by CryoLife for Cause, this
      Agreement shall terminate without further obligations to the Employee other
      than
      for payment obligations accruing through the Date of Termination.

    

    (d)           Severance
      Payment.  The "Severance Payment" shall be $1,985,000. The
      Severance Payment shall be payable in cash by the Company in 24 equal monthly
      installments over the two year period following the Date of Termination (the
      "Severance Period"), with the first payment commencing on the date thirty (30)
      days after Employee's Date of Termination; provided, however, that, to the
      extent required under Section 409A of the Code to avoid the imposition of
      additional tax to Employee under that Section, any payment of the Severance
      Payment shall commence on the six-month anniversary of Employee's separation
      from service with the Company, or on the date of Employee's death if Employee
      should die prior to such six-month anniversary (such payment date being referred
      to herein as the “Initial Payment Date”), with the first payment to be equal to
      the sum of those payments that would have been made prior to the Initial Payment
      Date but for the delay, and the remainder to be paid in equal monthly
      installments over the remainder of the Severance Period; provided further,
      that
      to the extent permitted under Section 409A of the Code without the imposition
      of
      additional tax to Employee under that Section, the Severance Payment shall
      be
      paid (i) in an immediate lump-sum in the event the Employee's separation from
      service occurs on or after a Change of Control or (ii) in an immediate lump
      sum
      at the time of a Change of Control (less amounts previously paid to Employee)
      in
      the event the separation from service occurs within six months prior to a Change
      of Control.  Payment of any Severance Payment will be subject to
      normal withholding.

     

    
 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (e)           Limitations
      on Major Medical Benefits.  The Company's obligation to provide
      Major Medical Benefits to Employee and Ann B. Anderson, or either of them,
      after
      employment termination shall not oblige the Company to expend more than the
      Maximum Annual Premium Amount in any calendar year as determined by
      CryoLife.  For purposes of this Agreement, Maximum Annual Premium
      Amount shall mean the sum of $25,000 increased by the Consumer Price Index
      using
      September 1, 2005 as the base date. If all of the Major Medical Benefits cannot
      be provided for the Maximum Annual Premium Amount, the Company shall utilize
      the
      Maximum Annual Premium Amount to obtain such major medical insurance coverage
      as
      can reasonably be obtained.  When Employee or Employee's wife, Ann B.
      Anderson, qualifies for Medicare, Medicaid or other governmentally provided
      major medical benefit (collectively, "Government Benefits") of the sorts
      otherwise included within Major Medical Benefits, the provision of benefits
      under the Major Medical Benefits may be conditioned on Employee or Employee's
      wife, Ann B. Anderson, as the case may be, looking first to Government Benefits
      for coverage before drawing on the Major Medical Benefits.

    

    7.           NON-EXCLUSIVITY
      OF RIGHTS.

    

    Nothing
      in this Agreement shall prevent
      or limit the Employee's continuing or future participation in any plan, program,
      policy or practice provided by CryoLife or any of its affiliated companies
      and
      for which the Employee may qualify, nor, except as specifically set forth
      herein, shall anything herein limit or otherwise affect such rights as the
      Employee may have under any contract or agreement with CryoLife or any of its
      affiliated companies.  Amounts which are vested benefits or which the
      Employee is otherwise entitled to receive under any plan, practice or program
      of
      or any contract or agreement with CryoLife or any of its affiliated companies
      at
      or subsequent to the Date of Termination shall be payable in accordance with
      such plan, policy, practice or program or contract or agreement except as
      explicitly modified by this Agreement.

    

    8.           FULL  SETTLEMENT.

    

    In
      no event shall the Employee be
      obligated to seek other employment or take any other action by way of mitigation
      of the amounts payable to the Employee under any of the provisions of this
      Agreement and such amounts shall not be reduced whether or not the Employee
      obtains other employment.  CryoLife agrees to pay as incurred, to the
      full extent permitted by law, all legal fees and expenses which the Employee
      may
      reasonably incur as a result of any contest by CryoLife or Employee with respect
      to liability under or the interpretation of the validity or enforceability
      of,
      any provision of this Agreement, but only in the event and to the extent that
      (i) the Employee receives a final, non-appealable judgment in his favor in
      any
      such action or receives a final judgment in his favor that has not been appealed
      by the Company within 30 days of the date of the judgment; or (ii) the parties
      agree to dismiss any such action upon CryoLife’s payment of the sums allegedly
      due the Employee or performance of the covenants by CryoLife allegedly breached
      by it.

     

    
 

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    9.           LIMITATION
      OR EXPANSION OF BENEFITS.

    

    (a)           In
      the event it shall be determined that any benefit, payment or distribution
      by
      CryoLife to or for the benefit of the Employee (whether payable or distributable
      pursuant to the terms of this Agreement or otherwise) would, if paid, be subject
      to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
      as amended (the "Code"; such excise tax, the "Excise Tax"), then CryoLife shall
      pay to Employee an additional amount of cash (a "Gross-Up Payment") equal to
      the
      amount necessary to cause the amount of the aggregate after-tax compensation
      and
      benefits received by the Employee hereunder (after payment of the excise tax
      under Section 4999 of the Code with respect to any excess parachute payment,
      and
      any state and federal income and employment taxes with respect to the Gross-Up
      Payment) to equal the aggregate after-tax compensation and benefits the Employee
      would have received if Sections 280G and 4999 of the Code had not been enacted.
      A nationally recognized public accounting firm selected by CryoLife shall
      initially determine, at CryoLife's expense, whether an "excess parachute
      payment" will be made to Employee, and if so, the amount of the Gross-Up
      Payment.  In the event of a subsequent claim by the Internal Revenue
      Service that, if successful, would result in Employee's liability for an Excise
      Tax under Section 4999 of the Code in excess of the amount covered by any
      previous Gross-Up Payment, the Employee shall promptly notify CryoLife in
      writing of such claim.  If CryoLife elects to contest such claim, it
      shall so notify the Employee and shall bear and pay directly or indirectly
      all
      costs and expenses of contesting the claim (including additional interest and
      penalties incurred in connection with such action), and shall indemnify and
      hold
      Employee harmless, on an after-tax basis, for any excise, income, or employment
      tax, including interest and penalties with respect thereto, imposed as a result
      of CryoLife's payment of costs of the contest. Employee shall cooperate fully
      with CryoLife in the defense of any such IRS claim.  If, as a result
      of CryoLife's action with respect to a claim, Employee receives a refund of
      any
      amount paid by CryoLife with respect to such claim, Employee shall promptly
      pay
      such refund to CryoLife.  In the event the IRS claim is finally
      determined to result in the imposition of additional excise tax under Section
      280G of the Code on Employee, CryoLife shall make an additional Gross-Up Payment
      with respect to any such additional excise tax.

    

    (b)           Anything
      in this Agreement to the contrary notwithstanding, aggregate severance,
      separation and/or similar payments made to Employee pursuant to this Agreement
      and otherwise shall be limited to the equivalent of Employee’s salary paid
      during the three completed fiscal years ended prior to the Date of Termination,
      including bonuses and guaranteed benefits paid during those years. If necessary,
      any Gross-Up Payment will be reduced in order to comply with this provision;
      provided, however, that the Company agrees that it shall not deem any Retention
      Payment hereunder to be a “severance, separation and/or similar payment” for
      purposes of this Section 9(b) and Article IV, Section 8 of the
      Company’s Bylaws.  In consideration of this agreement, Employee agrees
      to indemnify the Company and the Board for any and all costs and expenses,
      including reasonable legal expenses, they may reasonably incur as a direct
      result of such agreement.  As soon as practicable following November
      3, 2009, the Company agrees to amend this Agreement to remove this
      Section 9(b) and to amend its Bylaws to remove the second sentence of
      Article IV, Section 8 thereof.

     

    
 

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    10.           CONFIDENTIAL
      INFORMATION.

    

    The
      Employee and CryoLife are parties
      to one or more separate agreements respecting confidential information, trade
      secrets, inventions and non-competition (collectively, the "IP Agreements").
      The
      parties agree that the IP Agreements shall not be superseded or terminated
      by
      this Agreement and shall survive any termination of this Agreement.

    

    11.           SUCCESSORS.

    

    (a)           This
      Agreement is personal to the Employee and without the prior written consent
      of
      CryoLife shall not be assignable by the Employee otherwise than by will or
      the
      laws of descent and distribution. This Agreement shall inure to the benefit
      of
      and be enforceable by the Employee's legal representatives.

    

    (b)           This
      Agreement shall inure to the benefit of and be binding upon CryoLife and its
      successors and assigns.

    

    (c)           CryoLife
      will require any successor (whether direct or indirect, by purchase, merger,
      consolidation or otherwise) to all or substantially all of the business and/or
      assets of CryoLife to assume expressly and agree to perform this Agreement
      in
      the same manner and to the same extent that CryoLife would be required to
      perform it if no such succession had taken place.  As used in this
      Agreement, "CryoLife" shall mean CryoLife as hereinbefore defined and any
      successor to its business and/or assets as aforesaid which assumes and agrees
      to
      perform this Agreement by operation of law, or otherwise.

    

    12.           MISCELLANEOUS.

    

    (a)           This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Georgia, without reference to principles of conflict of laws. The
      captions of this Agreement are not part of the provisions hereof and shall
      have
      no force and effect. This Agreement may not be amended or modified otherwise
      than by a written agreement executed by the parties hereto or their respective
      successors and legal representatives.

    

    (b)           All
      notices and other communications hereunder shall be in writing and shall be
      given by hand delivery to the other party or by registered or certified mail,
      return receipt requested, postage prepaid, in either case, accompanied by a
      facsimile copy, addressed as follows:

    

    
      	 	
              If
                to the Employee:

            
	 	 
	 	
              Steven
                G. Anderson

            
	 	
              5040
                Northside Drive

            
	 	
              Atlanta,
                Georgia  30327

            
	 	
              Facsimile:
                (770) 590-3754

            

    

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
 

    
      	 	 
	 	
              With
                a copy to:

            
	 	 
	 	
              Steven
                E. Fox

            
	 	
              Rogers
                & Hardin LLP

            
	 	
              2700
                International Tower

            
	 	
              229
                Peachtree Street, N.E.

            
	 	
              Atlanta,
                Georgia  30303-1601

            
	 	
              Facsimile:
                (404) 525-2224

            
	 	 
	 	
              If
                to CryoLife:

            
	 	 
	 	
              CryoLife,
                Inc.

            
	 	
              1655
                Roberts Boulevard, N.W,

            
	 	
              Kennesaw,
                Georgia 30144

            
	 	
              Attention:  Chief
                Financial Officer

            
	 	
              Facsimile:
                (770) 590-3754

            
	 	 
	 	 
	 	
              With
                a copy to:

            
	 	
              B.
                Joseph Alley, Jr.

            
	 	
              Arnall
                Golden Gregory LLP

            
	 	
              171
                17th
                St.
                N.W., Suite 2100

            
	 	
              Atlanta,
                Georgia 30363

            
	 	
              Facsimile:
                (404) 873-8689

            

    

    

    

    or
      to
      such other address as either party shall have furnished to the other in writing
      in accordance herewith. Notice and communications shall be effective when
      actually received by the addressee.

    

    (c)           The
      invalidity or unenforceability of any provision of this Agreement shall not
      affect the validity or enforceability of any other provision of this
      Agreement.

    

    (d)           CryoLife
      may withhold from any amounts payable under this Agreement such Federal, state,
      local or foreign taxes as shall be required to be withheld pursuant to any
      applicable law or regulation.

    

    (e)           This
      Agreement embodies the entire agreement between the parties with respect to
      the
      subject matter addressed herein.  From and after the Effective Date,
      this Agreement shall supersede any other agreement between the parties with
      respect to the subject matter hereof including the Employment Agreement between
      the parties dated September 5, 2005, which shall be null and void and of no
      further force or effect.  In the event of any conflict between this
      Agreement and any benefits provision of CryoLife's Employee Handbook, the
      provisions of this Agreement shall prevail.

    

    (f)           The
      provisions of this Agreement are intended to satisfy the applicable requirements
      of Section 409A of the Code and shall be performed and interpreted consistent
      with such intent. If any provision of this Agreement does not satisfy such
      requirements or could otherwise cause Employee to be subject to the interest
      and
      penalties under Section 409A of the Code, Employee and the Company agree to
      negotiate in good faith an appropriate modification to maintain, to the maximum
      extent practicable, the original intent of the applicable provision without
      violating the requirements of Section 409A of the Code (or causing the
      imposition of additional tax to Employee under Section 409A of the
      Code).

     

    
 

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Employee has
      hereunder set the Employee's hand and, pursuant to the authorization from its
      Compensation Committee and Board, CryoLife has caused this Agreement to be
      executed in its name on its behalf, all as of the day and year first above
      written.

    

    
      	 	
              /s/
                Steven G. Anderson

            
	 	
              STEVEN
                G. ANDERSON

            
	 	 
	 	 
	 	
              CRYOLIFE,
                INC.

            
	 	 
	 	 
	 	
              By:  /s/
                Ronald C. Elkins, M.D.

            
	 	
              Ronald
                C. Elkins, M.D.

            
	 	
              Director
                and Chairman,

            
	 	
              Compensation
                Committee

            

    

    

    

    

    

    

    

    
      
        
        

      

      
        14kl07066_ex10-1.htm

    
      
        

      

    

     

     

    Exhibit
      10.1

    

    SHARE
      SALE AND PURCHASE AGREEMENT

    

    

    

    by
      and
      between

    

    

    

    

    NEW
      WORLD BRANDS, INC.

    

    

    

    and

    

    

    

    TELES
      AG INFORMATIONSTECHNOLOGIEN

    

    

    

    

    

    

    

    

    

    Dated
      as
      of July 26, 2007

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    SHARE
      SALE AND PURCHASE AGREEMENT

    

    SHARE
      SALE AND PURCHASE AGREEMENT, dated July 26, 2007 (the “Agreement”),
      between:

    

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

    

    on
      the
      one hand, and

    

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

    

    on
      the
      other hand,

    

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

    

    

    

    RECITALS

    

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

    

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

    

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

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    WHEREAS,
      pursuant to the terms and conditions set forth herein, the Seller agrees to
      sell
      to the Purchaser, and the Purchaser agrees to purchase from the Seller, all
      of
      the Shares;

    

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

    

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

    

    

    
      	
              I.  

            	
              DEFINITIONS
                AND INTERPRETATION

            

    

    

    
      	
              1  

            	
              Certain
                Terms

            

    

    

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

    

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

    

    “Agreement”
      means the Sale and Purchase Agreement

    

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

    

    “Closing
      Consideration” means the “Purchase Price” as set out in Article II. 3.1
      payable at the Closing in the manner set forth in Article II. 2.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

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

    

    “CPE
      Product Line” means the following:

    

    
      	
               

            	
              (i)

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

            

    

    

    
      	
               

            	
              (ii)

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

            

    

    

    
      	
               

            	
              (iii)

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

            

    

    

    
      	
               

            	
              (iv)

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

            

    

    

    
      	
               

            	
              (v)

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

            

    

    

    (vi)     
      Excluding the iGATE & vGATE product line.

    

    “Earn
      Out” has the meaning as set forth in Article II. 3.2.

    

    “Effective
      Date” is on July 1, 2007.

    

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

    

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

    

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

    

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

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

    “Marked
      Materials” has the meaning set forth in Article IV. 6.

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    

    
      	
              2  

            	
              Interpretation

            

    

    

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

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
              2.1 
                  

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

            

    

    

    
      	
              2.2 
                  

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

            

    

    

    
      	
              2.3  
                 

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

            

    

    

    
      	
              2.4 
                  

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

            

    

    

    
      	
              2.5 
                  

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

            

    

    

    
      	
              2.6 
                  

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

            

    

    

    

    
      	
              II.  

            	
              PURCHASE
                AND SALE OF SHARES

            

    

    

    
      	
              1     
                 

            	
              Purchase
                and Sale of Shares

            

    

    

    
      	
              1.1  
                 

            	
              Upon
                the terms and subject to the conditions contained herein, the Purchaser
                hereby buys, and the Seller hereby sells and delivers to the Purchaser,
                all of the Shares, free and clear of all liens and rights of any
                third
                party, for an aggregate purchase price equal to the sum of the Closing
                Consideration (as such term is defined in Article II. 3 and other
                consideration described herein.

            

    

    

    
      	
              1.2 
                  

            	
              Title
                to the Shares purchased by the Purchaser, as contemplated by this
                Agreement, shall be transferred to the Purchaser on the date hereof,
                upon
                payment of the Closing Consideration, all in accordance with Article
                II.
                2.

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    
      	
              1.3 
                  

            	
              With
                effect of the Effective Date, the Purchaser is entitled to profits
                of the
                Company.  Also with effect of the Effective Date, at the Closing
                the Purchaser shall pay to the Seller the sum of amounts advanced
                to the
                Company by Seller, and reflected on the Financial Statements as loans,
                after the Effective Date (the “Seller Advances”).  The
                parties hereby agree that the total amount of the Seller Advances
                payable
                by the Purchaser pursuant to this paragraph is USD
                157,500.

            

    

    

    
      	
              2    
                  

            	
              Closing

            

    

    

    
      	
              2.1 
                  

            	
              Closing.
                The closing of the purchase and sale of the Shares (the "Closing")
                shall take place immediately upon execution of the Sale and Purchase
                Agreement latest on July 26, 2007, at the Premises of the Company
                or
                remotely by exchange of facsimile signatures. The Parties shall confirm
                in
                writing that all Closing Requirements have
                occurred.

            

    

    

    
      	
              2.2 
                  

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

            

    

    

    
      	
              2.2.1  

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

            

    

    

    
      	
              2.2.2 
                 

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

            

    

    

    
      	
              2.2.3
                  

            	
              Waiver
                of Claims. With effect of close of business on June 30, 2007, the
                Seller shall declare towards the Company a complete waiver of claims
                for
                repayment of all loans, credits, open account terms, receivables
                from
                goods and services, bills of exchanges and any other receivables
                (as
                described in Annex 1 to this 

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

     

                Agreement),
      including interest, subject to payments otherwise required by this Agreement
      (including, without limitation, by Article II.1.3).

    
      	
              2.2.4 
                 

            	
              Indemnification
                Agreement (PieCom). With effect of the Effective Date, the Seller
                shall enter into an indemnification agreement with the Company subject
                to
                the following conditions: With respect to the contracts and agreements
                with PieCom Tech, dated January 12, 2006, April 6, 2006 and January
                8,
                2007 (“PieCom Agreements”), and the relating Litigation (the
                “PieCom Litigation”), the Seller agrees to reimburse the Company
                for, indemnify the Company and hold the Company harmless from and
                against
                any obligation to perform any of the duties and obligations included
                in
                the PieCom Agreements and against all claims, losses, liabilities
                and
                expenses which may be made or brought against the Company or which
                the
                Company may suffer or incur as a result of or in connection with
                the
                PieCom Litigation. The Seller shall be obliged and entitled to undertake
                and/or direct the conduct of the defense of the Company in respect
                of the
                PieCom Litigation, and to pursue claims arising from the PieCom
                Agreements, at its own costs, in the name of the Company or otherwise,
                and
                shall be entitled to all benefits of the PieCom Litigation and the
                PieCom
                Agreements, including without limitation any sums or other benefits
                recovered or received by the Company, the Purchaser or the Seller,
                by
                settlement, litigation, arbitration or otherwise. At the request
                of the
                Seller, the Company shall cooperate with the Seller and execute all
                documents reasonably required to enable the Seller to conduct the
                defense
                or prosecution of the PieCom Litigation (including claims against
                PieCom
                or others) in the name of the Company, and to pursue claims arising
                from
                the PieCom Agreements.

            

    

    

    
      	
              2.2.5
                  

            	
              Partner
                Contract.  The parties shall have executed a Partner
                Contract in the form as attached as Annex 2 to this
                Agreement.

            

    

    

    
      	
              2.2.6 
                 

            	
              Subject
                to prior or concurrent receipt of conditions enumerated in clauses
                2.2.1
                to 2.2.5 of this Article (2.2), the Purchaser shall pay the Seller
                the
                Closing Consideration, by wire transfer to the
                Seller.

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	
              3
                   

            	
              Consideration

            

    

    

    
      	
              3.1
                  

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

            

    

    

    
      	
              3.2
                  

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

            

    

    

    
      	
              4 
                 

            	
              Cancellation

            

    

    

    In
      the
      event that the Closing Requirements are not fulfilled by July 26, 2007, either
      Party shall be entitled to cancel this Agreement by written notice. Such
      cancellation shall be considered as cancellation of all contracts and agreements
      which the Parties entered into pursuant to the covenants of this
      Agreement.

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
              III. 
                  

            	
              REPRESENTATIONS
                AND WARRANTIES

            

    

    

    
      	
              1  
                 

            	
              Representations
                of the Seller and the
                Purchaser.

            

    

    

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

    

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

     

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

     

    There
      is
      no investment banker, broker, finder or other intermediary that has been
      retained by or is authorized to act on behalf of either party or any of their
      respective affiliates who might be entitled to any fee or commission in
      connection with the transactions contemplated by this Agreement.

     

    

    
      	
              2  
                 

            	
              Representations
                of the Seller

            

    

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              2.1  
                 

            	
              Corporate
                Existence

            

    

    

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

    

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

    

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

    

    
      	
              2.2 
                  

            	
              Capital
                Stock and Ownership

            

    

    

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

    

    
      	
              2.3  
                 

            	
              No
                Conflicts

            

    

    

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

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

    

    
      	
              2.4  
                 

            	
              Financial
                Statements

            

    

    

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

    

    
      	
              2.5  
                 

            	
              Absence
                of Changes

            

    

    

    
      	
              2.5.1 
                  

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

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2.5.2 
                  

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

            

    

    

    
      	
              2.6 
                  

            	
              Real
                Property

            

    

    

    
      	
              2.6.1  
                 

            	
              There
                is no real property owned by the
                Company.

            

    

    

    
      	
              2.6.2 
                  

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

            

    

    
      	
              -  

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

            

    

    
      	
              -  

            	
              enjoys
                peaceful and undisturbed
                possession,

            

    

    
      	
              -  

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

            

    

    
      	
              -  

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

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	
              - 
                  

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

            

    

     

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

     

    

    
      	
              2.7  
                 

            	
              Compliance
                with Law and Other Instruments

            

    

    

      
      To the best of Seller’s knowledge:

    

    
      	
              2.7.1 
                  

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

            

    

    

    
      	
              2.7.2 
                  

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

            

    

    

    
      	
              2.8  
                 

            	
              Intellectual
                Property

            

    

    

    To
      the
      best of Seller’s knowledge:

    

    
      	
              2.8.1 
                  

            	
              The
                Company has full, valid and enforceable ownership rights, or valid
                rights
                of use as licensee, with respect to, all designs, patents, copyrights,
                trademarks, proprietary technical information, software, know-how
                or any
                other intellectual property rights and all pending applications therefor,
                which are used by it or necessary to the conduct of or otherwise
                material
                to its business and operations, 

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

       

      free
        and clear of all liens or any other right of third parties, except
        for the Company's obligations towards the Office of the Chief Scientist (the
        “OCS”) of the Israeli Ministry of Trade, Industry and Labor, pursuant to the
        Encouragement of Industrial Research and Development Law, 5744-1984 (the
        "Intellectual Property"). The Company has not taken any action or omitted
        to take any action which action or omission would waive, or result in the
        waiver
        of any of its rights with respect to the Intellectual Property of the Company,
        including the maintenance of existing registrations and applications and
        the
        secrecy of all confidential Intellectual Property. The Seller makes no
        representation or warranty regarding infringement claims or rights relating
        to
        any patent, copyright or other intellectual property of the
        Purchaser.

       

      
        
        

      

    

    
      	
              2.8.2  
                 

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

            

    

    

    
      	
              2.9  
                 

            	
              Contracts
                and Commitments

            

    

    

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

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    
      	
              2.10 
                  

            	
              Transactions
                with Affiliates

            

    

    

    
      	
              2.10.1 
                  

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

            

    

    
      	
              -  

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

            

    

    
      	
              -  

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

            

    

    

    
      	
              2.11 
                  

            	
              Litigation

            

    

    

    Except
      as
      disclosed in Annex 3 hereto, here are no actions, proceedings and investigations
      pending or, to the knowledge of the Seller or the Company, threatened against
      or
      involving the Company before any court, tribunal or governmental authority,
      that
      involve or would involve the expenditure by the Company of more than USD 5,000
      or are reasonably expected to result in an injunction against the Company.
      There
      are no outstanding orders, judgments, decrees or injunctions issued by any
      court, tribunal or governmental authority against the Company or any of its
      assets.

    

    
      	
              2.12  
                 

            	
              Taxes
                and Social Charges

            

    

    

    To
      the
      best of Seller’s knowledge:

    

    
      	
              2.12.1 
                  

            	
              The
                Company has correctly and timely filed all returns or other documents
                relating to Taxes and Social Charges required to be filed by the
                Company,
                and all such returns were correct and complete in all material respects;
                the Company has not requested or obtained any extension of time to
                file
                any such return.  The 

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

       

      Company
        has duly and timely paid all Taxes and Social Charges that are or
        have been due and payable by the Company and has duly accrued all Taxes and
        Social Charges which are not yet payable. The Company has established adequate
        reserves on the balance sheet of the Company at the Effective Date included
        in
        the Financial Statements for payment for Taxes and Social Charges by the
        Company
        relating to periods (or portions thereof) for which a return was required
        to be
        filed, for Taxes and Social Charges that are not then due or payable and
        has
        established adequate reserves for Taxes and Social Charges relating to
        subsequent periods as of the date hereof.

       

      
        
        

      

    

    
      	
              2.12.2  
                 

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

            

    

    

    
      	
              2.12.3  
                 

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

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    entitlement
      of the employees of the Company and involve mandatory
      contributions by the employer.

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

     

    
      	
              2.12.4 
                  

            	
              Results
                of Tax Examinations

            

    

    

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

    

    
      	
              2.13  
                 

            	
              Labor
                Related Matters

            

    

    

    
      	
              2.13.1 
                  

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

            

    

    

    
      	
              2.13.2  
                 

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

            

    

    

    
      	
              2.13.3  
                 

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

            

    

    

    
      	
              2.13.4  
                 

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

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

       

       

    

    
      	
              2.13.5 
                  

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

            

    

    

    
      	
              2.14 
                  

            	
              Subsidies

            

    

    

    To
      the
      best of Seller’s knowledge:

    

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

    

    
      	
              2.15 
                  

            	
              Disclosure

            

    

    

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

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	
              IV.  

            	
              ADDITIONAL
                COVENANTS

            

    

    

    
      	
              1     
                  

            	
              Non
                Competition

            

    

    

    
      	
                    
                1.1

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

            

    

    

    
      	
                   
                1.2

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

            

    

    

    
      	
                   
                1.3

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

            

    

    

    
      	
              1.3.1 
                  

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

            

    

    

    
      	
              1.3.2 
                  

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

            

    

    

    
      	
              1.3.3 
                  

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

            

    

    

    
      	
              1.3.4 
                  

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

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

    

    
      	
                   
                2     

            	
              No
                Solicitation

            

    

    

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

    

    
      	
              3     
                

            	
              Public
                Announcements

            

    

    

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

    

    
      	
              4   
                 

            	
              Confidentiality
                of Information

            

    

    

    
      	
              4.1  
                 

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

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    
      	
              4.2  
                 

            	
              The
                parties to this agreement shall be obliged, to keep all confidential
                information linked to this business relation or the other parties
                and
                their activities strictly confidential for an unlimited period. Besides
                business organisa­tion and structures this confidentiality rule
                applies particularly to information marked as confidential (or
                “vertrau­lich”), all financial information of either party that has
                not been publicly release (by earnings announcement or public filing),
                or
                information that is obviously company or business
                secrets.

            

    

    

    
      	
              4.3   
                

            	
              Unless
                the purpose of this agreement or the law demands otherwise, the parties
                to
                this agreement shall not pass any information, documentation or
                declarations to third parties. Affiliated companies in the sense
                of § 271
                clause 2 HGB (German Commercial Code) are not considered third parties
                in
                this sense. Confidential information shall be deemed to contain material
                non-public information regarding the parties or their subsidiaries
                or
                affiliates, and, in addition to other obligations hereunder, the
                party
                receiving such information agrees not to disclose or use the information
                in violation of the (U.S.) Securities Act of 1933 or the Exchange
                Act of
                1934.

            

    

    

    
      	
              5 
                   

            	
              Approvals
                and Consents

            

    

    

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

    

    
      	
              6  
                  

            	
              Right
                to Use Certain Marks, Logos and Corporate
                Name

            

    

    

    The
      ownership of all trademarks, service marks, brand names or trade, corporate
      or
      business names of the Seller or any of its Affiliates bearing the words "IP
      Gear" or the logo currently used by the Company in connection therewith (the
      "Seller's Marks") shall be transferred to the Purchaser, unless it is an
      integral part of the Company’s assets. The Purchaser shall grant an irrevocable,
      license to the Seller, exclusive within North America and any additional
      territory of exclusivity

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    under
      the Partner Contract, to use the Seller’s Marks on stationery,
      equipment, web, invoices, receipts, forms, packaging, advertising and
      promotional materials, products, software or like materials (the "Marked
      Materials") after Closing, in relation to the sales and marketing of the
      existing IP Gear, Ltd. product lines within the scope of the Partner
      Contract.  In addition, the Purchaser shall grant an irrevocable,
      nonexclusive license to the Seller, effective until such time as the Purchaser
      shall have paid to the Seller all of the Minimum Earn Out payment, to use the
      Seller’s Marks on the Marked Materials in relation to the Seller’s sales and
      marketing of telecommunications and networking equipment and services, without
      restriction based on territory or product.

    
      	
              7   
                 

            	
              Payment
                of Increased OCS Royalties

            

    

    

    
      	
              7.1  
                 

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

            

    

    

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

    

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

    

    
      	
              7.2   
                  

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

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Company
      or the Purchaser and the OCS unless the Seller has first approved
      the terms of the settlement or compromise.

     

    
      	
              7.3 
                   

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

            

    

    

    
      	
              7.4   
                  

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

            

    

    

    

    
      	
              V.  

            	
              INDEMNIFICATION

            

    

    

    
      	
              1  
                 

            	
              Seller’s
                Indemnification Obligations

            

    

    

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

    

    
      	
              1.1 
                   

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

            

    

    
      	
              1.2  
                 

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

            

    

    
      	
               

            	
              Agreement;
                and

            

    

    
      	
              1.3    
                

            	
              any
                catastrophic warranty or similar warranty claim, action, litigation,
                investigation or proceeding arising out of the sale or service of
                any
                goods or products by the Company prior to the date hereof, to the
                extent
                that, with regard to the foregoing paragraph 1.1 the Seller has acted,
                and
                with regard to the foregoing paragraph

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      1.2,
        the Seller has not reflected any risk in the Financial Statements,
        intentionally or with gross negligence.

       

       

    

    
      	
              2  
                 

            	
              Purchaser’s
                Indemnification Obligations

            

    

    

    The
      Purchaser shall defend, indemnify and hold harmless each of the Seller, its
      Affiliates, the Company, and their respective officers, directors, employees,
      agents, advisers and representatives (collectively, the "Seller’s
      Indemnities") from, against and with respect to any and all claims,
      liabilities, losses, damages, costs and expenses (including interest, penalties
      and reasonable attorneys' and accountants' fees and disbursements reasonably
      incurred in defending any of the foregoing or in asserting, preserving or
      enforcing any rights under this Agreement), whether or not resulting from
      third-party claims, and ascertained by an official authority (each of the
      foregoing a "Loss", and collectively "Losses"), arising out of or
      as a result of any material breach of any covenant or obligation of the
      Purchaser in this Agreement or any material inaccuracy of any representation
      or
      warranty made by the Purchaser in this Agreement.

    

    
      	
              3  
                 

            	
              Administration
                of Claims

            

    

    

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

    

    
      	
              4   
                

            	
              Limitation
                on Seller’s Indemnification
                Obligations

            

    

    

    
      	
              4.1   
                

            	
              Neither
                Party shall make a claim against the other Party for indemnification
                under
                Article V. 1 and 2 (except for claims for indemnification with respect
                to
                the representations and warranties set forth in Article III. 2.12)
                unless
                and until the amount of each Loss for which indemnification is sought
                exceeds a threshold amount of USD 10,000, it being understood that
                if the
                aggregate amount of 

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      Losses
        exceeds such threshold, the threshold shall not act as a
        deductible, and the Seller's indemnification obligation shall extend to the
        entire aggregate amount of the Loss.

       

    

    
      	
              4.2    
                

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

            

    

    

    

    
      	
              VI. 
                 

            	
              Further
                Cooperation

            

    

    

    
      	
              1   
                 

            	
              Sales
                Cooperation

            

    

    

    
      	
              1.1   
                

            	
              Partner
                Contract. At the Closing the Parties shall enter into a separate
                “Partner Contract” regarding the Sale and Marketing of TELES Group
                Products within the “North American” Market (in the form attached as
                Annex 2).

            

    

    

    
      	
              1.2  
                 

            	
              Inventory
                Credit Line. In connection with the above mentioned Partner Contract
                the Purchaser shall grant the Seller a revolving line of credit for
                inventory orders in the initial amount of USD 200,000. The inventory
                credit line shall be increased monthly, to an amount equal to the
                revenues
                made by the Seller during the 60 days preceding the end of each month,
                but
                up to a maximum of USD 500,000 (terms and conditions are set out
                in the
                Partner Contract attached as Annex
                2).

            

    

    

    
      	
              1.3  
                 

            	
              Marketing
                Subsidy. In consideration of the collaboration between the Parties
                within the above mentioned Partner Contract, the Purchaser shall
                grant to
                the Seller an additional marketing subsidy (non-repayable) in the
                amount
                of USD 200,000 per annum for a period of two years, payable at the
                commencement of each annum, whereby the payment of any amounts shall
                be
                subject to the prior approval of the Purchaser. A prolongation for
                a third
                year shall be agreed on the basis of the revenues (terms and conditions
                are set out in the Partner Contract attached as Annex
                2).

            

    

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              2    
                

            	
              Loan
                Agreement

            

    

    

    
      	
              2.1  
                 

            	
              In
                consideration of the collaboration between the Parties within the
                Partner
                Contract, the Purchaser shall provide a line of credit to the Seller
                of
                USD 1,000,000 pursuant to a separate loan agreement to be signed
                within 20
                days after the Closing.  The loan agreement shall have a period
                of validity of four years, in which the Seller is obliged to redeem
                the
                loan in 12 quarterly installments, starting after the first year.
                The
                Parties agree on a fixed interest rate of 7% per
                annum.

            

    

    

    
      	
              2.2    
                

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

            

    

    

    
      	
              2.3    
                

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

            

    

    

    

    
      	
              VII.   
                

            	
              MISCELLANEOUS

            

    

    

    
      	
              1  
                 

            	
              Entire
                Agreement, No Waiver

            

    

    

    This
      Agreement (including the Annexes hereto) constitutes the sole understanding
      of
      the Parties with respect to the subject matter hereof. This Agreement (including
      the Annexes hereto) supercedes all prior declarations, negotiations,
      undertakings, oral or written communications, acceptances, understandings or
      prior agreements between the Parties relative to the provisions to which this
      Agreement applies or which it lays down, including without limitation the
      Preliminary Agreement dated July 18, 2007, among the Parties. This Agreement
      may
      only be modified, expanded or added to by a written agreement executed by the
      parties. No waiver by any party of any breach of any provisions 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    hereof
      shall be effective or enforceable unless in writing signed by the
      waiving party.
 

    
      	
              2    
                

            	
              Severability

            

    

    

    If
      any
      provision of this Agreement is held to be invalid or unenforceable for any
      reason, the validity and the enforceability of the remainder of this Agreement
      shall not be affected provided that the Parties shall replace the provision
      in
      question with one or several valid provisions which can be enforced and are
      as
      close as possible to the intent and purpose of such invalid of unenforceable
      provision.

    

    
      	
              3   
                  

            	
              Governing
                Law and Jurisdiction

            

    

    

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

    

    
      	
              4  
                   

            	
              Binding
                Effect; No Third Party
                Beneficiaries

            

    

    

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

    

    
      	
              5   
                  

            	
              Notices

            

    

    

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

    

    If
      to
      Purchaser:

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    TELES
      AG
      Informationstechnologien

    Vorstand

    Ernst-Reuter-Platz
      8

    10587
      Berlin

    Germany

    

    Attention:
      Olaf Schulz

    

    If
      to
      the Seller:

    New
      World
      Brands Inc.

    340
      W.
      5th
      Avenue

    Eugene,
      OR 97401

    

    Attention:
      M. David Kamrat

    

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

    

    
      	
              6  
                 

            	
              Expenses
                and Taxes

            

    

    

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

    

    
      	
              7  
                 

            	
              Translations

            

    

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
              8  
                 

            	
              Execution
                Copies

            

    

    

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

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

    

    

    

    

    /s/
      M.
      David
      Kamrat                                                                     /s/
      Olaf
      Schulz

    New
      World
      Brands,
      Inc.                                                                                              TELES AG
      Informationstechnologien

    By:
      M.
      David Kamrat,
      CEO                                                                                          By: Olaf
      Schulz, CFO 

    

    

    

    Enclosures

    

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

    Annex
      2                      Partner
      Contract

    Annex
      3                      Schedule
      of Litigations

    Annex
      4                      Financial
      Statements

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    
      	
              Annex
                1 to Share Sale and Purchase Agreement

            	 
	 	 	 	 	 	 	 	 	 	 
	
              Waiver
                of Claim to Amounts Owed by IP Gear, Ltd. to New World
                Brands

            	 	 	 
	
              As
                At June 30, 2007

            	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	
              New
                World Brands, Inc., hereby declares toward and in favor of IP Gear,
                Ltd.,
                subject to limitation as provided below,

            
	
              a
                complete waiver of claims for repayment of the loans, credits, open
                account terms, receivables from goods and

            
	
              services,
                bills of exchanges and other receivables, listed in this Annex 1,
                including interest.

            	 	 
	 	 	 	 	 	 	 	 	 	 
	
              A.

            	
              Long
                term Debt to New World Brands(Qualmax)

            	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	
              GL
                Code

            	 	
              Amount
                (NIS)

            	 	 	
              Amount
                (USD)

            	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	
              741925

            	 	
               10,801,898.77

            	 	 	
               2,542,221.41

            	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	
              New
                World Brands Waives claim to the full amount listed above in GL Code
                741925

            	 	 
	 	
              per
                the financial records of IP GEAR LTD

            	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	
              B.

            	
              Short
                Term Debt to New World Brands

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	
              GL
                Code

            	 	
              Amount
                (NIS)

            	 	 	
              Amount
                (USD)

            	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	
              751405

            	 	
                    531,125.00

            	 	 	
                  125,000.00

            	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	
              New
                World Brands Waives claim to $107,500 of the amount listed above
                in GL
                Code

            	 	 
	 	
              751405
                per the financial records of IP GEAR LTD and retains claim to the
                remainder

            	 	 
	 	
              pursuant
                to section 1.3 of the Purchase and Sale Agreement

            	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	
              /s/
                M. David Kamrat

            	 	 	 	 	 	 	 	 
	
              M.
                David Kamrat, CEO

            	 	 	 	 	 	 	 
	
              New
                World Brands, Inc.

            	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      2 TO SHARE SALE AND PURCHASE AGREEMENT

    

    Partner
      Contract

    

    between

     

    TELES
      AG
      Informationstechnologien,

    Ernst-Reuter-Platz
      8, 10587 Berlin, Germany

    legally
      represented by the Management Board

     

    hereinafter
      „TELES“

     

    and

    

     

    New
      World Brands, Inc. dba IP Gear,

    340
      W. 5th Avenue, Eugene, OR 97401, USA

    legally
      represented by

     

    -
      hereinafter „PARTNER“

    

    

    

     

    
      	
              1.1 
                  

            	
              Preamble

            

    

     

    

    TELES
      is
      a telecommunication vendor.

     

    The
      Partner acts in the area of North America as a Partner/broker for
      telecommunications products and further related services.

     

    TELES
      and
      the Partner wish to enter into an agreement for the promotion, marketing, sale
      and support of 

    TELES’
      infrastructure products.

     

     

    Therefore
      the parties agree as follows:

     

     

    
      	
              1.  

            	
              Appointment,
                Territory

            

    

     

     

    
      	
              a)  

            	
              TELES
                hereby appoints the Partner and the Partner accepts to act as TELES’
                exclusive Distributor for the TELES products IP/TDM (iSWITCH product
                line), NGN (MGC product line), CPE (VoIPBOX family, VoIPGATE), FWA
                (iGATE,
                vGATE) and the IP Gear product line, any modifications, upgrades,
                and
                future generations of such products (hereinafter “the Products”),
                including products of any subsidiary or affiliate of TELES, in North
                America (hereinafter "the Territory," and “North America” defined as the
                United States, Canada, Mexico, all Caribbean Nations, Guatemala and
                Honduras) subject to and in accordance with the terms and conditions
                of
                this agreement. In addition, TELES hereby appoints and the Partner
                hereby
                accepts appointment as TELES’ non-exclusive Partner for sale of the FWA
                Products in South America, also subject to and in accordance with
                the
                terms and conditions of this agreement. TELES’ products to be sold by
                global players or as OEM in the Territory, will not be considered
                as a
                breach of the exclusivity. TELES agrees to make all reasonable efforts
                to
                prevent other resellers from selling to subsidiaries or other affiliates
                of North America-based customers, except global players and OEM.
                It is
                recognized that the Partner will be seeking to sell the Products
                to
                sub-distributors and VARs as well as end-users. When the Partner
                has
                identified a potential customer that is a sub-distributor or VAR,
                the
                Partner shall provide TELES written notification
                as

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    to
      the potential customer’s name, principal business
      location, and corporate jurisdiction. If TELES does not object in writing to
      the
      potential customer within ten (10) days after receiving the Partner’s notice,
      the potential customer shall be considered approved by TELES for future sales
      by
      the Partner. Exclusivity for the Partner is subject to the terms and conditions
      set forth in Exhibit A. In the event that Partner’s exclusivity within the
      Territory terminates, this Partner Contract shall not terminate but shall be
      considered an appointment as a nonexclusive Partner within the
      Territory.

     

    
      	
              b)  

            	
              As
                a TELES Partner, the Partner shall purchase the Products from TELES,
                maintain stocks of the Products, act as an independent contractor
                and
                shall sell the Products and provide product support to its customers
                in
                its own name and for its own account. Except as permitted by this
                Agreement, the Partner shall not authorize any other person or entity
                to
                be a sub-distributor of any Products without TELES’ written consent. The
                Parties are open to discuss about private labelling in the future
                against
                additional payment. Nothing in this Agreement shall be construed
                to
                constitute or appoint either party as the agent of the other party
                for any
                purpose whatsoever, or to grant to either party any right or authority
                to
                assume or create any obligation for or on behalf of or in the name
                of the
                other.

            

    

     

     

    
      	
              c)  

            	
              The
                Partner agrees at its best efforts and at its cost to actively and
                diligently promote and increase the sale of the Products throughout
                the
                Territory by all legal and ethical means, including advertising,
                demonstration of models, processing of orders and customer complaints
                and
                through distribution of technical literature, catalogues, brochures
                and
                advertising materials issued by TELES. The Partner agrees to maintain
                a
                sufficient number of qualified personnel for such
                purpose.

            

    

     

     

    

     

     

    
      	
              2.  

            	
              Prices,
                Payment Terms

            

    

     

     

    
      	
              a)  

            	
              All
                prices of the Products in the price list of TELES (price list attached
                as
                Exhibit B) are EXW Berlin (Incoterms 2000) and may be amended or
                replaced
                by TELES at its own discretion from time to time with 60 days prior
                written notice.  The Partner’s cost for the Products shall be
                50% discount from MSRP for FWA products, and 35% discount from MSRP
                for
                CPE and NGN products.

            

    

     

     

    
      	
              b)  

            	
              The
                total amount of the purchased Products plus potential VAT is due
                and
                payable in €, fixed as of the date of delivery, within 60 days after
                delivery to Partner.

            

    

     

     

    
      	
              c)  

            	
              Payments
                for services are due and payable 30 days after completion of the
                service
                provision and receipt of an
                invoice.

            

    

     

     

    
      	
              d)  

            	
              In
                order to facilitate the fulfilment of the financial obligations resulting
                from this contract, TELES shall grant the Partner a credit line in
                the
                initial amount of maximum USD 200,000 (accumulated outstanding debts
                from
                any order). On a monthly basis, the credit line shall be increased
                up to
                the total revenues made by the Partner during the preceding 60 days,
                up to
                a maximum credit line of USD
                500,000.

            

    

     

     

     

    
      	
              3.  

            	
              Order
                Placement, Delivery

            

    

     

     

    
      	
              a)  

            	
              The
                Partner’s purchase orders must contain all required and correct
                information, reference this agreement and be signed by an authorized
                representative of the Partner.

            

    

     

     

    
      	
              b)  

            	
              TELES
                will not be bound by any purchase order for the Products placed by
                the
                Partner until such purchase order has been accepted in writing by
                TELES,
                which shall not be entitled to accept or reject any such order at
                its sole
                discretion without reasonable
                cause.

            

    

     

     

    
      	
              c)  

            	
              As
                long as the Partner is in default of payment, TELES is entitled to
                withhold the processing of further orders of the Partner in spite
                of an
                order acknowledgement without falling
                behind.

            

    

     

     

    
      	
              d)  

            	
              TELES
                shall deliver ex works (Incoterms 2000) on the agreed date or,
                alternatively, on a date of which the Partner is advised at prior
                notice.
                The standard delivery time will be 4-6 weeks for normal quantities
                and 2-3
                weeks against forecast of the
                Partner.

            

    

     

     

    
      	
              e)  

            	
              TELES
                and the Partner may agree, on a sale-by-sale basis, to provide the
                Partner
                with price, quantity and delivery terms fixed for a period of time
                in
                relation to specific sales opportunities of the Partner, pursuant
                to a
                provisional purchase order plan to be developed by TELES and the
                Partner.

            

    

     

     

    
      	
              4.  

            	
              Inventory

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    The
      Partner is required to carry an inventory of adequate supply of Products,
      accessory products and documentation for use with such
      Products.

     

     

    
      	
              5.  

            	
              Business
                Plan, Joint Marketing
                Activities

            

    

     

    
      	
              a)  

            	
              Partner
                shall submit to TELES a yearly business plan and a quarterly business
                plan, which shall include sales forecast updates. The initial business
                plan for the first year, containing the expected revenue in USD for
                the
                first year shall be developed cooperatively by TELES and the Partner,
                and
                it is expected that the initial business plan will be revised by
                TELES and
                the Partner during the first year. The Partner’s minimum sales target for
                the initial period of 15 months shall be USD 1 million, and shall
                be
                increased by 15% for each 12 month period thereafter. For purposes
                of this
                section 5 sales during a period shall be calculated as the total
                sales of
                Products to end-users in the Territory (not stock) by the Partner
                during
                the sales period.

            

    

     

    In
      the
      event the Partner does not reach its projected sales targets within any targeted
      time but achieves at least 70% of the target, then the Partner shall have six
      months to catch up in the following time period without prejudice to that time
      period’s commitments; otherwise he immediately will lose any granted
      exclusivity. In the event that exclusivity is lost after the expiration of
      the
      above periods, the Partner may regain exclusivity, upon approval by TELES,
      if at
      the end of the following period the Partner has achieved the cumulative sales
      targets for all prior periods.

     

    
      	
              b)  

            	
              The
                parties shall mutually agree on joint marketing activities on a case
                by
                case basis. TELES undertakes to bear 50% of the costs for marketing
                activities of the Partner for TELES products if those marketing activities
                are approved by TELES in advance, but only up to a yearly amount
                of
                maximum 5% of the yearly turnover the Partner makes with TELES’
                Products.

            

    

     

    In
      addition, TELES shall grant to the Partner an additional marketing subsidy
      (non-repayable) in the amount of USD 200,000 per annum for a period of two
      years, whereby the payment of any amounts shall be in accordance with the
      business or marketing plan developed cooperatively by TELES and the Partner
      and
      only after prior approval of TELES on a case by case basis. An additional
      marketing subsidy of USD 200,000 shall be granted in the third year, provided
      the Partner achieves a USD 2 million sales target in the second
      year.

     

    
      	
              6.  

            	
              Stock

            

    

     

    Within
      thirty (30) days of signing this Contract the Partner agrees to order the
      minimum stock as stipulated in Exhibit E, to be agreed upon by the parties
      promptly after closing.

     

    
      	
              7.  

            	
              Reports

            

    

     

    
      	
              a)

            	
              The
                Partner shall submit details of its customer (name, location,
                jurisdiction, and nature of business) with each
                order.

            

    

     

    
      	
              b)

            	
              Further
                the Partner undertakes to submit to TELES a monthly report about
                the
                purchase orders submitted in the respective month until the 20th
                day of the
                following month.

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

     

    
      	
              8.  

            	
              TELES’
                Corporate Identity

            

    

     

    The
      Partner shall always coordinate his production of marketing material with TELES
      before publication in order to keep the corporate identity of TELES and to
      avoid
      misrepresenta­tions in product descriptions.

     

     

    
      	
              9.  

            	
              Training
                and Support

            

    

     

     

    
      	
              a)  

            	
              TELES
                undertakes to hold a sales training for the employees of the Partner
                for
                free. All transportation, travelling, accommodation and further expenses
                relating to those attending the sales training shall be borne and
                paid by
                the Partner.

            

    

     

     

    
      	
              b)  

            	
              TELES
                undertakes to hold at TELES’ training room in Berlin initial technical
                training plus periodical update training sessions for the employees
                and
                customers of the Partner at intervals convenient to both parties
                for free.
                All transportation, travelling, accommodation and further expenses
                relating to those attending the training sessions shall be borne
                and paid
                by the Partner.

            

    

     

     

    
      	
              c)  

            	
              The
                training for the Partner’s technicians shall be regularly made in TELES’
                facilities, but it could also be arranged for on-site training according
                to the price list.

            

    

     

     

    
      	
              d)  

            	
              Standard
                service is available on business working hours, but we can also provide
                contracts for 24/7 availability upon
                request.

            

    

     

     

    
      	
              10.  

            	
              Further
                Duties of the Partner

            

    

     

    The
      Partner shall make the best effort to never misrepresent the goods and services
      offered by TELES and to never jeopardize or otherwise threaten TELES’ customer
      relations in any way. For this purpose the Partner shall in
      particular:

     

     

    
      	
              a)  

            	
              always
                observe all rules and laws enacted by state, regional or professional
                bodies that are relevant for the purposes of this agreement and valid
                for
                the region for which this agreement is affective, incl. customs
                regulations;

            

    

     

     

    
      	
              b)  

            	
              not,
                without prior written approval by TELES, assure a customer of technical
                conditions and/or capabilities of TELES products beyond the technical
                specifications made in the data sheets. All financial detriments
                arising
                out of such assurances given by the Partner without a prior written
                approval by TELES shall be chargeable to the
                Partner;

            

    

     

     

    
      	
              c)  

            	
              keep
                and treat all TELES property with appropriate care and return such
                goods
                upon TELES’ request in the same condition as received, apart from
                fore­seeable wear and tear. This applies in particular to documents
                relating to TELES’ products. All such goods remain TELES’ property as long
                as no other agreement on such goods becomes
                effective;

            

    

     

    
      	
              11.  

            	
              Warranty

            

    

     

    
      	
              a)  

            	
              TELES
                grants to the Partner a warranty for a period of 15 months after
                Product
                delivery.

            

    

     

    
      	
              b)  

            	
              Besides
                this the respective regulations of TELES’ General Terms and Conditions for
                Sales, in the form attached hereto, apply, but to the extent that
                those
                Terms and Conditions are inconsistent with this Agreement the provisions
                of this Agreement shall control.

            

    

     

    
      	
              c)  

            	
              TELES
                represents and warrants to the Partner that TELES is the exclusive
                owner
                of the Products and all right, title and interest in and to all
                intellectual property rights therein and has the right to appoint
                the
                Partner and grant the rights relating to the Products pursuant hereto
                without violating any rights of any third party, that no third party
                holds
                any license or other rights of use in relation to the Products
                inconsistent with the appointment of Partner and grant of rights
                herein or
                performance by TELES and the Partner pursuant hereto, and that there
                is
                currently no actual or threatened suit by any third party based on
                an
                alleged violation of such rights by TELES or any of its affliates
                or other
                partners.  TELES hereby agrees to indemnify and hold harmless
                the Partner from any claims that the Products, or any portion thereof,
                infringes upon the intellectual property rights of any third
                party.

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              12.  

            	
              Liability

            

    

     

    
      	
              a)  

            	
              In
                case of slight negligence TELES, including his representatives or
                vicarious agents, shall be liable only if he has breached a material
                contractual duty (cardinal obligation). In any such case and in case
                of
                impossibility of performance, which he is answerable for, however
                TELES
                shall be only obligated to provide compensation for the damage typically
                occurring. In any other case of slight negligence TELES’ liability shall
                be excluded. This shall, in particular, be true for loss of data
                and any
                other indirect or consequential damages, as well as for loss of
                profit.

            

    

     

    
      	
              b)  

            	
              Besides
                this the respective regulations of TELES’ General Terms and Conditions for
                Sales apply, but to the extent that those Terms and Conditions are
                inconsistent with this Agreement the provisions of this Agreement
                shall
                control. Nothing in this section 12 shall limit or exclude TELES’ warranty
                obligations pursuant to section 11.

            

    

     

    
      	
              13.  

            	
              Product
                Changes, Discontinuation of
                Products

            

    

     

     

    
      	
              a)  

            	
              TELES
                shall have the right to modify, alter or improve any or all of its
                Products and shall also have the right to discontinue specific Products
                according to its EOL Policy.  In the event that Products in the
                Partner’s stock are discontinued, TELES shall accept a return of any such
                stock and grant to the Partner a full credit for such Products, but
                only
                for the Products in stock that were purchased and delivered within
                the
                last two months.

            

    

     

     

    
      	
              b)  

            	
              The
                Partner undertakes not to modify, alter, improve, disassemble, recreate,
                reverse engineer, copy or generate any of the Products or try to
                discover
                the source code of any software included
                therein.

            

    

     

     

    
      	
              c)  

            	
              TELES
                has no obligation to offer or sell to Partner any Product lines not
                listed
                in the current price list or to modify
                Products.

            

    

     

     

    
      	
              14.  

            	
              Customers

            

    

     

     

    TELES
      may
      also from time to time direct the Partner not to approach certain existing
      customers of TELES, and the Partner shall follow such directions and
      instructions of TELES without having any claim against TELES. In the event
      that
      TELES decides to sell Products directly to a customer introduced to it by the
      Partner or located or headquartered in the Territory, the parties shall decide
      on a case by case basis whether and when in what amount a commission shall
      be
      payable by TELES to the Partner, provided that TELES shall not directly sell
      any
      Products in the Territory unless the Partner is paid a commission for such
      sale,
      which amount will be mutually agreed upon on a case by case basis..

     

    
      	
              15.  

            	
              Confidentiality

            

    

     

     

    
      	
              a)  

            	
              The
                parties to this agreement shall be obliged, to keep all confidential
                information linked to this business relation or the other party and
                its
                activities strictly confidential for an unlimited period. Besides
                business
                organisa­tion and structures this confidentiality rule applies
                particularly to information marked as confidential (“vertrau­lich”) or
                information that is obviously company or business
                secrets.

            

    

     

     

    
      	
              b)  

            	
              Unless
                the purpose of this agreement or the law demands otherwise, the parties
                to
                this agreement shall not pass any information, documentation or
                declarations to third parties. Affiliated companies in the sense
                of § 271
                clause 2 HGB (German Commercial Code) are not considered third parties
                in
                this sense. Confidential information shall be deemed to contain material
                non-public information regarding the parties or their subsidiaries
                or
                affiliates, and, in addition to other obligations hereunder, the
                party
                receiving such information agrees not to disclose or use the information
                in violation of the (U.S.) Securities Act of 1933 or the Exchange
                Act of
                1934.

            

    

     

    
      	
              16.  

            	
              Term,
                Termination

            

    

     

    
      	
              a)  

            	
              This
                contract is valid for an initial term of 39 months starting with
                the
                signing of this contract. It automatically shall be prolonged for
                12 more
                months at a time, unless it is terminated by either party in writing
                at
                least two months prior to the end of the term. In addition, the Partner
                shall have the right to extend the term of this contract for up to
                three
                (3) additional terms of twelve (12) months each pursuant to new
                

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    mutually
      agreed sales targets. A purchase order
      accepted by TELES prior to the termination of this agreement shall not be
      affected by the termination but shall be carried out as stipulated.

     

    
      	
              b)  

            	
              An
                extraordinary termination is possible in case of a substantial breach
                of
                this agreement which is not cured by the breaching party within a
                reasonable time after notification of breach from the other
                party.

            

    

     

     

    
      	
              c)  

            	
              For
                a period of 12 months after termination of this contract if any Products
                are sold to a purchaser that was a customer of the Partner during
                the term
                of the contract or had been identified in writing by the Partner
                as a
                potential customer during the 12 months prior to termination, the
                Partner
                shall be paid a commission for such sale in an amount the parties
                shall
                mutually agree upon, but unless otherwise agreed not less than ten
                percent
                (10%) of the net revenue for the Products sold to the customer, but
                only
                under the condition that these customers were stated in the Partner’s
                monthly report.

            

    

     

    
      	
              17.  

            	
              TELES’
                General Terms and
                Conditions

            

    

     

    Besides
      the above regulations TELES’ General Terms and Conditions for Sales apply
      (Exhibit F).

     

    
      	
              18.  

            	
              Miscellaneous

            

    

     

    
      	
              a)  

            	
              This
                contract constitutes the entire agreement between the parties concerning
                this matter and supersedes all prior understandings and agreements.
                There
                are no oral or writ­ten additional agreements to this agreement.
                Written form is required for modifications or supplementations of
                this
                contract.

            

    

     

    
      	
              b)  

            	
              Exclusive
                venue for any dispute between the parties arising out of or relating
                to
                this Agreement shall be determined as follows, regardless of the
                place of
                execution or performance, and regardless of the venue in which a
                claim or
                counterclaim is first filed: venue for any action brought by TELES
                against
                the Partner, and for any counterclaims or cross claims related thereto,
                shall be in the US Federal District Court for the District of Oregon,
                or,
                if Federal jurisdiction is not available, the circuit courts in the
                State
                of Oregon, USA; venue for any action brought by the Partner against
                TELES,
                and for any counterclaims or cross claims related thereto, shall
                be in the
                courts of Berlin, Germany.  This Agreement shall be governed by
                and construed and enforced in accordance with the laws of the jurisdiction
                in which venue is determined pursuant to this Section 18(b), as such
                laws
                apply to a contract made and performed in such jurisdiction, without
                regard to conflicts of law provisions, and with exclusion of the
                CISG. If
                this Agreement is translated into any language other than English,
                the
                English version shall control and shall prevail on any question of
                interpretation.

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              c)  

            	
              The
                legal invalidity or ineffectiveness of a clause in this agreement
                shall
                not affect the validity of the remaining clauses. The parties shall
                be
                obligated to replace the invalid or ineffective clause by a valid
                clause
                that comes closest to the intended economic meaning and the contractual
                purpose.

            

    

     

     

    Berlin,
      26 July,
      2007                                                                                      
Eugene, July 26, 2007

    

    

    

    

    /s/
      Olaf
      Schulz                                                                             
  /s/ M. David Kamrat

    TELES
      AG                                                                                      
      New World Brands, Inc.

    By:
      Olaf
      Schulz,
      CFO                                                                                     By:
      M. David Kamrat, CEO

    

    

    Exhibits:

    -
      Exclusivity

    -
      Partner’s price list

    -
      Inventory List

    -
      Initial
      Business Plan

    -
      Minimum
      Stock List

    -
      TELES
      Terms and Conditions for Sales

    -
      List of
      special discounts

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      A: Exclusivity

    

    TELES
      agrees not to appoint any further Distributors, resellers or other agents for
      sale of, and not to sell, or permit or suffer to be sold, the Products in the
      Territory for the duration of this contract, under the following
      conditions:

    

    
      	
               

            	
               To
                maintain exclusivity the Partner must meet and continue to meet the
                minimum sales targets described in Section
                5(a).

            

    

     

    
      	
              2.1

            	
              Commencing
                on the closing of this contract the Partner shall not, and shall
                not cause
                its Affiliates to, directly or indirectly engage in sale, distribution,
                marketing and services of products that may compete with the TELES’ FWA
                products (iGate and vGate product
                lines).

            

    

    

    
      	
              2.2

            	
              Commencing
                15 months after the closing of this contract the Partner shall not,
                and
                shall not cause its Affiliates to, directly or indirectly engage
                in sale,
                distribution, marketing and services of products that may compete
                with the
                IP Gear’s products, in addition to the TELES’ FWA products, (the
                “Competitive Products”), provided
                that:

            

    

    

    2.2.1  The
      Partner may sell and distribute Competitive Products as part of a customer
      solution based on, or substantially incorporating, products of TELES or IP
      Gear
      Ltd.;

    

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

    

    2.2.3  The
      Partner may sell additional Competitive Products with TELES’ prior written
      consent;

    

    2.2.4  All
      restrictions on competition under Section 2.1 and this Section 2.2 shall
      terminate upon termination of the Partner’s exclusive distribution and sale
      rights pursuant to this Partner Contract, and shall only be effective within
      the
      Territory. The Parties agree that in this case the Marketing Subsidy will be
      terminated.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    ANNEX
      3 TO SHARE SALE AND PURCHASE AGREEMENT

    

    

    MPI
      Litigation

    

    The
      Company was named as a defendant in certain litigation filed in France before
      the Trade Tribunal of Nanterre against B.O.S. Better Online Solutions Ltd.
      (“BOS”) by Media Partners International (“MPI,” and the
“MPI Litigation”), a former distributor of BOS, whose contract
      with BOS allegedly related to certain distribution rights for the product
      division Qualmax purchased from BOS on December 31, 2005.  Pursuant to
      the asset purchase agreement between Qualmax and BOS, BOS agreed to indemnify
      and hold Qualmax harmless from liability, without limitation, arising from
      the
      claims raised in the MPI Litigation, and BOS has undertaken defense of Qualmax
      at BOS’s expense.  The litigation remains in its early stages, and as
      last report from counsel, the French court had not yet made definitive rulings
      on defendant’s motion to change venue and jurisdiction from France to
      Israel.  Initial hearings on the motion for change of venue were
      concluded in February 2007; additional hearings were conducted in late April
      2007; and a decision from the court as to venue is expected in September,
      2007.  If venue is in fact moved to Israel, that decision may have a
      material impact on the plaintiff’s willingness to continue the litigation, due
      to increased expense, but the outcome of the venue hearings, and the impact
      of
      that outcome on plaintiff’s claims, is purely speculative at this
      point.  At present, based upon the limited progress of the matter and
      without the benefit of the completion of factual discovery, management believes
      this litigation does not pose a significant financial risk to the
      Company.

    

    PieCom
      Dispute

    

    The
      Company entered into a contract with PieCom Tech Ltd. by which PieCom was to
      manufacture certain products for sale by the Company.  The Company
      believes that PieCom has defaulted on its obligations, and that PieCom is
      required to refund to the Company certain sums previously advanced by the
      Company.  Because of PieCom’s failure to deliver proper products on
      time, the Company has suspended all performance under the PieCom
      contract.

    

    Execution
      office file No. 5-07-05166-26

    

    The
      above
      suit was filed on the 5.6.07 to Execution Office in Hertzelia by PieCom Tech
      Ltd. (“PieCom”) against IP Gear Ltd. (“IP
      Gear”) (the: “Claim”).

    

    In
      the
      said claim, PieCom filed a 139,628.01 NIS in promissory notes for execution
      as a
      result of the termination notice delivered by IP Gear regarding the termination
      of the settlement agreement between Piecom and IP Gear, dated 8.1.07, and all
      the checks delivered under it. The termination notice was sent following Piecom
      failure to supply the agreed hardware under the time schedule specified in
      the
      settlement agreement and to comply with the specific technical requirement
      agreed on the April 2006 basic agreement.

    

    Together
      with the Claim, an attachment order was imposed over IP Gear future rights
      and
      monies being hold by third parties up to the said amount (i.e. Partner
      Communications Company 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    Ltd. and United Mizrahi Bank). On 25.6.07 an application
      for
      the removal of attachment by a bank guarantee replacement, was filed to the
      Execution Office, which application has subsequently been granted, lifting
      the
      attachment.

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