Document:

ex1013.htm

    Exhibit
10.13

     

     

    AGREEMENT

    

    This
Share Purchase Agreement (“Agreement”) signed on 13
November , 2005 by and between Pimi Marion Holdings Ltd,
(Company number 51-349712-3), incorporated in the State of Israel (“The Company”) and Mr. Nimrod Ben-Yehuda, I.D.
051795631  and Omdan
Consulting and Instructing LTD  private company no.
51-146831-6, (jointly and severally: the “Shareholders”) from one
side, and Mr. Alon Carmel
and JNS Capital
LLC (jointly and severally: “The Investors”) from the
other side.

    

    RECITALS

    

    
      	
              Whereas

            	
              The
      parties have executed a term sheet pursuant to which they now wish to
      execute this Agreement, and;

            

    

    

    
      	
              Whereas

            	
              The
      Investors after having conducted due diligence of the Company business
      inter alia by
      experts, and after being involved in the Company business and activity
      (including trade show and negotiations) desire to invest in The Company
      against the issuance of The Company’s Ordinary and Management shares in
      accordance with the terms set forth in this
  Agreement.

            

    

    

    

    Now
therefore the parties agree to the following:

    

    
      	
              1.

            	
              DEFINITIONS
      AND EXHIBITS

            

    

    

    For the
purpose of this Agreement, capitalized words shall have the meanings as
specified below or as defined in other parts of this Agreement.

    

    “Business Plan” - Financial
and non-financial targets that the Company believes it can meet, on a quarterly
basis in the years 2005, 2006 and 2007 – all of which are incorporated in a
document titled the Business Plan which is attached to this agreement as Appendix “A”.

    

    “Investment” - A total of US
$900,002 to be funded in quarterly installments as provided for in the Business
Plan against the issuance of 120,000 Ordinary Shares of the Company at the price
of $7.50 per shares, and 2 Management Shares at the price of $1.00
each.

    

     “The Loan Agreement” –
the loan agreement dated February 7, 2005 and as amended on May 11, 2005
attached hereto as Appendix
“B”.

    

    “The Loan” - Investors have
previously made four loans to the Company totaling $180,000 pursuant to The Loan
Agreement.

    

    “Intellectual Property” - The
Patents and Patent applications described in Appendix “C”, as well as any
and all related intellectual property, including knowledge, technologies and
know-how that have been developed, registered and/or accumulated by Mr. Nimrod
Ben-Yehuda, in relation to the Patents and Patents applications which
Intellectual Property is currently owned by the Company or will be transferred
to the ownership of the Company without any consideration – excluding rights to
use and/or benefit from that portion of the Intellectual Property that pertains
to the exclusive purpose of water treatment.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
 

    
      	
              2.

            	
              SALE
      AND TRANSFER OF SHARES / SIGNING AND
CLOSING

            

    

    

    2.1         SHARES

    

    
      	
               
      

            	
              Subject
      to the terms and conditions of this Agreement (including, without
      limitation, subject to the fulfillment of the conditions and obligations
      set out in Sections 2.3 and 2.4 below), at the Closing, The Company shall
      issue and deliver the Investors the Shares, free and clear of all
      Encumbrances, and The Investors will invest the investment sums in The
      Company, as set out in Section 2.2
below.

            

    

    

    2.2         INVESTORS
UNDERTAKINGS

     

    
      	

              (a)
       

            	

              The
      investment shall be in the total sum of US$ 900,002 (Nine hundred thousand
      and two US Dollars) (“The
      Investment”).

            
	 	 
	
              (b)  

            	
              The
      Investment shall be satisfied as
follows:

            

    

     

     

    
      	
              i)  

            	
              Pursuant
      to a previously signed Term Sheet, the Investors have increased their loan
      to the Company to US $110,000 on the same terms and conditions provided in
      the Loan Agreement dated February 7, 2005 and its addendum dated May 11,
      2005.

            

    

     

    
      	
              ii)  

            	
              On
      August 23 2005, the Parties have agreed to a new Business Plan, and
      therefore Investors have increased the loan to the Company to $140,000 on
      the same terms and conditions provided in the Loan Agreement dated
      February 7, 2005 and its addendum dated May 11,
  2005.

            

    

     

    
      	
              iii)  

            	
              On
      October 2005 the Investors have made an additional loan to the Company in
      the sum of $40,000 on the same terms and conditions provided in the Loan
      Agreement dated February 7, 2005 and its addendum dated May 11,
      2005.

            

    

     

    
      	
              (c)  

            	
              The
      investors shall convert any and all sums, which were furnished to the
      company as The Loan, to an investment to be deducted immediately from the
      funding obligations undertaken by
Investors.

            

    

     

    
      	
              (d)  

            	
              Pay
      to the Company the sum of $2.00 for the 2 Management Shares at the price
      of $1.00 per Management Share.

            

    

     

    
      	
              (e)  

            	
              Fund
      The Investment instalments according to the Business Plan. Each instalment
      shall be funded for the subsequent quarter, no later than 45 days prior to
      the end of each quarter, subject to clause 4.2(b)
    hereinafter.

            

    

     

    
      	
              (f)  

            	
              In
      the event that the Company exceeds the quarterly benchmarks provided in
      the Business Plan, Investors shall consider, favourably, the possibility
      to accelerate the funding of their Investment should Investors decide that
      such acceleration of funding assists the needs of the
    Company.

            

    

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

     

    
      	
              2.3  

            	
              COMPANY
      UNDERTAKINGS

            

    

    

    
      	
              (a)  

            	
              The
      Company shall issue to The Investors 24,000 Ordinary Shares against the
      funding of the Investment pursuant to Paragraphs 2.2 (b)(a) and 2.2
      (b)(b).

            

    

    

    
      	
              (b)  

            	
              In
      addition, The Company shall issue 96,000 Ordinary shares to an Escrow
      holder pursuant to the Escrow Clause set forth
  below.

            

    

    

    
      	
              (c)  

            	
              The
      Company shall issue 2 management shares to the Escrow holder pursuant to
      the Escrow Clause below.

            

    

    

    
      	
              (d)  

            	
              Subsequently,
      Company will provide to The Investors financial reports as
      following:

            

    

     

    
      	
              i)  

            	
              Management-prepared
      monthly reports – no later than on the 20th
      day of the subsequent month.

            

    

     

    
      	
              ii)  

            	
              Auditor-reviewed
      reports – no later than on the 45th
      day of the month subsequent to the end of each of the 1st,
      2nd
      and 3rd
      quarter of the year.

            

    

     

    
      	
              iii)  

            	
              Audited
      financial reports – no later than 120 days subsequent to the end of the
      year.

            

    

    

    
      	
              2.4  

            	
              ESCROW
      CLAUSE

            

    

    

     

    
      	
              (a)  

            	
              The
      parties shall appoint Advocate Yoel Levy of Twin Tower 1, 33 Jabotinsky
      st., Ramat Gan to act as escrow holder (“Escrow Holder”). At the signing
      of this Agreement, the Company shall issue  96,000 ordinary
      shares of NIS 0.01par value each and two (2) management shares of NIS 1
      par value each to the Escrow Holder. The Escrow Holder shall act in
      accordance with the following:

            

    

     

     

    
      	
              (b)  

            	
              Escrow
      shall deliver to Investors the Ordinary
Shares:

            

    

     

    
      	
              i)  

            	
              Upon
      notice from the Investors to Escrow, with a copy to the Company, of the
      funding of an instalment of the Investment accompanied by a receipt from
      the Company evidencing such instalment or a receipt
      evidencing a wire transfer of such instalment to the Company’s bank
      account Escrow shall deliver to Investors the number of shares that, at
      the price of $7.50 per share, corresponds to the amount of the
      instalment.

            

    

     

    
      	
              ii)  

            	
              All
      the shares held by Escrow upon notice, by Investors, of a Material Breach
      by Company, as defined hereinafter, and against payment to Escrow, by
      Investors, of the sum representing NIS 0.01 per share multiplied by the
      total number of shares held by Escrow, which sum Escrow will then deliver
      to the Company. The notice will be accompanied by an affidavit of one of
      the Investors that all the terms of section 4.2(iii) (b) have been
      fulfilled.

            

    

     

    
      	
              (c)  

            	
              Escrow
      shall deliver to Investors the 2 Management Shares held by Escrow as
      following:

            

    

     

    
      	
              i)  

            	
              One
      (1) Management Share shall be delivered to Investors upon notice from the
      Investors to Escrow, with a copy to the Company, that they have funded a
      total of $450,000 of the investment, accompanied by receipts from the
      company and/or wire transfer receipts evidencing funding of the entire
      $450,000 less the sums provided in Paragraphs 2.a and
  2.b.

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
              ii)  

            	
              One
      (1) Management Share shall be delivered to Investors upon notice from the
      Investors to Escrow, with a copy to the Company, that they have completed
      the funding of their entire Investment obligation under the Investment
      Agreement, accompanied by receipts from the company and/or wire transfer
      receipts evidencing funding of the entire $900,000 less the sums provided
      in Paragraphs 2.a and 2.b.

            

    

     

    
      	
              iii)  

            	
              Upon
      receipt of notice from the Investors to Escrow, with a copy to the
      Company, of a Material Breach by Company, as defined hereinafter,
      accompanied by an affidavit of one of the Investors that all the terms of
      section 4.2(iii)(b) have been
fulfilled.

            

    

     

    
      	
              (d)  

            	
              In
      the event of a breach by the Investors, Escrow shall deliver all the
      Ordinary Shares and Management Shares then held by Escrow to the
      Company.

            

    

     

    

    2.5         Performances by Share
Holders:

    

    The
holders of the 2 Management Shares not allocated to Investors shall support the
creation by the Company of an Employee Stock Option Plan and the allocation of
24,000 of the authorized ordinary shares to such plan.

    

    2.6         SIGNING
AND CLOSING

    

    Acts to
be Performed Prior to the execution of this agreement:

    

    
      	
               
      

            	
              (a)

            	
              Immediately
      prior to the execution of this agreement, the Company and the Shareholders
      will present to The Investors for examination all the documents (“The
      Closing Documents"), as set out
below:

            

    

    

    
      	
               
      

            	
              (1)

            	
              Resolutions
      of The Company’s board of directors (“The Company’s Board of Directors“)
      resolving (i) to approve the execution of this Agreement; and (ii) to
      approve the issuing of the shares pursuant to this Agreement and to
      authorize the directors of The Company to sign the appropriate
      documentation;

            

    

    

    
      	
               
      

            	
              (2)

            	
              Share
      allocation forms conforming with the articles of association of The
      Company, in respect of the shares, duly executed by The Company and The
      Shareholders;

            

    

    

    

    
      	
              3.

            	
              REPRESENTATIONS
      AND WARRANTIES.

            

    

    

    The
Company and the Shareholders hereby represent and warrant, jointly and
severally, to The Investors the representations and warranties set forth in
Sections 3.1 through 3.6 (inclusive) (“The Warranties“) and undertake
that the Warranties are true and accurate in all respects as of the agreement
execution date, and acknowledge that The Investor has agreed to enter into this
Agreement relying, inter
alia, on the truth and accuracy of The Warranties. No representation or
warranty of The Company or the Shareholders in this Agreement omits to state a
material fact necessary to make the statements herein or therein, and is, in
light of the circumstances in which they were made, not misleading. It is hereby
clarified that the Investors have conducted due diligence of the Company
business, Know-How, and Patents by their own experts, and has escorted the
Company and took part in its activity since 1st of
January 2005.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    
      	
              3.1

            	
              SHARE
      CAPITAL, TITLE, ORGANIZATION, AUTHORITY,
  COMPLIANCE

            

    

    

    
      	
              3.1.1

            	
              Share
      Capital and Title

            

    

    

    The
authorized share capital of The Company consists of 9,999,600 ordinary shares of
NIS 0.01 par value per share and 4 management shares of NIS 1.00 par value per
share, of which 120,000 ordinary shares and 2 management shares are issued and
outstanding, and constitute all of The Company’s shares prior to the issuance of
shares pursuant to this Agreement. The Shareholders are the registered owners
and holders of all the issued shares, free and clear of all encumbrances,
including, without limitation any encumbrances to the benefit of any beneficiary
owners.  Mr. Nimrod Ben-Yehuda, through Ash-Dor Assets Management and
Trusts Ltd is the owner of 75% of the Shares, comprising 90,000 Ordinary Shares
and 1 Management Share, and Mr. Eitan Shmueli through Omdan Consulting and
Instruction Ltd is the owner of 25% of the Shares, comprising 30,000 ordinary
shares and 1 management share. No reference to any purported Encumbrance appears
upon any certificate representing the share capital of The Company. All of the
outstanding share capital of The Company, has been duly authorized, validly
issued and is fully paid-up and non-assessable. There are no options, warrants
and/or any Contracts relating to the issuance, sale, or transfer of any shares
or other securities of The Company except for the obligation to eNitiatives
under section 3.3.8(iii) of this Agreement. None of the outstanding shares or
other securities of The Company was issued in violation of the Israeli Companies
Law, 1999 or any other legal requirement. The shares shall, upon their issuance
or transfer to The Investors, vest in The Company, free of any encumbrances, and
all rights (including voting rights, equity and all other rights) of
shareholders in The Company.

    

    
      	
              3.1.2

            	
              Subsidiaries

            

    

    

    The
Company does not own directly or indirectly, nor is entitled and/or required to
acquire, any shares or other securities of any Person pursuant to any Contract
or otherwise, nor does The Company have any direct or indirect equity or
ownership interest in any other business.

    

    
      	
              3.1.3

            	
              Organization
      and Good Standing

            

    

    

    
      	
              (a)

            	
              The
      Company is a corporation duly organized, validly existing, and in good
      standing under the laws of Israel, with full corporate power and authority
      to conduct its business as it is now being conducted, to own, lease or use
      the assets that it purports to own, lease or use, and to perform all its
      obligations under Contracts..

            

    

    

    
      	
              (b)

            	
              The
      minute books, and records of The Company are complete, correct and
      up-to-date in all respects and have been maintained in accordance with
      sound business practices and applicable legal requirements. The minute
      books of The Company contain accurate, complete and up-to-date records of
      all meetings held, and corporate action taken by the shareholders and the
      board of directors of The Company, and no meeting of any such shareholders
      or board of directors has been held for which minutes have not been
      prepared and are not contained in such minute books. At the agreement
      execution, all of those books and records will be in the possession of The
      Company.

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    
 

    
      	
              (c)

            	
              The
      Disclosure Letter (Appendix “D”) contains
      complete copies of all Organizational Documents of The Company as
      currently in effect. The copies of the Articles of Association of The
      Company attached hereto as aforesaid, are complete, correct and up-to-date
      in all respects and have embodied in them or annexed thereto a copy of
      every shareholders’ resolution amending the Article of Association in any
      way.

            

    

    

    
      	
              (d)

            	
              The
      Disclosure letter sets out the name of each bank in or with which the
      Company has had accounts, credit lines or safety deposit boxes, and the
      names of all persons presently authorized to draw thereon or having access
      thereto, and a brief description of each such
  account.

            

    

    

    
      	
              (e)

            	
              The
      Disclosure letter sets out the names of all persons now holding any power
      of attorney from The Company and a summary of the terms
      thereof.

            

    

    
 

    
      	
              3.1.4

            	
              Authority

            

    

    

    This
Agreement (including all those agreements and documents, the execution of which
is contemplated under this Agreement) have been, or will have been upon the
execution of this Agreement, duly and validly executed by The Company and/or the
Shareholders and are, or as the case may be, will on Execution, constitute the
legal, valid, and binding obligation of The Company and the Shareholders, and
such other parties, and enforceable against The Company and Shareholders and
such other parties in accordance with their terms. The Company and the
Shareholders have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and to perform their obligations
under this Agreement.

    

    
      	
              3.1.5

            	
              Compliance
      with Legal or Contractual
Requirements

            

    

    

    
      	
              (a)

            	
              Except
      as set forth in the Disclosure Letter (Appendix “D”), neither the
      execution and delivery of this Agreement nor the consummation or
      performance of any of the Contemplated Transactions will, directly or
      indirectly (with or without notice or lapse of
  time):

            

    

    

    
      	
               
      

            	
              (i)

            	
              Contravene,
      conflict with, or result in a violation of (A) any provision of the
      Organizational Documents of The Company, or (B) any resolution
      adopted by the board of directors or the shareholders of The
      Company;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Contravene,
      conflict with, or result in a violation of: (A) any rights of any
      Person, or (B) any Contracts to which any of the Shareholders are parties;
      or (C) any legal requirement or any Order to which The Company or any
      Shareholder, or any of the assets owned, leased or used by The Company,
      may be subject; or entitle any Governmental Body or other person to
      challenge any of the contemplated transactions or to exercise any remedy
      or obtain any relief under any legal requirement or any Order as
      aforesaid;

            

    

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
 

    
      	
               
      

            	
              (iii)

            	
              Contravene,
      conflict with, or result in a violation of any of the terms or
      requirements of, or result in any Governmental Body revoking, withdrawing,
      suspending canceling, terminating, or modifying, any Governmental
      Authorization held by The Company, relating to the business of, or any of
      the assets owned, leased or used by, The
  Company;

            

    

    

    
      	
               
      

            	
              (iv)

            	
              Cause
      the Company to become subject to, or to become liable for the payment of,
      any Tax;

            

    

    

    
      	
               
      

            	
              (v)

            	
              Cause
      any of the assets owned by The Company to be reassessed or revalued by any
      taxing authority or other Governmental
Body;

            

    

    

    
      	
               
      

            	
              (vi)

            	
              Contravene,
      conflict with, or result in a violation or breach of, or entitle any
      Person to declare a default or exercise any remedy under, or to accelerate
      the maturity or performance of, or to cancel, terminate, or modify, any
      Contract and/or any provision
thereof;

            

    

    

    
      	
               
      

            	
              (vii)

            	
              Relieve
      any Person of any obligation to The Company (whether contractual or
      otherwise) or entitle any Person to terminate any obligation, right or
      benefit (whether contractual or otherwise) enjoyed by The
      Company;

            

    

    

    
      	
               
      

            	
              (viii)

            	
              Result
      in the imposition or creation of any encumbrance upon or with respect to
      any of the assets owned, leased or used by The Company;
  or

            

    

    

    
      	
               
      

            	
              (ix)

            	
              Cause
      any officer or key employee of The Company to leave their
      employment.

            

    

    

    
      	
              (b)

            	
              Except
      as set forth in the Disclosure Letter (Appendix “D”), The
      Company nor any of the Shareholders are and will not be required to give
      any notice to, or obtain any consent, approval, ratification, waiver or
      other authorization (including, without limitation, any governmental
      authorization) from any person in connection with the execution and
      delivery of this Agreement or the consummation or performance of any of
      the contemplated transactions.

            

    

    

    
      	
              (c)

            	
              All
      returns, particulars, resolutions, and documents required by the Israeli
      Companies Law, 1999 or any other legislation to be filed with the Israeli
      Registrar of Companies or with any other Governmental Body, have been duly
      filed.

            

    

    

    
      	
              3.2

            	
              FINANCIAL
      STATEMENTS AND ASSETS

            

    

    

    
      	
              3.2.1

            	
              Proper
      Accounting and Compliance with Israeli Generally Accepted Accounting
      Principles

            

    

    

    The books
of account and all records of the Company are or will be complete, correct and
up-to-date and have been maintained in accordance with sound business practices,
and generally accepted accounting principles in Israel (”Israeli GAAP“), including the
maintenance of an adequate system of internal controls.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
 

    
      	
              3.2.2

            	
              Balance
      Sheets and Profit and Loss
Statements

            

    

    

    
      	
              (a)

            	
              General

            

    

    

    
      	
               
      

            	
              (i)

            	
              The
      Company has delivered to The
Investors:

            

    

    

    
      	
              (1)  

            	
              The
      unaudited trial balance of The Company as of August 31, 2005 and the
      related profit and loss statements (hereinafter the “Financial
      Statements").

            

    

     

     

    
      	
               
      

            	
               (ii)  The
      Financial Statements (A) conform to the books and records of The Company
      in all material respects; (B) present a true, complete and correct view of
      the financial condition and the results of operations, changes in
      shareholders' equity, and cash flow of The Company as at the respective
      dates of and for the periods referred to therein, all in accordance with
      Israeli GAAP; (C) reflect the consistent application of Israeli GAAP
      throughout the periods involved. No financial statements of any Person
      other than The Company are required by Israeli GAAP to be included in the
      financial statements of The
Company.

            

    

     

    

    
      	
               
      

            	
              (iii)   To
      the best of the Company’s and the Shareholders knowledge and of the
      knowledge of the officers of The Company, as of the date of the execution
      of this Agreement, there are no facts or circumstances which are material
      in relation to the assets, business or financial condition of The Company
      which do not appear from the Financial Statements and/or which have not
      been fully and fairly disclosed in the Disclosure Letter (Appendix
      “D”).

            

    

    

    

    
      	
              (b)

            	
              Without prejudice to and
      notwithstanding the generality of the above Section
      3.2.2(a):

            

    

    

    
      	
              (b1)

            	
              Title
      to Assets

            

    

    

    
      	
               
      

            	
              The
      Company owns, leases or has the legal right to use all assets used in the
      operation of its business and has good and marketable title to, or in the
      case of leased assets, valid leases in respect of, all the assets: (i (i)
      purchased or otherwise acquired by The Company since its organization,
      which assets purchased or acquired as aforesaid (other than inventory and
      short-term investments) are listed in the Disclosure Letter (Appendix “D”). All the
      assets owned, leased or used by The Company as aforesaid are free and
      clear of all Encumbrances and are not subject to any limitations of any
      nature, save as set out in the Disclosure Letter (Appendix
      “D”).

            

    

    

    
      	
              (b2)

            	
              Condition
      And Sufficiency Of Assets

            

    

    

    
      	
               
      

            	
              The
      Company owns, leases, or has the legal right to use all the assets that it
      needs in order to continue to run its business after the execution of this
      agreement in the same manner as it has during the 12 (twelve) months
      preceding that date.

            

    

    

    
      	
               
      

            	
              The
      equipment of The Company is structurally sound, in good operating
      condition and repair, and does not require any maintenance or repairs,
      except for routine maintenance and repairs, in the ordinary course of
      business, that are not material in nature or
  cost.

            

    

    
 

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

    Without
derogating from any other provision in this Agreement, it is recorded that all
office space (including shared storage space) occupied by The Company is validly
leased by The Company from Kibutz Alonim being registered owner thereof,
pursuant to a lease agreement dated 1/4/2005, which is in full force and effect.
The said Buildings are in good repair and fit for the purposes for which they
are used, and there is no material defect in the condition thereof, and the said
Buildings comply with all required planning and building permits. Save for the
said office space, The Company does not own, lease, occupy or use any other
immovable property in connection with its business.

    

    
      	
              (b3)

            	
              Accounts
      receivable

            

    

    

    All
accounts receivable of The Company reflected in the Financial Statements and in
the accounting records of The Company as of the date of this agreement execution
(collectively, the "Accounts receivable") represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. Unless paid prior to the execution date, the Accounts receivable
are, or will be, as of the execution date current and collectible net of the
respective reserves shown on the Financial Statements, respectively, or in the
accounting records of The Company as of the execution date (which reserves are
adequate and calculated consistent with the practice used for the year 2004 and,
in the case of the reserve as of the execution date, will not represent a
greater percentage of the Accounts receivable as of the execution date than the
reserve reflected in the 2004 Balance Sheet in respect of the Accounts
receivable reflected therein and will not represent a Material Adverse Change in
the composition of such Accounts receivable in terms of aging). Subject to such
reserves, each of the Accounts receivable either has been or will be collected
in full, without any set-off, within ninety days after the day on which it first
becomes due and payable. There is no contest, claim, or right of set-off, other
than returns in the ordinary course of business, under any Contract with any
obligor of an Accounts receivable relating to the amount or validity of such
Accounts receivable. The Disclosure Letter (Appendix “D”) contains a
complete and accurate list of all Accounts receivable as of 31.8.2005.
..

    

    
      	
               (b4)

            	
              Inventory

            

    

    

    All
inventory of The Company, whether or not reflected in the Financial Statements,
respectively, is in good and undamaged condition, and consists of a quality and
quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Financial Statements,
respectively, or in the accounting records of The Company as of the execution
date, as the case may be. All inventories not written off have been priced at
the lower of cost or net realizable value. The quantities of each item of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of The
Company.

     

    (b5)         Intellectual
Property

    

    (b5/1)
Know-How Necessary for the Business

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    
      	
               
      

            	
              (i)

            	
              Except
      as set forth in the Disclosure Letter (Appendix “D”), The
      Company is the owner of all right, title, and interest in and to each of
      the Intellectual Property Assets, whether or not reflected in the
      Financial Statements, necessary for the operation of its business as it is
      currently conducted and/or as reflected in the business plan given to The
      Investors, and such right, title, and interest is free and clear of all
      encumbrances, and other adverse claims, and has the right to use all such
      Intellectual Property Assets, without payment to, or the consent of any
      third party.

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Except
      as set forth in the Disclosure Letter (Appendix “D”), all
      former and current employees of The Company have executed written
      Contracts with The Company that assign without compensation to The Company
      all rights to any inventions, improvements, discoveries, or information
      relating to the business of The Company, if and to the extent that such
      assignment is not effected by operation of law under the law applicable to
      such Contract. No employee of The Company has entered into any Contract
      that requires the employee to transfer, assign, or disclose information
      concerning his work to anyone other than The
  Company.

            

    

    

    
      	
               
      

            	
              (b/5.2)
      Patents and Trademarks

            

    

    

    
      	
               
      

            	
              (i)

            	
              The
      Company has registered patents, trademarks and/or is in the process of
      registering patents as detailed in Appendix
      “C”.

            

    

    

    

    
      	
               
      

            	
              (b5/3)
      Trade Secrets

            

    

    

    
      	
               
      

            	
              (i)

            	
              The
      Shareholders and The Company have taken all reasonable precautions to
      protect the confidentiality of their Trade
  Secrets.

            

    

    

    
      	
               
      

            	
              (ii)

            	
              The
      Company has good title and an absolute (but not necessarily exclusive)
      right to use the Trade Secrets. The Trade Secrets are not part of the
      public knowledge or literature, and, to Shareholder’s knowledge, have not
      been used, divulged, or appropriated either for the benefit of any Person
      (other than to The Company) or to the detriment of The Company. No Trade
      Secret is subject to any adverse claim or has been challenged or
      threatened in any way.

            

    

    

    
      	
              (b6)

            	
              Tax
      and Social Security Contributions

            

    

    

    
      	
               
      

            	
              (a)

            	
              The
      Company has filed or caused to be filed (on a timely basis since its
      incorporation) all Tax Returns and all Social Security Returns that are or
      were required to be filed by or with respect to The Company, pursuant to
      applicable legal requirements, and all such Tax Returns and Social
      Security Returns filed by The Company are true, correct, and complete, and
      there is no tax or social security sharing agreement that will require any
      payment by The Company after the execution date The Disclosure Letter
      (Appendix “D”)
      contains a complete and accurate list of, all such Tax and of all such
      Social Security Returns filed since its
  organization.

            

    

    

    
      	
               
      

            	
              (b)

            	
              The
      Company has fully and on a timely basis paid, or made full provision for
      the payment of, all Taxes and all Social Security Contributions that have
      become due, except such Taxes and/or Social Securities Contributions, if
      any, as are listed in the Disclosure Letter (Appendix “D”) and are
      being contested in good faith and as to which adequate reserves have been
      provided in the Financial Statements. The charges, accruals, and reserves
      with respect to Taxes and Social Security Contributions in The Company’s
      books are adequate (determined in accordance with Israeli GAAP) and are at
      least equal to The Company's liability for Taxes and Social Security
      Contributions. There exists no proposed Tax or Social Security
      Contribution assessment against The Company except as disclosed in the
      Financial Statements, respectively, or in the Disclosure Letter (Appendix “D”). All Taxes
      and/or Social Security Contributions that The Company is or was required
      by legal requirements to withhold or collect have been duly withheld or
      collected and, to the extent required, have been paid to the proper
      Governmental Body or other Person.

            

    

    
 

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    To the
best of the Shareholders’ knowledge, no facts exist that could constitute
grounds for the assessment of any material liability for Taxes and/or Social
Security Contributions by any Governmental Body with respect to The Company. The
Company has taken all steps reasonably required by it to be taken prior to the
execution date, in order to obtain any Tax credits, or other Tax benefits,
whether available in respect of the period prior to or after the execution
date.

    

    
      	
              (b7)

            	
              Employee
      Compensations

            

    

    

    
      	
               
      

            	
              (a)

            	
              The
      Disclosure Letter (Appendix “D”) contains a
      complete and accurate list of the following information for each employee
      or director of The Company, including each employee on leave of absence or
      layoff status:

            

    

    

    
      	
               
      

            	
              (i)

            	
              Employee
      name, job title, material terms of employment, (including, without
      limitation, particulars regarding, salary, linkage of salary, annual
      vacation, accrued vacation, Supplementary Education Fund (Keren Hishtalmut), sick
      pay, pension fund and provident fund or manager’s insurance, travel
      allowances), any agreements or promises, whether written or oral,
      regarding current or future profit-sharing, cash, shares or other bonus
      entitlements, fringe benefits, severance pay, retirement pay, accrued
      vacation pay, any change in compensation since January 1,
      2005;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Service
      credited for purposes of vesting and eligibility to participate under The
      Company's pension, retirement, profit-sharing, thrift-savings, deferred
      compensation, share bonus, share option, cash bonus, employee share
      ownership (including investment credit or payroll share ownership),
      severance pay, insurance, medical, welfare, or vacation
    plan.

            

    

    

    
      	
               
      

            	
              (b)   Except
      as disclosed in article 3.2.2 (b7) The payments by The Company to pension
      and provident funds (including, without limitation, manager’s insurance),
      together with the relevant reserves reflected in the Financial Statements,
      respectively, fully cover the liability of The Company under law or under
      any collective agreement, individual employment agreement, or other
      employment agreement or arrangement with respect to its employees and
      directors as at the dates of the aforesaid balance sheets for pension,
      severance pay, vacation pay and similar Liabilities, and The Company has
      continued to make all current payments to such pension and provident funds
      (including, manager’s insurance) until the execution date. All of the
      employees and directors shall have been paid all amounts owing to them by
      The Company, and all amounts deductible from The Company’s employees shall
      have been duly deducted, as at the execution date. To the best of the
      Shareholders knowledge, there are no outstanding claims against The
      Company by any of its employees and/or
  directors.

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
 

    
      	
               
      

            	
              (c)

            	
              Except
      as disclosed in Part 3.2.2(b7) or in the Employment Agreements referred to
      in Section 2.3(ii) (5) of this Agreement, there exist no agreements or
      promises between The Company and any of its employees or directors,
      whether written or oral, with respect to any change in compensation,
      current or future profit-sharing, cash, shares or other bonus
      entitlements, fringe benefits, severance pay, retirement pay, accrued
      vacation pay, vacation accrued, and no service credited for purposes of
      vesting and eligibility to participate under The Company's pension,
      retirement, profit-sharing, thrift-savings, deferred compensation, share
      bonus, share option, cash bonus, employee share ownership (including
      investment credit or payroll share ownership), severance pay, insurance,
      medical, welfare, or vacation plan.

            

    

    
 

    3.3         NO
LIABILITIES

    

    
      	
              3.3.1

            	
              General

            

    

    

    Except as
set forth in any Part of the Disclosure Letter (Appendix “­D”) The Company
has no Liabilities or obligations of any nature whatsoever except for
Liabilities or obligations reflected or reserved against in the Financial
Statements, and Liabilities incurred in the ordinary course of business since it
organization.

    

    In
particular and without derogating from the generality of the foregoing, the
following is represented and warranted:

    

    
      	
              3.3.2

            	
              Compliance
      with Legal Requirements

            

    

    

    Except as
set forth the Disclosure Letter (Appendix “­D”), The
Company is, and at all times since its incorporation has been, in full
compliance with each legal requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use of any of its
assets. To the best of the Company knowledge, no event has occurred, act been
performed or omission omitted which may result after the execution date in
violation by The Company of any of the laws referred to in this Section or in
the incurring by The Company of any Liability or cost in connection
therewith.

    

    
      	
              3.3.3

            	
              Contracts:
      No Defaults

            

    

    

    Except as
set forth the Disclosure Letter (Appendix
“­D”):

    

    
      	
              (a)

            	
              no
      officer, director, agent, employee, consultant, or contractor of The
      Company is bound by any Contract that purports to limit or which adversely
      affects or will affect (i) the ability of such individual or of The
      Company to engage in or continue any conduct, activity, or practice
      relating to the business of The Company, or (ii) the ability of such
      individual to assign to The Company any rights to any invention,
      improvement, discovery or other Intellectual Property
    Assets.

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
 

    
      	
              (b)

            	
              Each
      Contract is in full force and effect and is legal, valid and enforceable
      in accordance with its terms, and shall continue in full force and effect
      (and not be subject to termination by the counterparty thereto),
      notwithstanding the consummation of the transactions contemplated by this
      Agreement, and is, and has been, fully complied with by all of the parties
      thereto. None of the parties to any Contract is in breach or default
      thereof and no event has occurred or circumstance exists that may result
      in a violation or breach of any Contract, or give any party to such
      Contract the right to declare a default or an acceleration of maturity or
      performance, or to exercise any
remedy.

            

    

    

    
      	
              (c)

            	
              There
      are no renegotiations of, or outstanding rights to renegotiate any
      material amounts paid or payable to The Company under current or completed
      Contracts with any Person and no such Person has made oral or written
      demand for such renegotiation.

            

    

    

    
      	
              3.3.4

            	
              Employees

            

    

    

    
      	
              (a)

            	
              No
      director, officer, or other key employee of The Company intends to
      terminate its employment with The
Company.

            

    

    

    
      	
              (b)

            	
              The
      Disclosure Letter (Appendix “­D”)
      contains a complete and accurate list of the following information for
      each retired employee or director of The Company, or their dependents,
      receiving benefits or scheduled to receive benefits in the future: Name,
      pension benefit, retiree medical insurance coverage, retiree life
      insurance coverage, and other
benefits.

            

    

    

    
      	
               
      

            	
              Except
      as disclosed in the Disclosure Letter (Appendix “­D”), such
      retired employees or directors, or their dependents, will not receive or
      are not scheduled to receive any pension benefits, retiree medical
      insurance coverage, retiree life insurance coverage, and other
      benefits.

            

    

    

    
      	
              3.3.5

            	
              Insurance

            

    

    

    
      	
              (i)  

            	
              All
      policies set out in the Disclosure Letter (Appendix “­D”) which
      are held by The Company or that provide coverage to any Shareholder, The
      Company or any director or officer of The Company: (i) are valid,
      outstanding, and enforceable, (ii) are issued by an insurer that is
      reputable to be financially sound, and (iii) taken together, provide
      adequate insurance coverage for the assets and the operations of The
      Company, (iv) are sufficient for compliance with all legal requirements
      and Contracts to which The Company is a party or by which any of them is
      bound, (v) will continue in full force and effect following the
      consummation of the Contemplated Transactions, and (vi) do not provide for
      any retrospective premium adjustment or other experienced-based liability
      on the part of The Company.

            

    

    

    
      	
              (ii)  

            	
              None
      of the Shareholders nor The Company has received (i) any refusal of
      coverage or any notice that a defense will be afforded with reservation of
      rights, or (ii) any notice of cancellation or any other indication that
      any insurance policy is no longer in full force or effect or will not be
      renewed or that the issuer of any policy is not willing or able to perform
      its obligations.

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
 

    
      	
              (iii)  

            	
              The
      Company has punctually paid all respective premiums due, and has otherwise
      performed all of its obligations, under each policy to which it is a party
      or that provides coverage to it or to any director
  thereof.

            

    

    

    
      	
              (iv)  

            	
              The
      Company has given timely notice to the insurer of all claims that may be
      insured thereby.

            

    

    

    
      	
              (v)  

            	
              The
      Shareholders are not aware of the occurrence of any act or omission, which
      could invalidate or impair such
insurance.

            

    

    

    
      	
              3.3.6

            	
              Environmental
      Matters

            

    

    

    Without
derogating from the provisions of Section 3.3.1 above, except as set forth in
the Disclosure Letter (Appendix
“­D”), The Company is, and at all times has been, in full compliance
with, and has not been and is not in violation of or has Liability or potential
Liability under, any legal requirement relating to environmental protection,
occupational, health and safety and similar laws.

    

    
      	
              3.3.7

            	
              Labor
      Relations; Compliance

            

    

    

    
      	
              Except
      as set forth in The Disclosure Letter (Appendix
      “­D”):

            

    

    

    
      	
              (i)  

            	
              There
      has not been, nor is there presently pending or existing, nor Threatened,
      any Proceeding against or affecting The Company relating to the alleged
      violation of any legal requirement pertaining to labor relations or
      employment matters. No event has occurred nor circumstance exists that
      could provide the basis for any labor
dispute.

            

    

    

    
      	
              (ii)  

            	
              The
      Company has complied in all respects with all legal requirements relating
      to employment, equal employment opportunity, nondiscrimination,
      immigration, wages, hours, benefits, collective bargaining, Occupational
      Safety and Health, and plant
closing.

            

    

    

    
      	
              3.3.8

            	
              Certain
      Payments / Finder's Fees

            

    

    

    
      	
              (i)  

            	
              Except
      as disclosed in the Disclosure Letter (Appendix “­D”):
      neither The Company, nor any director, officer, agent, employee of The
      Company, nor any other Person associated with or acting for or on behalf
      of any Company, has directly or indirectly (i) made any bribe, payoff,
      kickback, or other payment to any Person, private or public, regardless of
      form, whether in money, property, or services to obtain or reward special
      concessions, or favorable treatment in securing business for or in respect
      of The Company or in violation of any legal requirement, (ii) established
      or maintained any fund or asset that has not been recorded in the books
      and records of The Company.

            

    

    

    
      	
              (ii)  

            	
              Upon
      execution of the Investment the Company shall pay to eNitiatives – New
      Business Architects Ltd. (“eNitiatives”), within 30 days of the Investment
      Agreement, the sum of $18,000 plus VAT as consideration for eNitiatives’
      work done to facilitate the
Investment.

            

    

    

    
      	
              (iii)  

            	
              eNitiatives
      shall have the right to receive from The Company and The Company shall
      have the right to deliver to eNitiatives, 1,200 Ordinary Shares at a value
      of $7.50 per share, in lieu of 50% of the payment provided, in which case
      The Company shall only pay to eNitiatives the sum of $9,000 in addition to
      the delivery of the shares plus VAT on the entire value, the transaction
      to take place within 30 days of the execution of this
      Agreement.

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    
 

    
      	
              (iv)  

            	
              The
      holders of the 2 Management Shares not held by Investors shall vote in
      support of Investors’ Management Shares regarding employment of
      eNitiatives and/or Mr. Reuven Marko, which employment shall be covered in
      a separate agreement.

            

    

    

    

    3.4         NO
PENDING OR THREATENED PROCEEDINGS

    

    Except as
set forth in the Disclosure Letter (Appendix
“­D”):

     

    
      
        	
              	(a)	There
      is no pending Proceeding:
	 	 	 
	
                 
      

              	
                (i)

              	
                That
      has been commenced by or against The Company or that otherwise relates to
      or may affect the business of, or any of the assets owned, leased or used
      by, The Company; or

              

      

    

    

    
      	
               
      

            	
              (ii)

            	
              That
      challenges, or that may have the effect of preventing, delaying, making
      illegal, or otherwise interfering with, any of the Contemplated
      Transactions; or

            

    

    

    
      
        	
                 
      

              	
                (iii)

              	
                That
      Threatens to subject any officer, director, agent, or employee of The
      Company or any of its Subsidiaries to any Order that would prohibit such
      officer, director, agent, or employee from engaging in or continuing any
      conduct, activity, or practice relating to the business of The
      Company.

              
	 	 	 
	 	(b)	

                To
      the knowledge of The Company and the Shareholders: (i) no such
      Proceeding has been Threatened, and (ii) no event has occurred or
      circumstance exists that may give rise to or serve as a basis for the
      commencement of any such Proceeding. The Proceedings listed in the
      Disclosure Letter (Appendix “­D”) will
      not have a Material Adverse Effect on the business, operations, assets,
      condition, or prospects of The
Company.

              

      

    

     

    3.5         NO
MATERIAL ADVERSE CHANGE

     

    
      
        	 	(a)	Since
      January 1, 2005 and until the execution of this Agreement:
	 	 	 
	
                 
      

              	
                (i)

              	
                No
      dividend, bonus or distribution (including without limitation, cash
      payment) has been declared, made or paid on or in respect of any share
      capital of, or otherwise to any shareholder (or any Related Persons
      thereof) of  The
Company;

              

      

    

    

    
      	
               
      

            	
              (ii)

            	
              Except
      as set forth in the Disclosure Letter (Appendix “­D”), The
      Company has conducted its business only in the ordinary course of
      business, and there has been no material adverse change, nor have there
      been any events or circumstances that may have a material adverse effect,
      including without limitation;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              No
      change in The Company's authorized or issued share capital; grant of any
      share options; issuance of any security convertible into such share
      capital; grant of any registration rights; purchase, redemption,
      retirement, or other acquisition by The Company of any shares of such
      share capital;

            

    

    

    
      	
               
      

            	
              (iv)

            	
              No
      amendment to the incorporation documents of The Company was
      made;

            

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    
 

    
      	
               
      

            	
              (v)

            	
              Except
      as detailed in Section 2.3(a)(5) no payment nor increase by The Company of
      any salaries, bonuses, or other compensation payable by The Company to any
      Shareholder, director, officer, or (except in the ordinary course of
      business) to any employee; or entry by The Company into any employment, or
      other similar Contract with any director, officer, or employee (except in
      the ordinary course of business), and no making, forgiveness or other
      change in the terms of any loan by The Company to any
      employee;

            

    

    

    
      	
               
      

            	
              (vi)

            	
              Except
      as detailed in Section 2.3(a)(5), no adoption of, or increase in the
      payments to or benefits under, any profit sharing, bonus, deferred
      compensation, savings, insurance, pension, retirement, or other employee
      benefit plan for or with any employees of The
  Company;

            

    

    

    

    
      	
               
      

            	
              (ix)

            	
              No
      sale, transfer, lease, or other disposition of any asset of The Company
      outside the ordinary course of business, nor mortgage, pledge, or
      imposition of any lien or other Encumbrance on any material asset of The
      Company; and no amendment or modification of any agreement other than in
      the ordinary course of business;

            

    

    

    
      	
               
      

            	
              (xi)

            	
              No
      material change in the accounting methods, principles or practices
      followed by The Company;

            

    

    

    
      	
               
      

            	
              (xii)

            	
              No
      agreement, commitment, or undertaking, whether oral or written, by The
      Company to do any of the foregoing.

            

    

    

    
      	
              (b)

            	
              There
      is no fact known to any Shareholder or The Company (other than general
      economic or industry conditions) that has or will have a Material Adverse
      Effect or materially threatens, the assets, business, prospects, financial
      condition, or results of operations of The Company that has not been set
      forth in this Agreement or the Disclosure Letter (Appendix
      “D”).

            

    

    

    

    3.6     MR.
NIMROD BEN-YEHUDA:

    

    Mr. Nimrod Ben-Yehuda (“Nimrod”):

    

     

    
      	
              a)  

            	
              Will
      provide his services to The Company in the capacity of Chief Technology
      Officer for a period of no less than three years, starting on the date of
      execution of this Agreement.

            

    

     

    
      	
              b)  

            	
              Shall
      act as The Company’s Director of Business Development until such time as
      the board will resolve that the Company should hire a dedicated person to
      serve in the capacity of Director of Business
  Development.

            

    

     

    
      	
              c)  

            	
              Will
      substantially devote all his time and efforts to the business of The
      Company and to the continued development of its technology and
      intellectual property, as may be requested, from time to time, by The
      Company’s board of directors.

            

    

     

    
      	
              d)  

            	
              Nimrod
      shall not be involved, directly or indirectly, in any venture whose
      interests are deemed by The Company’s board of directors, in conflict with
      The Company or in the event such involvement is detriment to the business
      of The Company. To the extent that Nimrod is currently in any other
      venture or any other time-consuming activity and/or research and, to the
      extent that Nimrod currently own other patents and/or technologies,
      disclosure of same is made in the Disclosure Letter (Appendix
      “D”).

            

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

     

    Nimrod’s
compensation from The Company shall include the following:

     

    
      	
              e)  

            	
              Monthly
      gross salary of NIS 25,000 starting April 2005, including Twenty (20) paid
      vacation days per year, and specifically includes the compensation for the
      limitation undertaken under Section 6 herein
  below.

            

    

     

    
      	
              f)  

            	
              Executive
      insurance.

            

    

     

    
      	
              g)  

            	
              “Keren
      Hishtalmut at the rate of 10% (7.5% contribution by the
      Company).

            

    

     

    
      	
              h)  

            	
              Disability
      insurance at a rate not to exceed 2% with customary
    coverage.

            

    

     

    
      	
              i)  

            	
              A
      fully paid rental car (including taxes assessed for private
      use).

            

    

     

    
      	
              j)  

            	
              A
      company-provided mobile phone. The phone charges shall be fully covered by
      The Company.

            

    

     

    
      	
              k)  

            	
              A
      semi-annual bonus as following:

            

    

     

    
      	
              (i)  

            	
              NIS
      25,000 if the company meets its financial targets in the pertinent half
      year.

            

    

     

    
      	
              (ii)  

            	
              NIS
      60,000 if the company exceeds its financial targets by 30% or more in the
      pertinent half year.

            

    

     

    Nimrod
shall receive from The Company the following for the purpose of performing his
obligations in accordance with his employment with The Company:

     

    
      	
              l)  

            	
              A
      laptop computer paid by The
Company.

            

    

     

    
      	
              m)  

            	
              A
      company credit card to be used exclusively for company-approved expenses.
      The use of such credit card shall be audited, at the end of each year, by
      the Company’s auditors and any improper or un-approved use of the credit
      card, as determined by the auditors, shall be deducted from Nimrod’s
      salary as expediently as possible.

            

    

     

    
      	
              n)  

            	
              When
      traveling on business, the Company shall also
  pay:

            

    

     

    
      	
              (iii)  

            	
              Airfare
      in economy class;

            

    

     

    
      	
              (iv)  

            	
              Non-luxury
      hotels;

            

    

     

    
      	
              (v)  

            	
              Transportation;

            

    

     

    
      	
              (vi)  

            	
              Up
      to the sum of $100 per day for other
expenses.

            

    

     

    
      	
              (vii)  

            	
              The
      Company shall further pay for entertainment of customers and selected
      vendors and service providers hosted by
Nimrod.

            

    

     

    A breach,
by Nimrod, of any of these provisions shall be considered a Material Breach as
defined hereinafter and shall entitle the Investors to their remedies resulting
from a Material Breach as provided for hereinafter.

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    
      	
              4.

            	
              INDEMNIFICATION

            

    

    

    
      	
              4.1        
       

            	
              BREACHES
      BY THE COMPANY

            

    

     

    
      	
              (a)

            	
              The
      Company shall be deemed in “Breach” in the event
  that:

            

    

     

    (i)                 For
the period of July 1, 2005 through March 31, 2006:

     

    
      	
              1.  

            	
              The
      Company fails to deliver financial reports to Investors on the dates
      provided hereinbefore, provided the Company delivers such reports no later
      than 60 days subsequent to the dates provided
  hereinbefore.

            

    

     

    
      	
              2.  

            	
              Failure
      by the Company and/or Nimrod to fulfill their undertakings pursuant to
      this Agreement.

            

    

     

    (ii)                 At
any time subsequent to March 31, 2006:

     

    
      	
              3.  

            	
              It
      fails to meet 65% of its financial targets as provided in the Business
      Plan in any given quarter; and/or,

            

    

     

    
      	
              4.  

            	
              It
      fails to meet any of its quarterly non-financial targets as provided in
      the Business Plan.

            

    

     

    
      	
               (b)

            	
              The
      Company shall be deemed to be in a “Material Breach” in the event
      that:

            

    

     

    
      	
              (i)  

            	
              At
      any time subsequent to the execution of this Agreement, and provided the
      Investors are not in breach as provided
herein

            

    

     

    
      	
              (1)  

            	
              The
      Company fails to deliver financial reports to Investors on the dates
      provided hereinbefore, provided such failure is not remedied within 60
      days.

            

    

     

    
      	
              (2)  

            	
              The
      Company and/or Nimrod fail to rectify a breach within 45 days of receipt
      of a notice of breach from The
Investors.

            

    

     

     (ii)                 Subsequent
to march 31, 2006 and provided Investors are not in breach, as provided
herein:

     

    
      	
              (1)  

            	
              It
      fails to meet at least 75% of its cumulative financial targets for any two
      consecutive quarters, as provided in the Business Plan;
    and/or

            

    

     

    
      	
              (2)  

            	
              It
      fails to meet any of its quarterly non-financial targets for any quarter,
      as provided in the Business Plan and fails to
      remedy such shortcomings, in addition to making the non-financial targets
      in the subsequent quarter;

            

    

     

    4.2          REMEDIES
GRANTED TO INVESTORS:

     

     (a)                 Unless
specifically agreed upon otherwise, The Company and the Shareholders, severally,
hereby undertake to indemnify and hold harmless The Investors or, at The
Investors option, The Company, for any Liability, loss, claim, damage
(including, without limitation, incidental and consequential damages), expense
(including, without limitation, costs of investigation, defense, reasonable
attorneys' fees, and other legal expenses) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:

     

    
      
        	 	(i)	any
      breach of any of the Shareholders’ Warranties;
	 	 	 
	
                 
      

              	
                (ii)

              	
                any
      breach by any Shareholder of any covenant or obligation of such
      Shareholder in this Agreement;

              
	 	 	 
	 	(iii)	In
      case of Breach or Material Breach as defined
above:

      

    

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    
      	
              (a)  

            	
              In
      the event of a Breach The Investors shall have the right, at their sole
      discretion, to postpone the installment of the quarter subsequent to the
      breach until after the last installment of the
  investment.

            

    

     

    
      	
              (b)  

            	
              In
      the event of a Material Breach: Investors shall be under no obligation to
      further invest in the Company and shall nonetheless receive from the
      Escrow holder the Ordinary Shares and Management Shares then remaining in
      Escrow as provided in the Escrow Provision – Provided, however, that the
      Company fails to:

            

    

     

    
      	
              (i)  
      

            	
              Rectify
      the Material Breach in the subsequent quarter in addition to
      meeting the subsequent quarter’s targets;
or

            

    

     

    
      	
              (ii)  
      

            	
              Repurchase
      from Investors all their shares of the Company at the price of $7.50 per
      shares, within 1 year from such Material Breach (“Repurchase”).

            

    

    

    Notwithstanding
the foregoing, should the Company recruit a new investor or a purchaser for the
entire company at a price, or post-investment valuation of $5 million Dollars or
higher, The Company shall give Investors a notice of such investment and/or
purchase and the Investors shall have the right to cure the funding of the
Investment within 10 days of receipt of such notice and restore all their rights
provided in the Agreement.

    It is
hereby clarified that if the Investors decided to act according to this section
they will not be able to act in accordance with section 4.2(i) or 4.2(ii)
above.

     

    4.3         Breaches by Investors and
Remedies granted to Company:

     

    
      	
              (a)  

            	
              Breach:
      Investors sole obligation is to fund the Investment in accordance with the
      Investment Agreement, unless The Company is in
      breach.  Investors shall be deemed in breach if Investors
      default on their funding obligations and fail to
      cure such default within 37 days of receipt of a notice of default from
      the Company.

            

    

     

    
      	
              (b)  

            	
              Remedy: In the
      event of a breach by Investors, Investors shall lose their right to
      complete the investment and lose their right to the Management Shares held
      by the Escrow at such time – all of which shall be returned by Escrow to
      the Company’s pursuant to the Escrow
Provision.

            

    

    

    
      	
              5       TIME
      LIMITATIONS

            

    

    

    
      	
              (i)  
      

            	
              Subject
      to the clause (ii) below, Shareholders liability (for indemnification or
      otherwise) with respect to any of their Warranties, or covenant or
      obligation in this Agreement shall continue until and be time barred in
      accordance with the Israeli statute of
  limitation.

            

    

    

    
      	
              (ii) 
      

            	
              The
      Shareholders acknowledge and agree that the Investors is and/or was under
      no obligation or duty whatsoever to investigate, inspect or examine the
      Shares and/or The Company for defects or deficiencies at any time before,
      on or after the execution date, except for the examination of all
      documents and/or materials and/or other information presented by the
      Shareholders to the Investors.

            

    

    

    
      	
              6

            	
              NON-COMPETITION
      BY SHAREHOLDERS

            

    

    

    6.1         COVENANT
NOT TO COMPETE

    

    
      	
              (a)

            	
              For
      a period of 3 years after the date of signing of this Agreement, and in
      case of Nimrod 3 years after the date of termination of his employment
      with the Company, which ever is
later:

            

    

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (i)

            	
              Each
      Shareholder will not, directly or indirectly, engage or invest in, own,
      manage, operate, finance, control, or participate in the ownership,
      management, operation, or control of, be employed by, associated with, or
      in any manner connected with, lend such Shareholders’ name or any similar
      name to, lend such Shareholders’ credit to, or render services or advice
      to, any business whose products or activities compete in whole or in part
      with the products or activities of The Company in Israel (boundaries as of
      execution date), provided, however, that any Shareholder may purchase or
      otherwise acquire up to (but not more than) one percent of any class of
      securities of any enterprise (but without otherwise participating in the
      activities of such enterprise) if such securities are listed on any
      national or regional securities exchange. Each Seller agrees that this
      covenant is reasonable with respect to its duration, geographical area,
      and scope;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Each
      Shareholder will not, directly or indirectly, either for himself or any
      other Person, (A) induce or attempt to induce any employee of The
      Company to leave its employ, (B) employ, or otherwise engage as an
      employee, independent contractor, or otherwise, any employee of The
      Company, or (D) induce or attempt to induce any customer, supplier,
      licensee, or business relation of The Company to cease doing business with
      such Company, or in any way interfere with the relationship between any
      customer, supplier, licensee, or business relation of The
      Company.

            

    

    

    
      	
              (b)

            	
              In
      the event of a breach by any Shareholder of any covenant set forth in
      clause (a) above, the term of such covenant will be extended by the period
      of the duration of such breach.

            

    

    

    
      	
              (c)

            	
              Each
      Shareholder will, for a period of 3 years after the date of signing of
      this Agreement (as defined hereinafter), within ten days after accepting
      any employment, advise The Investors of the identity of any employer of
      such Shareholder. The Investors or The Company may serve notice upon each
      such employer that such Shareholder is bound by the non-competition
      covenant of this Agreement (Section 6.1) and furnish each such employer
      with a copy of Sections 6 and 5.1 of this Agreement or relevant portions
      thereof.

            

    

    

    
      	
              (d)

            	
              The
      restrictions under (a), (b) and (c) above shall apply also to the
      Investors mutatis mutandis.

            

    

    

    
      	
              7.

            	
              GENERAL
      PROVISIONS

            

    

    

    7.1         EXPENSES

    

    Except as
otherwise expressly provided in this Agreement, the Investors, the Shareholders
and The Company will bear their respective expenses incurred in connection with
the preparation, execution, and performance of this Agreement and the
contemplated transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. stamp duty, if any, payable in
respect of this Agreement shall be paid by the Shareholders and/or The Company.
The Shareholder will ensure that The Company does not bear or incur any fees and
expenses of agents, representatives, counsel, and accountants

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    
 

    7.2         CONFIDENTIALITY
/ PUBLIC ANNOUNCEMENTS

    

    This
Agreement and its contents shall be kept confidential by the parties hereto. The
contents of any communication about this Agreement to third parties shall be
mutually agreed upon by the parties. Any public announcement, press release or
similar public communication with respect to this Agreement will, however, be
issued at such time and in such manner as shall be mutually
determined.

    

    7.3         ENTIRE
AGREEMENT AND MODIFICATION

    

    Save for
The Loan Agreement, this Agreement replaces and supersedes all prior agreements,
term sheets or any other document or previous understanding between the parties
with respect to its subject matter and constitutes (along with all its Exhibits
which are an integral part of it) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended except by a written agreement executed and
signed by the parties to be charged with the amendment, and any waiver of this
provision shall only be valid and binding if executed in writing by the party
giving the waiver.

    

    7.4         DISCLOSURE
LETTER

    

    In the
event of any inconsistency between any provisions of and/or the statements in
this Agreement and those in the Disclosure Letter (Appendix “D”) (unless
otherwise specifically stated in the Disclosure Letter with respect to a
specific representation or warranty), the provisions or statements in this
Agreement shall prevail.

    

    7.5         ASSIGNMENTS,
SUCCESSORS, AND NO THIRD-PARTY RIGHTS

    

    Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, except that The Investors may assign any of their
rights (but not obligations) under this Agreement to any related person or
entity. Subject to the above said, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties.

    

    7.6         SEVERABILITY

    

    If any
provision of this Agreement is held invalid or unenforceable by any court or
arbitral tribunal of competent jurisdiction, the other provisions of this
Agreement will remain in full force and effect, and the invalid or unenforceable
provision shall be substituted by a valid and enforceable provision closest to
the economic intent intended by the parties with the invalid or unenforceable
provision which achieves, as far as possible, the original business purposes of
the excluded provision.

    

    7.7           GOVERNING
LAW AND ARBITRATION

    

    
      	
              7.7.1          

            	
              Governing
      Law and Jurisdiction

            

    

    

    This
Agreement shall be governed by and construed according to the laws of Israel and
the authorized courts of Tel-Aviv, Israel, shall have the sole and exclusive
jurisdiction over any dispute arising between the parties hereto.

    

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    

    7.8           ENTRY
INTO FORCE / COUNTERPARTS

    

    
      	
              (a)

            	
              This
      Agreement shall come into force as of the date last below written, once
      duly executed by all the parties.

            

    

    

    
      	
              (b)

            	
              This
      Agreement and its Exhibits may be executed in 3 original sets (one such
      set for each party).

            

    

    

    

    IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date last below written.

    

    
      
        
          
            	Pimi Marion Holdings, Ltd.	 	
                    Title

                  	 	
                     

                  
	 	 	
                     

                  	 	 
	By: /s/ Eitan Shmeuli	 	
                    Director

                  	 	
                     

                  
	Eitan Shmeuli	 	 	 	 
	
                     

                    Omdan Education and
      Instructing, Ltd.

                     

                  	 	 	 	 
	
                    /s/
      Eitan Dhmeuli

                  	 	 	 	
                     

                  
	Eitan Dhmeuli	 	 	 	 
	
                     

                    INS Captial LLC.

                     

                  	 	 	 	 
	
                    /s/
      Joe Shapira

                  	 	
                    Managing
      Member

                  	 	
                     

                  
	Joe Shapira	 	 	 	 

          

        

      

    

    

     

     

    Agreed to
by:

     

    
      
        
          	
                  eNitiatives - New Business
      Architects, Ltd.

                   

                   

                	
                   

                	 	 	 
	
                  /s/
      Reuven Marko

                	
                   

                	 	
                   

                	 
	Name: Reuven
      Marko	 	 	
                   

                	 
	
                  Title:
      General Manager

                	 	 	
                   

                	 

        

      

    

     

    

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    

     

     

    EXHIBIT
A

     

    Mile
Stones

     

    

     

    

    First
Quarter (Q4 2005)

    
      	
              ·  

            	 

    

    
      	
              ·  

            	
              Begin
      series of field trials

            

    

    
      	
              ·  

            	
              Initial
      web site on air

            

    

    
      	
              ·  

            	
              Attend
      key industry conference to promote next seeding season use of products
      followed
      by aggressive follow-up with key
leads.

            

    

    
      	
              ·  

            	
              Identify
      & appoint Israel Sales manager with primary task to aggressively begin
      sales in Israel

            

    

    
      	
              ·  

            	
              Identify
      certification requirements and specialists in key
      countries/regions

            

    

    

    Second
Quarter  (Q1 2006)

    
      	
              ·  

            	
              Identify
      and appoint CEO to company, subect to comitment of the Investors ot
      continue their investment.

            

    

    
      	
              ·  

            	
              Begin
      field trial in at least Europe or
USA

            

    

    
      	
              ·  

            	
              Complete
      first draft of usage protocol

            

    

    Third
Quarter (Q2 2006)

    
      	
              ·  

            	
              Gather
      and publish results of field trials

            

    

    
      	
              ·  

            	
              Complete
      formal usage protocol

            

    

    
      	
              ·  

            	
              Nominate
      world wide Marketing and Sale
Manager.

            

    

    

    Fourth
Quarter (Q3 2006)

    
      	
              ·  

            	
              Add
      at least one new product to product
line

            

    

    
      	
              ·  

            	
              First
      sale to at least one non-Israel
client

            

    

    

    

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

    

    
Financial
plan

    

    
      
        
          
            	 
      	 	
                    2005

                  	 
	 
      	 	 	
                    Q1

                  	 	 	 	
                    Q2

                  	 	 	 	
                    Q3

                  	 	 	 	
                    Q4

                  	 
	
                    Sales

                  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                     Diluted
      Material (Litters)

                  	 	 	-	 	 	 	-	 	 	 	-	 	 	 	25	 
	
                     Price
      per Litter

                  	 	$	20	 	 	$	20	 	 	$	22	 	 	$	22	 
	
                     Sales
      of diluted (in $000)

                  	 	$	-	 	 	$	-	 	 	$	-	 	 	$	550	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                    Extract
      Material (Litters)

                  	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	
                    Price
      per Litter

                  	 	$	3,000	 	 	$	3,000	 	 	$	3,000	 	 	$	3,000	 
	
                    Sales
      of Extract ($000)

                  	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                    Sales
      of Potato Spudefender

                  	 	$	-	 	 	$	-	 	 	$	15,000	 	 	$	15,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                    Total
      Revenues

                  	 	$	-	 	 	$	-	 	 	$	15,000	 	 	$	15,550	 
	
                    Total
      Revenues Annual

                  	 	 	 	 	 	 	 	 	 	 	 	 	 	$	30,550	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                    Expenses

                  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                    Cost
      of Goods Sold

                  	 	$	-	 	 	$	-	 	 	$	-	 	 	$	83	 
	
                    Gross
      Profit

                  	 	$	-	 	 	$	-	 	 	$	15,000	 	 	$	15,468	 
	
                    Gross
      Margin

                  	 	 	n/a	 	 	 	n/a	 	 	 	100	%	 	 	99	%
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                    Research
      & Development

                  	 	$	15,000	 	 	$	34,000	 	 	$	45,000	 	 	$	50,000	 
	
                    Marketing
      & Sales

                  	 	$	1,000	 	 	$	2,000	 	 	$	15,000	 	 	$	40,070	 
	
                    General
      & Administrative

                  	 	$	6,000	 	 	$	6,000	 	 	$	11,500	 	 	$	28,240	 
	
                    Total
      Other Expenses

                  	 	$	22,000	 	 	$	42,000	 	 	$	71,500	 	 	$	118,310	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                    Pre
      Tax Profit

                  	 	$	(22,000	)	 	$	(42,000	)	 	$	(56,500	)	 	$	(102,843	)
	
                    Pre
      Tax Profit Annual

                  	 	 	 	 	 	 	 	 	 	 	 	 	 	$	(223,343	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                    Proceeds
      from the Investment

                  	 	$	50,000	 	 	$	50,000	 	 	$	80,000	 	 	$	100,000	 
	
                    Cash-on-hand

                  	 	$	28,000	 	 	$	36,000	 	 	$	59,500	 	 	$	56,658	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                    Accumulated
      investment

                  	 	$	50,000	 	 	$	100,000	 	 	$	180,000	 	 	$	280,000	 

          

        

      

    

    

    

    

    

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	

                                                      2006

                                                    	 
	 
      	 	 	Q1	 	 	 	Q2	 	 	 	Q3	 	 	 	Q4	 
	
                                                      Sales

                                                    	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                       Diluted
      Material (Litters)

                                                    	 	 	75	 	 	 	650	 	 	 	1,200	 	 	 	2,200	 
	
                                                       Price
      per Litter

                                                    	 	$	25	 	 	$	25	 	 	$	25	 	 	$	25	 
	
                                                       Sales
      of diluted (in $000)

                                                    	 	$	1,875	 	 	$	16,250	 	 	$	30,000	 	 	$	55,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Extract
      Material (Litters)

                                                    	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1	 
	
                                                      Price
      per Litter

                                                    	 	$	3,000	 	 	$	3,000	 	 	$	3,000	 	 	$	3,000	 
	
                                                      Sales
      of Extract ($000)

                                                    	 	 	-	 	 	 	-	 	 	 	-	 	 	 	3,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Sales
      of Potato Spudefender

                                                    	 	$	15,000	 	 	$	15,000	 	 	$	30,000	 	 	$	30,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Total
      Revenues

                                                    	 	$	16,875	 	 	$	31,250	 	 	$	60,000	 	 	$	88,000	 
	
                                                      Total
      Revenues Annual

                                                    	 	 	 	 	 	 	 	 	 	 	 	 	 	$	196,125	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Expenses

                                                    	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Cost
      of Goods Sold

                                                    	 	$	281	 	 	$	2,438	 	 	$	4,500	 	 	$	8,550	 
	
                                                      Gross
      Profit

                                                    	 	$	16,594	 	 	$	28,813	 	 	$	55,500	 	 	$	79,450	 
	
                                                      Gross
      Margin

                                                    	 	 	98	%	 	 	92	%	 	 	93	%	 	 	90	%
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Research
      & Development

                                                    	 	$	55,000	 	 	$	65,500	 	 	$	86,500	 	 	$	91,750	 
	
                                                      Marketing
      & Sales

                                                    	 	$	51,000	 	 	$	56,000	 	 	$	68,000	 	 	$	68,000	 
	
                                                      General
      & Administrative

                                                    	 	$	36,500	 	 	$	36,500	 	 	$	39,500	 	 	$	45,000	 
	
                                                      Total
      Other Expenses

                                                    	 	$	142,500	 	 	$	158,000	 	 	$	194,000	 	 	$	204,750	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Pre
      Tax Profit

                                                    	 	$	(125,906	)	 	$	(129,188	)	 	$	(138,500	)	 	$	(125,300	)
	
                                                      Pre
      Tax Profit Annual

                                                    	 	 	 	 	 	 	 	 	 	 	 	 	 	$	(518,894	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Proceeds
      from the Investment

                                                    	 	$	115,000	 	 	$	105,000	 	 	$	100,000	 	 	$	100,000	 
	
                                                      Cash-on-hand

                                                    	 	$	45,751	 	 	$	21,564	 	 	$	(16,936	)	 	$	(42,236	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Accumulated
      investment

                                                    	 	$	395,000	 	 	$	500,000	 	 	$	600,000	 	 	$	700,000	 

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    

    

    
      
        
        

      

      
        A-3

        
          

        

      

      
        
        

      

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	

                                                      2007

                                                    	 
	 
      	 	 	Q1	 	 	 	Q2	 	 	 	Q3	 	 	 	Q4	 
	
                                                      Sales

                                                    	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                       Diluted
      Material (Litters)

                                                    	 	 	3,750	 	 	 	7,000	 	 	 	10,000	 	 	 	14,000	 
	
                                                       Price
      per Litter

                                                    	 	$	22	 	 	$	22	 	 	$	22	 	 	$	22	 
	
                                                       Sales
      of diluted (in $000)

                                                    	 	$	82,500	 	 	$	154,000	 	 	$	220,000	 	 	$	308,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Extract
      Material (Litters)

                                                    	 	 	4	 	 	 	8	 	 	 	18	 	 	 	33	 
	
                                                      Price
      per Litter

                                                    	 	$	3,000	 	 	$	3,000	 	 	$	3,000	 	 	$	3,000	 
	
                                                      Sales
      of Extract ($000)

                                                    	 	 	10,500	 	 	 	22,500	 	 	 	52,500	 	 	 	97,500	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Sales
      of Potato Spudefender

                                                    	 	$	30,000	 	 	$	30,000	 	 	$	45,000	 	 	$	45,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Total
      Revenues

                                                    	 	$	123,000	 	 	$	206,500	 	 	$	317,500	 	 	$	450,500	 
	
                                                      Total
      Revenues Annual

                                                    	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,097,500	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Expenses

                                                    	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Cost
      of Goods Sold

                                                    	 	$	13,425	 	 	$	25,350	 	 	$	38,250	 	 	$	55,950	 
	
                                                      Gross
      Profit

                                                    	 	$	109,575	 	 	$	181,150	 	 	$	279,250	 	 	$	394,550	 
	
                                                      Gross
      Margin

                                                    	 	 	89	%	 	 	88	%	 	 	88	%	 	 	88	%
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Research
      & Development

                                                    	 	$	96,750	 	 	$	96,750	 	 	$	102,000	 	 	$	102,000	 
	
                                                      Marketing
      & Sales

                                                    	 	$	68,000	 	 	$	68,000	 	 	$	86,750	 	 	$	86,750	 
	
                                                      General
      & Administrative

                                                    	 	$	47,000	 	 	$	47,000	 	 	$	47,000	 	 	$	47,000	 
	
                                                      Total
      Other Expenses

                                                    	 	$	211,750	 	 	$	211,750	 	 	$	235,750	 	 	$	235,750	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Pre
      Tax Profit

                                                    	 	$	(102,175	)	 	$	(30,600	)	 	$	43,500	 	 	$	158,800	 
	
                                                      Pre
      Tax Profit Annual

                                                    	 	 	 	 	 	 	 	 	 	 	 	 	 	$	69,525	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Proceeds
      from the Investment

                                                    	 	$	100,000	 	 	$	100,000	 	 	$	-	 	 	$	-	 
	
                                                      Cash-on-hand

                                                    	 	$	(44,411	)	 	$	24,989	 	 	$	68,489	 	 	$	227,289	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                      Accumulated
      investment

                                                    	 	$	800,000	 	 	$	900,000	 	 	$	900,000	 	 	$	900,000	 

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    

    

    
      
        
        

      

      
        A-4

        
          

        

      

      
        
        

      

    

    

    

    
      	
               
      

            	
              Exhibit
      B

            

    

    
      	
               
      

            	
              LOAN
      AGREEMENT

            

    

    

    This
Loan Agreement is entered into by and among

    

    
      	
              Debtor

            	
              Pimi
      Marion Holdings Ltd, a company incorporated in the State of Israel, and
      its Subsidiaries, wherever they may be incorporated (hereinafter, “the
      Company”),

               

            
	
              Lenders:

            	
              Alon
      Carmel, whose address is 270 No. Cannon Dr., Beverly Hills, CA
      90210,

               

              And

               

              JNS
      Capital LLC, whose address is 3200 Toppington Dr., Beverly Hills, CA
      90210

               

              (Hereinafter
      jointly referred to as “Lenders”)

               

            

    

    

    

    
      	
              Whereas

            	
              Lenders
      have agreed in principal to invest the sum of US$900,000 in the Company,
      at pre-investment valuation of the company of $900,000 and against the
      issuance by the Company, to Lenders, of 1200 fully paid ordinary shares of
      the Company, representing, post issuance, 50% of the issued share capital
      of the Company; and

            

    

     

    
      	
              Whereas

            	
              Lenders
      and the Company are negotiating the terms of the Investment Agreement and
      due diligence by Lenders and anticipate completion of such within sixty
      (60) days; and

            

    

     

    
      	
              Whereas

            	
              Lenders
      have agreed to lend to the Company the sum of $50,000  (“The
    Loan”);

            

    

     

     

    
      	
               
      

            	
              NOW,
      THEREFOR:

            

    

     

    
      	
              1.  

            	
              Preamble
      and Appendices

            

    

    

    The
Preamble to this Loan Agreement and the Appendices are one and integral part of
the Loan Agreement.

    

    
      	
              2.  

            	
              Purpose
      of the Loan

            

    

     

    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

    
 

    The
Company shall use the Loan for

    
      	
              a.  

            	
              Development
      of  documentation and manuals for use of the Company’s product
      of Seed Potatoes treatment (to be completed within 60
    days).

            

    

    
      	
              b.  

            	
              Advancement
      of sales efforts of the Company’s products in
  Israel.

            

    

    
      	
              c.  

            	
              A
      tour of various trade shows and potential customers in the United States
      license application from the EPA.

            

    

    
      	
              d.  

            	
              Payment
      to patent lawyers in order to advance patents
  applications.

            

    

    

    
      	
              3.  

            	
              The
      Loan

            

    

    

    The Loan
shall be made in one installment of $50,000  (fifty thousands US
Dollars)  (hereinafter: “The Loan”).

    

    The Loan
shall be transferred, in full, to the bank account of the Company within 2
working days from the date of signature of this Loan Agreement by all
parties.

    

    The
Company’s bank account details are as follows:

    Name:
Pimi Marion Holdings Ltd.

    Account #
100083

    Branch
537 (Yaalom Branch)

    Poalim
Bank  # 12

    Code:
Poalilit

    

    
      	
              4.  

            	
              Interest
      on and Term of the Loan

            

    

    

    The Loan
shall bear an interest rate of 4% above the six month LIBOR.

    

    The
Company shall repay the loan in one payment, including principal and interest,
180 days subsequent to the funding of the Loan.

    

    
      	
              5.  

            	
              Event
      of Default

            

    

    

    In the
event of a default, to be defined as the breach of any provision of this Loan
Agreement, Lenders shall be entitled to any and all remedial measures provided
to Lender as aforementioned and hereinafter described. Without derogating from
any other provision of this Agreement, for the purpose of this section herein
described, and the section that follows, the Company and its Subsidiaries,
jointly and severally shall be referred to as the Company.

    

    An Event
of Default could occur hereunder if:

    

     (a)
The Company shall:

    
      	
               
      

            	
              (i)

            	
              Apply
      for or consent to the appointment of a receiver, trustee or liquidator for
      it or all or a substantial part of its
assets,

            

    

    
      	
               
      

            	
              (ii)

            	
              Admit
      in writing its inability to pay its debts as they
  mature,

            

    

    
      	
               
      

            	
              (iii)

            	
              Make
      a general assignment for the benefit of
  creditors,

            

    

    
      
        	
                 
      

              	
                (iv)

              	
                Be
      adjudicated a bankrupt or insolvent,

              
	 	

                (v)

              	

                File
      a voluntary petition for winding up or a petition or an answer seeking
      reorganization or an arrangement with creditors to take advantage of any
      insolvency law,

              
	 	

                (vi)

              	

                File
      an answer admitting the material allegations of a petition filed against
      it in any winding up, reorganization or insolvency proceeding or fail to
      dismiss such petition within 60 days after the filing thereof;
      OR

              

      

    

     

    
      	
              (b)

            	
              If
      an order, judgment or decree shall be entered, without the application,
      approval or a consent of the Company by any court of competent
      jurisdiction approving a petition seeking reorganization or liquidation of
      the Company or appointing a receiver, trustee or liquidator of the Company
      for all or a part of its assets and such order, judgment or decree shall
      not be vacated or stayed on appeal or otherwise stayed within 60 days;
      OR

            

    

     

    
      
        
        

      

      
        B-2

        
          

        

      

      
        
        

      

       

    

    
      	
              (c)

            	
              The
      Company has not fulfilled its obligations to repay the loan(s) herein
      described.

            

    

    

    Notwithstanding
the above, if such breach is cured by the Company within 30 days from the date
the Company received a notice from the Lender with respect to such Event of
Default, such default will be considered cured and all steps taken by the Lender
and/or the Escrow Agent, if any, will be canceled.

    

    
      	
              6.  

            	
              Remedial
      Measure in Event of Default

            

    

    

    Upon the
occurrence of an Event of Default, the Lenders may, in addition to all other
remedies provided to Lenders under applicable laws, declare immediately due and
payable the entire outstanding balance of the loan, principal and interest
accrued thereon, and any and all other sums payable hereunder, and may decide to
exercise his rights according to any law in order to enable him to receive all
amounts due on that date. A Receiver, if appointed, shall be entitled to any and
all powers and authorities available under law, shall be empowered to realize
all rights of the Lender in order to deal with the Company’s assets, in
accordance with his discretion, for the purpose of enabling the Lender to
receive the amounts specified above.

    

    Notwithstanding,
the waiver of a default by Lenders, or their failure to invoke one or more
remedial measures, shall not be considered as a waiver of other defaults and
remedial measures provided herein.

    

    
      	
              7.  

            	
              Absence
      of Dividends

            

    

    

    The
Company hereby declares that no form of dividend shall be distributed by the
same to its shareholders prior to the repayment or conversion of any outstanding
Loan amounts owed to the Lender.

    

    
      	
              8.  

            	
              No
      Finders Fee

            

    

    

    The
Company confirms that no agent, finder or broker acting on behalf of or under
the authority of the Company is or will be entitled to any broker’s or finder’s
fee or any other similar commission or fee in connection with the transactions
contemplated hereby.

     

    
      	
              9.  

            	
              Confidentiality

            

    

    

    The
Company, the Lender and any other person acting on their behalf shall keep this
Agreement and any related correspondence in strict confidence, and shall not
issue any public statement or press release concerning this transaction without
the other parties prior written approval of the substance and form of any such
statement or release.  The Lender agrees to treat confidentially all
confidential information provided by the Company and shall use such confidential
information solely for the purpose of evaluating the transactions contemplated
hereby and shall not disclose any of such confidential information to any third
party without the prior written consent of the Company.

    

    
      	
              10.  

            	
              Notices

            

    

    

    All
notices dispatched and sent by registered mail, by courier, by fax or by e-mail
shall be deemed to have been delivered five days after posting them if by
registered mail, and on the following business day when delivered by courier, by
fax or by e-mail, subject to receipt of delivery, fax or e-mail transmittal
confirmation.

    

    
      	
              11.  

            	
              Conflict
      of Laws

            

    

    

    The laws
of the State of Israel shall govern this Agreement.   The
competent courts of the State of Israel, and particularly of Tel Aviv-Jaffo,
shall have jurisdiction in all disputes, which may arise in connection with this
Agreement.

     

    
      
        
        

      

      
        B-3

        
          

        

      

      
        
        

      

    

    
 

    
      	
              12.  

            	
              Cost
      of Litigation:

            

    

    

    In the
event of litigation resulting from this agreement, the loosing party shall
reimburse the prevailing party for all of its expenses in connection with such
litigation, including, without limitation, Attorneys fees.

    

     

    
      
        	
                The
      Lenders   

                 

                
                  Date:___________________________

                

                 

              	 	 	
                The Company

                 

                Date:___________________________

              	 
	
                /s/
      Alon Carmel    

              	 	 	
                /s/
      Eitan Shmueli

              	 
	
                Alon
      Carmel    

              	 	 	
                Eitan
      Shmueli, Manager

              	 
	
                 

                 

              	 	 	
                 

              	 
	
                JNS
      Capital LLC

                 

              	 	 	 	 
	/s/
      Joe Shapira 	 	 	 	 
	
                Joe
      Shapira, Managing Member

                 

              	 	 	 	 

      

    

     

    
      
        
        

      

      
        B-4

        
          

        

      

      
        
        

    

    Exhibit
C

     

    We hereby
state in good faith that this is a comprehensive list that includes all patents
and patents applications under section 1g of the Term Sheet.

     

    

    
      	
              275’1

            	
              US
      Patent No. 6,797,320 – US Application No. 09/744,681 titled
      “Environmentally Compatible Processes, Compositions And Materials Treated
      Thereby” was filed on June 6, 2001 as part of a section 371 of
      PCT/IL99/00403 which, in turn, claimed priority from Israeli Patent
      Application No. 125520 filed July 27, 1998. Application 09/744,681 matured
      into US Patent 6,797,302 and is in force. Assignment duly filed in the
      USPTO on September 15, 2005 for all patent right to the assignee Pimi
      Marion Holdings Ltd.

            

    

    

    
      	
              275’2

            	
              US
      Patent Application No. 10/792,759 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” was filed on March
      5, 2004 as a Divisional Application of US Application No. 09/744,681
      (275’1). As of May 9, 2005 our US Associates has advised that the Examiner
      is preparing to allow this
Application.

            

    

    

    
      	
              275’3

            	
              New
      US Patent Application titled “Environmentally Compatible Processes,
      Compositions And Materials Treated Thereby” was filed or is being filed
      transient to the preparation of this report as a Divisional Application of
      US Application No. 09/744,681
(275’1).

            

    

    

    
      	
              275’4

            	
              European
      Patent Application No. 99933105.1 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” was filed on July
      22, 1999 as part of a section 371 of
  PCT/IL99/00403.

            

    

    

    
      	
              275’5

            	
              Chinese
      Patent No. 99810112.5 titled “Environmentally Compatible Processes,
      Compositions And Materials Treated Thereby” was granted on July 23, 2003
      and is in force.

            

    

    

    
      	
              275’6

            	
              Russian
      Patent Application No. 2001102049 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” has received a
      Decision of Grant on February 16,
2005.

            

    

    

    
      	
              275’7

            	
              Russian
      Patent Application No. 2005115093 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” was filed on May 16
      2005 as a Divisional Application of Russian Patent Application No.
      2001102049 (275’6)

            

    

    

    
      	
              275’8

            	
              Australian
      Patent No. 757,181 titled “Environmentally Compatible Processes,
      Compositions And Materials Treated Thereby” matured from Australian Patent
      Application 49273/99 was filed on June 6, 2001 as part of a section 371 of
      PCT/IL99/00403.

            

    

    

    
      	
              275’9

            	
              South
      African Patent No. 2001/1528 titled “Environmentally Compatible Processes,
      Compositions And Materials Treated Thereby” was issued on April 24, 2002
      and is in force.

            

    

    

    
      	
              275’10

            	
              Israeli
      Patent Application No. 125520 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” was filed on July
      27, 1998.

            

    

    

    
      	
              275’11

            	
              Chilean
      Patent Application No. 1675-99 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated
  Thereby”.

            

    

    

    
      	
              275’12

            	
              Mexican
      Patent Application No. PA/a/2001/000967 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby”. Notice of
      Allowance recently received.

            

    

    

    
      	
              275’13

            	
              Canadian
      Patent Application No. 2,338,718 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby”. As of May 13, 2005
      our Canadian Associates have been instructed to duly file the Assignment
      of all patent right to the name of Pimi Marion Holdings
    Ltd.

            

    

     

    
      
        
        

      

      
        C-1

        
          

        

      

      
        
        

      

    

    
      	
              275’14

            	
              Kenyan
      Patent Application No. PCT/IL99/00403 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby”. A Response to the
      outstanding Office Action is being prepared and shall be timely filed in
      the Kenyan Patent Office.

            

    

    

    
      	
              275’15

            	
              Argentinean
      Patent Application No. P990103701 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Argentinean Patent Office.

            

    

    

    
      	
              275’16

            	
              Bulgarian
      Patent No. 105167 titled “Environmentally Compatible Processes,
      Compositions And Materials Treated Thereby” is pending before the
      Bulgarian Patent Office.

            

    

    

    
      	
              275’17

            	
              Bolivian
      Patent Application No. 7651 titled “Environmentally Compatible Processes,
      Compositions And Materials Treated Thereby” is pending before the Bolivian
      Patent Office.

            

    

    

    
      	
              275’18

            	
              Brazilian
      Patent Application No. PI9912697-4 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Brazilian Patent Office.

            

    

    

    
      	
              275’19

            	
              Colombian
      Patent Application No. 99047340 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Colombian Patent Office.

            

    

    

    
      	
              275’20

            	
              Costa
      Rican Patent Application No. 6061 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Costa Rican Patent Office.

            

    

    

    
      	
              275’21

            	
              Cuban
      Patent Application No. 22/2001 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Cuban Patent Office.

            

    

    

    
      	
              275’22

            	
              Czech
      Republic Patent Application No. PV 2001-254 titled “Environmentally
      Compatible Processes, Compositions And Materials Treated Thereby” is
      pending before the Czech Republic Patent
Office.

            

    

    

    
      	
              275’23

            	
              Georgian
      Patent Application No. AP1999004257 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Georgian Patent Office.

            

    

    

    
      	
              275’24

            	
              Guatemala
      Patent Application No. PI99-01099 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Guatemala Patent Office.

            

    

    

    
      	
              275’25

            	
              Honduras
      Patent Application No. PCT/IL99/120 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Honduras Patent Office.

            

    

    

    
      	
              275’26

            	
              Hungarian
      Patent Application No. P0201109 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Hungarian Patent Office.

            

    

    

    
      	
              275’27

            	
              Korean
      Patent Application No. 2001-7001082 titled “Environmentally Compatible
      Processes, Compositions and Materials Treated Thereby” is pending before
      the Korean Patent Office.

            

    

    

    
      	
              275’28

            	
              Latvian
      Patent Registration No. 12750 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby”. As of May 13, 2005
      our Latvian Associates have been instructed to duly file the Assignment of
      all patent right to the name of Pimi Marion Holdings
  Ltd.

            

    

     

    
      
        
        

      

      
        C-2

        
          

        

      

      
        
        

      

    

    
 

    
      	
              275’29

            	
              Nicaragua
      Patent Registration No. 1441; Patent No. 125520 titled “Environmentally
      Compatible Processes, Compositions And Materials Treated Thereby” was
      granted on November 20. 2001.

            

    

    

    
      	
              275’30

            	
              New
      Zealand Patent Application No. 509566 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the New Zealand Patent Office and received a notice of Acceptance on June
      4 2003.

            

    

    

    
      	
              275’31

            	
              Peruvian
      Patent Application No. 760 titled “Environmentally Compatible Processes,
      Compositions And Materials Treated Thereby” is pending before the Peruvian
      Patent Office.

            

    

    

    
      	
              275’32

            	
              Polish
      Patent Application No. P-348722 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Polish Patent Office. As of May 13, 2005 our Polish Associates have
      been instructed to duly file the Assignment of all patent right to the
      name of Pimi Marion Holdings Ltd.

            

    

    

    
      	
              275’33

            	
              Paraguay
      Patent No. 4217 (Application 72/99) titled “Environmentally Compatible
      Processes, Compositions and Materials Treated Thereby” was issued by the
      Paraguayan Patent Office on August 2,
2003.

            

    

    

    
      	
              275’34

            	
              Slovenian
      Patent No. 9920057 - 20615 titled “Environmentally Compatible Processes,
      Compositions and Materials Treated Thereby” was issued by the Slovenian
      Patent Office on February 28, 2002.

            

    

    

    
      	
              275’35

            	
              Slovakian
      Patent Application No. PV97-2001 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Slovakian Patent Office.

            

    

    

    
      	
              275’36

            	
              Turkish
      Patent No. TR2001 00231 titled “Environmentally Compatible Processes,
      Compositions And Materials Treated Thereby” is pending before the Turkish
      Patent Office.

            

    

    

    
      	
              275’37

            	
              Ukrainian
      Patent Application No. 2001010598 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” was expressly
      abandoned by Makhteshim in the Ukrainian Patent
  Office.

            

    

    

    
      	
              275’38

            	
              Uruguayan
      Patent Application No. 025.625 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Uruguayan Patent Office.

            

    

    

    
      	
              275’39

            	
              Venezuelan
      Patent Application No. 1999-001481 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Venezuelan Patent Office.

            

    

    

    
      	
              275’40

            	
              Serbia
      and Montenegro Patent Application No. P-51/01 titled “Environmentally
      Compatible Processes, Compositions And Materials Treated Thereby” is
      pending before the Serbia and Montenegro Patent
  Office.

            

    

    

    
      	
              275’41

            	
              Norwegian
      Patent Application No. 20010447 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Norwegian Patent Office.

            

    

    

    
      	
              275’42

            	
              Romanian
      Patent Application No. a2001-00090 titled “Environmentally Compatible
      Processes, Compositions And Materials Treated Thereby” is pending before
      the Romanian Patent Office.

            

    

    

    
      	
              275’43

            	
              US
      Trademark Application No. 78620464 for the mark “SPUDEFENDER” in Class 001
      was filed on May 1, 2005 and is pending before the US Patent and Trademark
      Office.

            

    

    

    
      	
              275’44

            	
              US
      Trademark Application No. 78620465 for the mark “FOG IT” in Class 001 was
      filed on May 1, 2005 and is pending before the US Patent and Trademark
      Office.

            

    

    

    

    
      
        
        

      

      
        C-3

        
          

        

      

      
        
        

      

    

    

    

    Exhibit
D

    EDISCLOSURE
LETER

     

    This
letter together with the documents listed in Specific Disclosure Appendix
constitute the Disclosure Letter referred to in the agreement (the “Agreement”) to be entered into
today between Pimi Marion Holdings Ltd (the “Company”), Mr. Nimrod
Ben-Yehuda and Omdan Consulting and Instructing LTD (jointly and
severally:
“Shareholders”) from one side, and Mr. Alon Carmel and JNS Capital LLC
(jointly and severally: “The
Investors”) from the other side, in connection with the investment made
by the investors in the company against the issuance of the company’s Ordinary
and Management shares.

     

    Preliminary
Matters

     

    
      	
               
      

            	
              Unless
      the context requires otherwise, words and expressions defined in the
      Agreement shall have the same meanings in this letter. References in this
      letter to paragraph, headings and numbers shall, unless the context
      otherwise requires, to be those headings and numbers in the agreement.
      Such headings and numbers are for convenience only and shall not alter the
      construction of this letter.

            

    

     

    
      	
               
      

            	
              In
      the event of any conflict or inconsistency between any provisions of
      and/or the statements in this Agreement and those in this letter, unless
      otherwise specifically stated in this letter with respect to a specific
      representation or warranty, the provisions or statements in the Agreement
      shall prevail.

            

    

     

    
      	
               
      

            	
              Where
      any conflict or inconsistency arises between the contents of any document
      supplied to the investors by the shareholders and the terms of this letter
      and the documents attached to this letter, the information contained in
      this letter shall prevail unless otherwise expressly stated in this
      letter.

            

    

     

     

    
      
        
        

      

      
        D-1

        
          

        

      

      
        
        

      

    

     

    Specific
Disclosures

     

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        
                                                                                          
                                                                                            	
                                                                                                    Article

                                                                                                  	
                                                                                                    Disclosure

                                                                                                  
	
                                                                                                    3.1.3
      (c)

                                                                                                  	
                                                                                                    See
      Disclosure Document no. 1.

                                                                                                  
	
                                                                                                    3.1.3
      (d)

                                                                                                  	
                                                                                                    Bank
      Hapoalim LTD. Branch no. 537 – Yaalom. Account no. 100083. Signatories:
      Mr. Eitan Shmueli or Mr. Nimrod Ben-Yehuda.

                                                                                                  
	
                                                                                                    3.1.3(e)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.1.5
      (a)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.1.5
      (b)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.2.2
      (a) (i)

                                                                                                  	
                                                                                                    See
      Disclosure Document no. 2.

                                                                                                  
	
                                                                                                    3.2.2
      (a) (iii)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.2.2
      (b1)

                                                                                                  	
                                                                                                    Lease
      Agreement dated 1.4.2005 signed with Kibutz Alonim is attached as
      Disclosure Document no. 3.

                                                                                                    List
      of countries in which assignment of title in Patents or Patents
      applications was not completed yet: Argentina, Georgia, Guatemala,
      Honduras, Mexico, Norway, Paraguay, Republic of Korea, Romania, Slovakia,
      Venezuela Yugoslavia, China, Turkey, Czech Republic, South Africa, Cuba,
      Uruguay, Peru, Costa Rica and Colombia.

                                                                                                    Assignment
      between Makhteshim Chemical Works LTD. and Nir Ecology LTD. of the Patents
      and the Patents application is attached as Disclosure Document no.
      4.

                                                                                                    Agreement
      between the Company and Nir Ecology LTD. with regard to the completion of
      the assignments is attached as Disclosure Document no.
  5.

                                                                                                  
	
                                                                                                    3.2.2
      (b3)

                                                                                                  	
                                                                                                    See
      Disclosure Document no. 6.

                                                                                                  
	
                                                                                                    3.2.2
      (b5) (i)

                                                                                                  	
                                                                                                    Sanosil
      SA supplies the concentrate for the material and owns its formula.
      Agreement for the supply of the concentrate by Nir Ecology LTD. is
      attached as Disclosure Document no. 7.

                                                                                                    The
      right of use of the patents for water treatment applications has been
      granted without limitation of time and territory to Nir Ecolgy
      Nimrod  an/or Nava Ben Yehuda .

                                                                                                  
	
                                                                                                    3.2.2
      (b5) (ii)

                                                                                                  	
                                                                                                    Nimrod
      Ben-Yehuda or Nir Ecology or any company in which Nimrod Ben-Yehuda or
      Nava Ben-Yehuda have an interest, in has the right of use in the Patents
      for water treatments.

                                                                                                  
	
                                                                                                    3.2.2
      (b6) (a)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.2.2
      (b6) (b)

                                                                                                  	
                                                                                                    None.

                                                                                                    None.

                                                                                                  
	
                                                                                                    3.2.2
      (b7)

                                                                                                  	
                                                                                                    Mr.
      Avi Levi’s employment contract with Pimi is attached as Disclosure
      Document no. 8. Nimrod Ben-Yehuda terms of employment are as in section
      3.6.

                                                                                                  
	
                                                                                                    3.3.1

                                                                                                  	
                                                                                                    See
      Disclosure Document no. 9.

                                                                                                    (v) The
      Company patent advisor is advocate Daniel Brass who is currently entitled
      to monthly payment of US$ 3,000 per month.

                                                                                                     

                                                                                                    (vi) The
      Company legal advisor is advocates Eitan Shmueli. Mr Shmueli fee will be
      agreed upon for any service or will based on hourly fee.

                                                                                                     

                                                                                                    (vii) The
      Company accountat is Fhan Kane who is entitled to annual payment of US$
      3,000 for the year 2004.

                                                                                                  
	
                                                                                                    3.3.2

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.3.3

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.3.4

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.3.5

                                                                                                  	
                                                                                                    See
      Disclosure Document no. 10. To be attached.

                                                                                                  
	
                                                                                                    3.3.6

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.3.7
      (i)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.3.8
      (i)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.4
      (a)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.4
      (b)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.5
      (a) (ii)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.5
      (b)

                                                                                                  	
                                                                                                    None.

                                                                                                  
	
                                                                                                    3.6
      (d)

                                                                                                  	
                                                                                                    Water
      treatment and other areas of operation, which are not covered by the
      patents and/or patents
applications.ex1021.htm

    Exhibit
10.21

     

    Letter of Intent
dated 20th Day of January
2009

     

    

    Between : Vegiesafe LLC a
Limited Liability Company registered in New York whose address is 126 Fifth
Avenue 4th Floor New York, NY 10011-5629 USA ("Vegiesafe") and Between Pimi Agro CleanTech
Ltd. a company registered in Israel whose address is POB 107 Kibutz Alonim,
Israel ("Pimi").

     

    
      	
              Whereas

            	
              Pimi developed
      Stabilized Hydrogen Peroxide (STHP) ("The Product") and a
      storage protocol ("the
      Storage Protocol") used in the treatment of fruits and vegetables
      in storage and has filed for patent registrations for such applications
      and formulations;

            

    

     

    
      	
              And
    Whereas

            	
              Pimi has registered
      patents and patents application for the Product and the Storage Protocol
      (hereinafter the Product and Storage Protocol are
      collectively referred to as the "Technology") in various
      countries among them the USA.  The
      patents, patent applications and all enhancements, improvements,
      derivatives and additions thereto, whether now in existence or created in
      the future are hereinafter referred to as the Patents. Set forth in Exhibit A attached
      hereto is a list of the registered Patents and
    applications.

            

    

     

    
      	
              And
    Whereas

            	
              Pimi has introduced the
      Technology for use in storage of
potatoes.

            

    

     

    
      	
              And
    Whereas

            	
              Pimi is active currently
      in Europe and Israel and desires to expand and start activity in the US, Canada and
      Mexico.

            

    

     

    
      	
              And
    Whereas

            	
              Vegiesafe and its
      affiliated companies are marketing, brand and product development
      companies which do business with mass-market retailers and supermarket
      stores in the US
      such as Wal-Mart
      ("WM"), Target and others.

            

    

     

    
      	
              And
    Whereas

            	
              Vegiesafe has
      represented to Pimi that its affiliated
      companies have relationships with WM and other mass-market
      retailers and major supermarket chains in North America ("Retailers") and will
      seek to build a business for CIPC free potatoes and
      potato products using the Technology for the
  Retailers.

            

    

     

    
      	
              And
    Whereas

            	
              The
      parties have agreed to cooperate in the development and expansion of Pimi activities in the
      US.

            

    

     

     

    
      	
               
      

            	
              Now
      it has been Declared and Agreed between the
  Parties:

            

    

     

    
      	
              1.  

            	
              Preamble
      and Appendices

            

    

     

    
      	
              1.1  

            	
              The
      Preamble and appendices to this LOI is one and integral
      part of it.

            

    

     

    
      	
              1.2  

            	
              The
      headings of the section are for convenient only and would not serve for
      inter­pretation to this LOI.

            

    

     

    
      	
              2.  

            	
              Incorporation
      a US Subsidiary by Pimi

            

    

     

    
      	
              2.1  

            	
              Pimi intends to
      incorporate a fully owned subsidiary in the US ("NEWCO" or "NC") which might be the
      main vehicle for Pimi activities in the
      US.

            

    

     

    
      	
              2.2  

            	
              Pimi will grant to NC licenses for the use
      of the under the Patents.  The licenses for the US will be an
      exclu­sive license and the licenses for Canada and Mexico will be
      non-exclusive.

            

    

     

    
      	
              3.  

            	
              The
      Joint Venture between the Parties

            

    

     

    
      	
              3.1  

            	
              On
      or before January 15, 2009 NC or Pimi and Vegiesafe will enter
      into a joint venture agree­ment ("JV Agreement")
      incorporating the terms and conditions set forth in this LOI  ("The Joint Venture"). The
      Joint Venture will be in the form of an American LLC or partnership as the
      parties will agree. The LLC or the partnership will be incorporated when
      the Joint Venture will commercially justify it. In the event a JV
      Agreement is not entered into by February 15, 2009, the terms of this LOI
      and the terms stated herein to be set forth or provided in the JV
      Agreement shall constitute the parties JV
  Agreement.

            

    

     

    
      	
              3.2  

            	
              In
      the event any Retailer, any fast-food chain or any major packaged, frozen
      or snack food marketers or any major or national vegetable (or fruit)
      growers and major or national distributors (all collectively referred to
      herein as "Distributor"), in the US (such Distributors, being subject to
      the mutual approval of Vegiesafe and Pimi,
      which approval shall not be unreasonably withheld) expresses an interest
      in launching CIPC
      free potatoes or CIPC free potato
      products at any Retailer or by any Distributor by requesting its
      supplier/s to use the Technology  for  potatoes or
      potato products, in order to produce or to supply CIPC
      free  potatoes or CIPC
      free  potato products for its consumption, such request
      hereinafter referred to as a "Trigger Event". The Parties will continue to
      operate the Joint Venture under the terms hereof and the JV Agreement, so
      long as such Trigger Event occurs prior to December 31,
    2009.

            

    

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    
      	
              4.  

            	
              Scope
      of the Joint Venture

            

    

     

    
      	
              4.1  

            	
              The
      Joint Venture will market, sell and distribute the Technology throughout
      of the USA on an
      exclusive basis,
      and throughout Canada and Mexico on a
      non-exclusive basis. The Technology will be distributed under the
      Trademark/s or such other name/s as shall be mutually agreed upon by the
      Parties as well as under Earthbound LLC’s (“EB”), an affiliated company of
      Vegiesafe umbrella brand known as
"Galapagos".

            

    

     

    
      	
              4.2  

            	
              The
      Joint Venture will have exclusivity for marketing, sales and distribution
      of the Technology for treatment and storage of potatoes in the USA subject to Section
      4.3 below. Treatment and storage of other fruits and vegetables will be
      added to the Joint Venture in the future based upon the milestone and
      vision set forth in Exhibit B.

            

    

     

    Notwithstanding
the above, the Parties agree that opportunities may come along with respect to
other fruits and vegetables.  The Parties mutually agree that when
these opportunities come along, the Parties will decide together whether or not
to include such additional categories within the scope of this
Agreement.

     

    The Joint
Venture will also market, sell and distribute the Technology for treatment and
storage of potatoes in Canada and Mexico, but not on an exclusive
basis.

     

    
      	
              4.3  

            	
              The
      exclusivity of the Joint Venture will be subject to fulfillment of certain
      milestones of annual sales set forth in the Exhibit
    C.

            

    

     

    
      	
               
      

            	
              In
      case such milestones are not achieved, either party will have the right,
      but not the obligation to terminate the Joint Venture's
      exclusivity.

            

    

     

    
      	
              4.4  

            	
              The
      Joint Venture will relate initially to process potatoes such as,
      French-Fries, Chips and fresh table potatoes. Once the Joint Venture has
      achieved the milestones set forth in Exhibit B, the Joint
      Venture's rights will be extended to other fruits and vegetables by mutual
      agreement, taking into account resources, funds availability, and vision
      for such expansion.  Vegiesafe acknowledge that Pimi is in
      R&D stages for other usages of the Technology such as soil treatment
      and disinfection, and grain treatment and other potential solutions and
      usages which are not part of the
LOI/Agreement.

            

    

     

    
      	
              5.  

            	
              Parties
      share in the Joint Venture and its
Management

            

    

     

    
      	
              5.1  

            	
              The
      parties' share in the Joint Venture will be: NC 70%, Vegiesafe 30% of all net
      revenues.  "Net revenues": will include all sums received for
      the Technology regardless of whether such sums are paid in the form of a
      royalty or payment for the sale of the Products or use of the Storage
      Protocol less any cost and expenses relating to achieving the
      revenues.

            

    

     

    
      	
              5.2  

            	
              The
      Joint Venture will have a board of directors.  Pimi will be entitled to
      have two directors and Vegiesafe will be
      entitled to have one director.  Notwithstanding the above, all
      decisions regarding expenditures of Company funds relating only to the
      first investment of the $250,000 will require unanimous approval of the
      Board. Notwithstanding the above, expenses relating to the EPA approval of
      up to $100,000 as set forth in Exhibit E, efficacy
      tests/demonstration room/s of up to $50,000, and travel expenses to the US
      of Pimi staff or to Israel by Vegiesafe or the staff
      of its affiliated companies for working session of up to $50,000 will be
      considered as approved in advance, and will not require additional
      approval of the Board of the JV.

            

    

     

    
      	
              5.3  

            	
              At
      such time as the activities of the Joint Venture warrant and upon mutual
      agreement of the Parties, the Joint Venture will employ a CEO and/or such other
      employees as may be necessary for the successful operation of the Joint
      Venture, including without limitation an agronomist who will be in touch
      with the customers in the USA.

            

    

     

    
      	
              5.4  

            	
              The
      Parties will have a meeting every quarter to review the busi­ness of
      the Joint Venture.  Such meeting may be in person or by
      conference call.

            

    

     

    
      	
              6.  

            	
              Pimi/NC
      Responsibilities.

            

    

     

    
      	
              6.1  

            	
              NC and Pimi responsibilities
      and missions under the Joint Venture are as
  follows:

            

    

     

    
      	
              6.1.1  

            	
              Pimi/NC will give sub
      license to the Joint Venture for the use of the Technology, and all other
      intellectual property and know-how including any research and
      develop­ment relating to the formula and any new product developed
      ("IP") for the
      term of the Joint Venture.

            

    

     

    
      	
              6.1.2  

            	
              Training
      of core personnel and technical support required for the activity in the
      US, until the
      Joint Venture will engage sufficient personnel who will take upon itself
      the technical support for the installa­tion and the treatment and
      Storage Protocol.

            

    

     

    
      	
              6.1.3  

            	
              Receiving
      of all approvals and consents required for the activity of the Joint
      Venture in the USA.

            

    

     

    
      	
              6.1.4  

            	
              Installation
      of the initial trials and demonstration
rooms.

            

    

     

    
      	
              6.1.5  

            	
              Pimi, its owners,
      officers, and managers agree (i) they will not, directly or indirectly,
      initiate contact with any Retailer or Distributor for the purpose of
      proposing or soliciting a license, sales, or other agreement for any
      Products or the Technology that are exclusive to the Joint Venture
      hereunder, and (ii) if contacted by any such Retailer or Distributor,
      Pimi will refer
      such Retailer or Distributor to Joint Venture.  In the event of
      a violation of this paragraph by Pimi, the Parties agree
      that the measure of Vegiesafe's damages will
      be based on its share of net revenue set forth in Paragraph
      5.1.

            

    

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    
      	
              7.  

            	
              Vegiesafe
      Responsibilities:

            

    

     

    
      	
              7.1  

            	
              Vegiesafe
      responsibilities and missions under the Joint Venture are as
      follows:

            

    

     

    
      	
              7.1.1  

            	
              Marketing
      and sales activities of the Joint
Venture.

            

    

     

    
      	
              7.1.2  

            	
              Seeking
      to have a Retailer and/or major Distributor in the US, which will be
      mutually agreed upon by the parties, to start treatment of a line of CIPC free potatoes or
      CIPC free potato
      products, by recommending its producer/s and/or supplier/s to manufacture
      and supply such CIPC free pota­toes
      or CIPC free
      potato products; and following up with a line of products for extending
      shelf life of fruits and vegetables with CropDefender, Pimi
      products and other products treated by or that include the
      Technology.  Such next step will be discussed and mutually
      agreed upon by the parties once the milestones set forth In Exhibit B have
      been achieved.

            

    

     

    
      	
              7.1.3  

            	
              Assisting
      with the allocation of required personnel for the Joint
      Venture.

            

    

     

    
      	
              8.  

            	
              Services
      and Goods provided by the Parties to the Joint
  Venture

            

    

     

    
      	
              8.1  

            	
              All
      services provided to the Joint Venture by any party will be charged to the
      Joint Venture at cost basis.

            

    

     

    
      	
              8.2  

            	
              Pimi
      will sell the Products to the Joint Venture on cost basis including but
      not limited to any external work done and
  transportation.

            

    

     

    
      	
              9.  

            	
              Financing
      the Joint Venture

            

    

     

    
      	
              9.1  

            	
              Vegiesafe will invest in
      the Joint Venture an aggregated amount of $250,000 which will be used for
      expenses reflected in a budget prepared for the Joint Venture and approved
      by Vegiesafe and
      Pimi.  The
      budget shall include such items as EPA approval, flights,
      accommodations, legal/accounting and first Potato treatments tests, etc.
      The above sum will be provided on an as required basis according to a
      working quarterly budget prepared by NewCo or Pimi and as shall be
      determined by the board of directors of the Joint Venture in accordance
      with section 5.2 above. Vegiesafe will deposit
      $40,000 with Pimi on or before January 26, 2009 which will be an advanced
      of the above amount out of which the sum of $12,400 which Pimi has already
      expended will be reimbursed to Pimi.  Once this amount has been
      used Vegiesafe will deposit additional amount of $40,000 and so forth.
      Decision as to costs and expenses relating to the expending the above
      investment will be taken by mutual
consent.

            

    

     

    
      	
              9.2  

            	
              The
      Joint Venture will open a bank account when practical. Signature rights in
      the Joint Venture bank account will be as decided by the Joint Venture
      Board of Directors.

            

    

     

    
      	
              9.3  

            	
              Any
      additional investment in excess of the $250,000 set forth in section 9.1
      above shall be contributed by the parties to the Joint Venture upon the
      mutual consent of the parties taking into account the Joint Venture's
      business and needs and will be paid to the Joint Venture as
      follows:  70% to be paid by Pimi and 30% to be paid by
      Vegiesafe.

            

    

     

    
      	
              9.4  

            	
              Breach
      by Vegiesafe of its obligation to invest under section 9.1 above, will be
      considered a fundamental breach of this LOI and/or the JV Agreement and
      will enable Pimi or NC to terminate the JV Agreement or this LOI by an
      advance written notice to Vegiesafe of its default under which it will
      provide Vegiesafe with a period of 15 days from the date of receipt of
      Pimi or NC’s notice to cure its default of payment of any of the
      installments payable under section 9.1. In case of termination in the
      above circumstance Vegiesafe will not be entitled to receive any
      compensation or the consideration under section 11.4 herein
      under.

            

    

     

    
      	
              9.5  

            	
              A
      breach by Vegiesafe of its obligations to invest in the Joint Venture
      under section 9.1 above shall not affect EB’s rights with respect to EB’s
      investment in Pimi under Section
10.

            

    

     

    
      	
              10.  

            	
              Vegiesafe
      investment in Pimi

            

    

     

    
      	
              10.1  

            	
              EB,
      an affiliate of Vegiesafe will invest directly in Pimi Agro CleanTech Ltd
      $300,000 at a valuation of $8M pre-money ("EB Investment") for
      226,642 Ordinary Shares of 0.01 NIS each representing 3.61% of the issued
      capital of Pimi at the time of investment. The investment will be paid to
      Pimi in tranches as follows:  first tranche of $60K will be paid
      on the 15th
      of March 2009.  The balance of $240,000 will be paid in four
      installments as follows: $60,000 on the 15th
      June, 2009, $90,000 on 15th
      of September, 2009 and $90,000 on the 15th
      of January 2010.  EB will receive the allocated shares pro rata
      to the EB Investment against each payment of the EB Investment. Attached
      to this LOI as Exhibit
      D is the Term Sheet for EB investment in
  Pimi.

            

    

     

    
      	
              10.2  

            	
              In
      the event Pimi
      raises funds from a VC, or from an institutional investor ("The Outside
      Investment"), or will issue shares in an IPO, for a valuation which is
      higher than $8Million then EB will have the option
      to pay the balance of the EB Investment prior to the funding of the
      Outside Investment. If EB, in its sole
      discretion elects not to pay the balance of the EB Investment at such
      time, it will then lose its right to pay the balance of the EB Investment
      and will not receive the balance of the shares, and will be left only with
      those shares that have been already allocated under paragraph 10.1
      above.

            

    

     

    
      	
              10.3  

            	
              In
      case that prior to the first payment of the Investment by EB, there will
      be a conversion of the shares of Pimi to shares in a US company, as a part
      of the plan to register the shares of the US company on the NASDAQ OTC/BB,
      then instead of shares in Pimi, EB will receive shares in the US company
      at the same rate of conversion which applies to all other holders of the
      Ordinary Shares 0.01 NIS each of
Pimi.

            

    

     

    
      	
              10.4  

            	
              Breach
      by EB of its obligation to invest in Pimi under section 10.1 above, will
      be considered a fundamental breach of this LOI and/or the JV Agreement by
      Vegiesafe and will enable Pimi or NC to terminate the JV Agreement or this
      LOI by an advance written notice to Vegiesafe of its default and providing
      Vegiesafe with a period of 15 days from the date of receipt of Pimi or
      NC’s notice to cure its default of payment of any of the installments
      payable under section 10.1. In case of termination in the above
      circumstance Vegiesafe will not be entitled to receive any compensation or
      the consideration under section 11.4 herein
  under.

            

    

     

    
      	
              11.  

            	
              Termination
      of the LOI or the Joint Venture

            

    

     

    
      	
              11.1  

            	
              Either
      Party shall have the right to terminate this LOI and/or the Joint
      Venture and the JV Agreement if the Trigger Event, as that term is defined
      in Section 3.1, does not occur by December 31, 2009. Notice of the
      exercise of the right to terminate this LOI and/or the Joint
      Venture and the JV Agreement shall be sent to the other party as provided
      in Section 17 within 60 days after December 31, 2009.  In the
      event of a termination as provided in this Section 11.1, Vegiesafe acknowledges
      that its investment made in the Joint Venture will not be returned, except
      for its investment which was used for acquiring the EPA approval for
      registration of the Technology in the US including without
      limitation the expenses set forth in Exhibit E including expenses added to
      the EPA registration budget after the date hereof and such additional
      direct expenses associated with EPA registration if actually
      incurred.

            

    

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    
      	
              11.2  

            	
              Pimi
      and/or NC shall have the right but not the obligation to terminate the
      exclusivity of the Joint Venture, if the milestones set forth in Exhibit C
      (“Milestones”) are not achieved. If, however, good faith negotiations with
      Retailers or Distributors, that are, in both parties good faith
      determination, reasonably expected to achieve the Milestones are ongoing
      at the time of any Milestone deadline, the parties will discuss the
      potential of such negotiations and give consideration to such negotiations
      prior to terminating the exclusivity of the Joint Venture for failure to
      achieve a Milestone.

            

    

     

    
      	
              11.3  

            	
              Upon
      termination of the Joint Venture the Technology and EPA approval and any
      other license or consent, will remain the sole property of Pimi and/or
      NC.

            

    

     

    
      	
              11.4  

            	
              Upon
      termination of the Joint Venture NC or Pimi, if NC has not
      been formed will continue to pay Vegiesafe its share of
      revenue from the sales as agreed under the JV Agreement as long as Vegiesafe continues to
      provide services required under any agreement to which it is a
      party.

            

    

     

    
      	
              11.5  

            	
              Upon
      termination of the Joint Venture, all rights in and to EB's Galapagos brand and
      such customized trademark, other than the actual Licensed Mark used in
      conjunction with the Products, will belong exclusively to EB.  Pimi and/or NC shall own
      all right, title and interest in and to the underlying Technology, IP, and
      to the under­lying artwork in the brand collateral produced by the
      Joint Venture, including but not limited to, any Product specifications,
      copyrights, names, seals, logos and art­work developed in connection
      therewith, Pimi agrees it will not use, either during or after the term of
      this LOI or the JV
      Agreement, any intellectual property, including but not limited to artwork
      and designs, created by Vegiesafe using or connected to the Technology or
      Licensed Mark for any purpose outside the scope of this LOI or the Joint Venture
      without the prior written consent of Vegiesafe upon such terms as are
      agreeable to Vegiesafe .

            

    

     

    
      	
              12.  

            	
              Confidentiality
      and non Compete

            

    

     

    
      	
              12.1  

            	
              The
      parties will keep their relationship confidential unless mutually
      pre-agreed in writing or required under any court order and or law or
      regulations of the USA or Israel.

            

    

     

    
      	
              12.2  

            	
              Any
      information disclosed by one Party to the other under this LOI or in connection
      with the Joint Venture will be kept confidential and will be used only for
      the mutual benefit of the Parties in furtherance of the purpose of the
      Joint Venture.

            

    

     

    
      	
              12.3  

            	
              Vegiesafe will not be
      involved in any other solution for fruit and vegetables that directly
      competes with the Technology for five (5) years after termination of this
      LOI or the Joint
      Venture.

            

    

     

    
      	
              12.4  

            	
              During
      the term of this LOI and the JV
      Agreement, neither party shall engage in any independent business
      enterprise in the US without the other in connection with any business
      enterprise that sells, promotes or markets products that are competitive
      with the Technology. Notwithstanding anything to the contrary set forth
      above, nothing contained herein shall preclude Vegiesafe from entering
      into a business relation­ship with Vego LLC which is extending shelf
      life for processed fruit and vegetables.  Vegiesafe shall be
      permitted to enter into any business relationship with Vego LLC even if
      the subject matter of such business competes with the Technology or other
      Pimi Products
      subject to Vego LLC not using the
Technology.

            

    

     

    
      	
              12.5  

            	
               The
      Parties agrees not to solicit the other Party's employees to work directly
      or indirectly for them or hire any former employees of the other Party for
      a period of three (3) years after the former employee's employment
      terminated.

            

    

     

    
      	
              12.6  

            	
              The
      provisions of this Section 12 shall survive the termination of this LOI.

            

    

     

    
      	
              13.  

            	
              Sale of Brand or
      Pimi.

            

    

     

    The Joint
Venture Agreement will provide the in case of sale of the JV or the JV
operations relating to fruit and vegetables by NC or Pimi, PIMI’s share will be 70% and
Vegiesafe’s share will
be 30% of the consideration of such sale, provided the Trigger Event has
occurred. The above entitlement is only in case that Vegiesafe has not received
consideration for its part in the JV directly which is intended to represent 30%
of the total consideration for such sale.

     

    
      	
              14.  

            	
              Goodwill.

            

    

     

    
      	
              14.1  

            	
              The
      Parties acknowledge that any intellectual property, including but not
      limited to artwork and designs, created by Vegiesafe using or connected
      to the Technology or Licensed Mark is created for the mutual benefit and
      profit of the Joint Venture.  Vegiesafe  retains the
      perpetual right to use, solely as an historical example of its
      advertising, any advertising and promotional materials produced by or for
      Pimi or the Joint Venture hereunder which incorporate the Licensed Mark,
      provided that such use will be exclusively for award consideration and
      non-commercial internal and port­folio
  purposes.

            

    

     

    
      	
              14.2  

            	
              Pimi
      acknowledges that the Galapagos brand is solely the property of
      EB.  Pimi shall not, at any time, regardless of the duration of
      this LOI, dispute
      or contest, directly or indirectly, EB's ownership of the Galapagos
      brand.  Pimi recognizes the value of the goodwill associated
      with the Galapagos brand and agrees that all rights in the Galapagos Brand
      and goodwill associated with it, including all goodwill generated by use
      of the Galapagos brand in connection with the sale of the Technology
      belong to EB.  Pimi acknowledges that any intellectual property
      created by EB using the Galapagos brand is created for the exclusive
      benefit and profit of EB.  Pimi agrees it will not use, either
      during or after the term of this LOI or the JV Agreement,
      for any purpose, any intellectual property, including but not limited to
      artwork and designs, created by Vegiesafe using or connected to the
      Galapagos brand.

            

    

     

    
      	
              15.  

            	
              Arbitration

            

    

     

    Parties
agree that any controversy or claim arising out of or relating to this LOI, the Joint Venture or the
JV Agreement or any breach or alleged breach of the provi­sions of this
LOI or the JV Agreement,
shall be settled by arbitration submitted to the American Arbitration
Association, to be conducted, in New York City, New York, and judgment upon the
award rendered may be entered in any court having jurisdiction
thereof.  The arbitration shall be conducted in accordance with the
then current commercial rules of the American Arbitration
Association.

     

    
      	
               
      

            	
              In
      the event of the actual or threatened breach of this LOI or the JV Agreement,
      the non-breaching Party shall be entitled to a preliminary restraining
      order or injunction restraining the breaching Party from violating its
      provisions.  Nothing contained in this LOI or the JV Agreement
      shall be construed to prohibit the non-breaching Party from pursuing any
      other available remedies for such breach or threatened breach, including
      the recovery of damages.  Any recourse by a Party to a court for
      interim or provisional relief shall not be deemed incompatible with the
      agreement to arbitrate or a waiver of the right to
    arbitrate.

            

    

     

    
      	
              16.  

            	
              Reports
      and transparency

            

    

     

    NC,
Vegiesafe and Pimi will report to each other on any meeting, and/or connection
and/or relations with Retailer or Distributor as well as potential Retailer or
Distributor, as well as any technical data or trials made in the US or Canada or
Mexico, and any other territory.

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    
      	
              17.  

            	
              Joint
      Venture/Joint Venture Agreement

            

    

     

    
      	
              17.1  

            	
              The
      parties will instruct their lawyers to work on a JV Agreement which will
      incorporate and reflect the terms and conditions of this
    LOI.

            

    

     

    
      	
              17.2  

            	
              The
      parties will use their best commercial efforts to complete and sign the JV
      Agreement by no later than February 15, 2009. If the JV Agreement is not
      signed by January 15, 2009 this LOI shall be the JV
    Agreement.

            

    

     

    
      	
              18.  

            	
              Notices

            

    

     

    All
notices and other communications pursuant to this LOI shall be sent by telefax
with confirmation or by overnight courier service to the other Party at the
address stated above.  Each Party's address may be changed by notice
to the other party in accor­dance with this Paragraph.

     

    
      	
               
      

            	
              Any
      and all notices sent to Vegiesafe shall also require that a copy be sent
      to Kamerman & Soniker P.C., 470 Park Avenue South, 12th Floor South,
      New York, New York 10016 fax 212-400-4935.  Any and all notices
      sent to Pimi shall also require that a copy be sent to Advocate Eitan
      Shmueli, Sadot & Co Law offices of 12 Abba Hillel St. Ramat-Gan,
      Israel fax
      972-3-6122377.  In the
      event of delivery by overnight courier, the date of delivery is deemed to
      be the next business day (two business days for international delivery)
      after deposit to the overnight courier.  In the event of
      delivery by confirmed telefax, the date of delivery is deemed to be the
      date of transmission if transmission occurs before 4:00 PM at the location
      of receipt of the notice, otherwise the next business
  day.

            

    

     

    
      	
              19.  

            	
              Execution/Counterparts.

            

    

     

    This LOI
(or any subsequent amendment or addendum thereto) may be executed in
counterparts by the Parties with each such counterpart then being considered one
and the same and all of which shall constitute one and the same
agreement.  A signed e-mail or telefaxed copy of this LOI (or any subsequent
amendment or adden­dum thereto) shall have the same force and effect as an
original signed copy of this LOI.

     

    In
witness whereof the Parties have signed this LOI on the 20th of
January 2009.

     

     

    
      
        
          
            
              
                	Vegiesafe LLC 	 	 	Pimi
      Agro CleanTech Ltd.	 
	 	 	 	 	 
	 	 	 	 	 
	
                        /s/
      Jack Dereck

                      	 	 	
                        /s/
      Eitan
      Shmueli

                      	 
	
                        Jack
      Dereck

                      	 	 	
                        Eitan
      Shmueli Director
      

                      	 
	
                        7/22/2009

                      	 	 	
                         

                      	 
	 	 	 	Alan
      Carmed Chairman	 
	 	 	 	 	 

              

            

          

        

      

    

     

    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    

     

    

     

    EB's
consent

     

    We the
undersigned Earthbound LLC agree to terms of this LOI and to be bound by the
terms of section 10 above. We also agree to grant the JV and/or Pimi and/or the
NC the right to use our brand name "Galapagos" pursuant to the terms of this LOI
and for the purposes of the JV, as long as the JV or the partnership under it
will be in force, free of any charge and without any consideration to
us.

     

    Earthbound
LLC

     

    By : Jack
Dereck

     

    Signature:
/s/ Jack Dereck

     

    Date:
1/22/2009

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

     

    Exhibit
A

     

    Patents
and Patent Applications

     

    
      
        
          
            
              	
                      COUNTRY

                    	
                      Patent Register
      No.

                    	
                      Application
      No.

                    	
                      Status

                    
	
                      U.S.A

                    	
                      6,797,302

                      6,946,155

                      7,147,872

                    	 
      	
                      Granted

                    
	
                      Canada

                    	 
      	
                      2,338,718

                    	
                      Pending

                    

            

          

        

      

    

     

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

     

    Exhibit
B

     

    Milestones
for other fruits and vegetables to be added

     

    The Joint
Venture has achieved sale target of 300,000 tons potatoes using the
Technology.

     

    Vision:

     

    Vegetables:
Cabbage, Onions, Mushrooms, Sweet Potatoes, carrots, Broccoli
cauliflower.

     

    Fruits:
Citrus, Apples , Pear, Peach.

     

    Priority
will be decided according to market information and demand as well as product
development.

     

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

    Exhibit
C

     

    Milestones
to maintain exclusivity:

     

    
      	
              1.  

            	
              Trigger
      Event until December 31, 2009.

            

    

     

    
      	
              2.  

            	
              Entering
      a CIPC free branding program with 2 Retailers or Distributors before crop
      season started Sep 2010.

            

    

     

    
      	
              3.  

            	
              Treatment
      of 150,000 tons of potatoes in season which starts on Sep.
      2011.

            

    

     

    
      	
              4.  

            	
              Treatment
      done to 350,000 tons of potatoes in season starts on Sep.
      2012.

            

    

     

     

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

     

    Exhibit
D

     

    Term Sheet and POA

     

    

     

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    

     

    

     

    

     

    Exhibit
E

     

    
      
        	 
      	
                EPA Registration Budget

              	 
      	 
      
	
                Item

              	
                Description

              	
                Budget
      (USD)

              	
                payment

              
	
                1

              	
                phys/chem
      properties

              	
                15,000

              	
                Q1
      09

              
	
                2

              	
                Acute
      toxicity

              	
                14,000

              	
                Q1
      09

              
	
                3

              	
                EPA
      fee

              	
                4,200

              	
                Q2
      09

              
	
                4

              	
                Registration
      in all states including California

              	
                2,750

              	
                Q4
      09

              
	
                5

              	
                Chemical
      characterization of hydrogen peroxide

              	
                15,000

              	
                Q1
      09

              
	
                6

              	
                WRA
      (Pimi Consultant) to prepare registration dossier

                and
      submit to US EPA

              	
                2,625

              	
                Paid

              
	
                7

              	
                WRA
      to prepare registration dossier

                and
      submit to US EPA

              	
                2,625

              	
                Q2
      09

              
	
                8

              	
                WRA
      to prepare and submit a petition

              	
                4,125.00

              	
                Paid

              
	
                9

              	
                WRA
      to prepare and submit a petition

              	
                4,125.00

              	
                Q2
      09

              
	
                10

              	
                WRA
      pre-registration

                conference
      with EPA

              	
                850

              	
                Paid

              
	
                11

              	
                WRA
      pre-registration

                conference
      with EPA

              	
                850

              	
                Q1
      09

              
	 
      	
                Unforeseen

              	
                10,000

              	 
      
	 
      	
                Total

              	
                76,150

              	 
      

      

    

    

     

    

     

     

     

     

    11

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