Document:

ex10-2.htm

    
      

    

    EXHIBIT 10.2

    SECURITY
AGREEMENT

    

    1.           Identification.

     

          This Security
Agreement (the "Agreement"), dated as of December 5, 2007, is entered into by and
between Ido Security Inc., a Nevada corporation ("Debtor"), and Barbara R. Mittman, as collateral agent acting in the manner and to the extent
described in the Collateral Agent Agreement defined below (the "Collateral
Agent"), for the benefit of the parties identified on Schedule A hereto
(collectively, the "Lenders").

    

    2.           Recitals.

     

         
2.1           The Lenders have made, are making and will be making loans to Debtor (the "Loans").  It is
beneficial to Debtor that the Loans were made and are being
made.

     

         
2.2           The Loans are and will be evidenced by
certain promissory notes (each a “Note”) issued by Debtor on or about the date of and after the date of this
Agreement pursuant to subscription agreements (each a “Subscription Agreement”) to which Debtor and Lenders are parties.  The
Notes are further identified on Schedule A hereto and were and will be executed
by Debtor as “Borrower” or “Debtor” for the benefit of each Lender as
the “Holder” or “Lender” thereof.

     

         
2.3           In consideration of the Loans made and
to be made by Lenders to Debtor and for other good and valuable
consideration, and as security for the performance by Debtor of its obligations under the Notes and as
security for the repayment of the Loans and all other sums due from Debtor to Lenders arising under the
Transaction Documents (as defined in the Subscription Agreement), and any other
agreement between or among them (collectively, the "Obligations"),
Debtor, for good and valuable consideration,
receipt of which is acknowledged, has agreed to grant to the Collateral Agent,
for the benefit of the Lenders, a security interest in the Collateral (as such
term is hereinafter
defined), on the terms and conditions hereinafter set
forth.  Obligations include all future advances
by Lenders to Debtor made pursuant to the Subscription
Agreement.

     

         
2.4           The Lenders have appointed the Collateral Agent pursuant to that
certain Collateral Agent
Agreement dated at or about
the date of this Agreement
(“Collateral Agent
Agreement”), among the
Lenders and Collateral Agent.

     

         
2.5           The following defined terms which are
defined in the Uniform Commercial Code in effect in the State of New York
on the date hereof are used
herein as so defined:  Accounts, Chattel Paper, Documents, Equipment,
General Intangibles, Instruments, Inventory and Proceeds.  Other capitalized terms
employed herein shall have the meanings attributed to them in the
Subscription
Agreement.

    

    3.           Grant of
General Security Interest in Collateral.

     

         
3.1           As security for the Obligations of
Debtor, Debtor hereby grants the Collateral Agent, for
the benefit of the Lenders, a security interest in the
Collateral.

     

         
3.2           “Collateral” shall mean all of the following property of Debtor:

    

    (A)           All now owned and hereafter acquired
right, title and interest of Debtor in, to and in respect of all Accounts,
Goods, real or personal property, all present and future books and records
relating to the foregoing and all products and Proceeds of the
foregoing, and as set forth below:

    

    
      
        
        

      

      
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    (i)           All now owned and hereafter acquired
right, title and interest of Debtor in, to and in respect of all: Accounts,
interests in goods represented by Accounts, returned, reclaimed or
repossessed goods with
respect thereto and rights as an unpaid vendor; contract rights; Chattel Paper;
investment property; General Intangibles (including but not limited to, tax and
duty claims and refunds, registered and unregistered patents (including but not limited to the patents, patents
pending and applications set forth on Schedule B hereto), trademarks, service marks,
certificates, copyrights trade names, applications for the foregoing, trade
secrets, goodwill, processes, drawings, blueprints, customer lists, licenses, whether as licensor
or licensee, chooses in action and other claims, and existing and future
leasehold interests in equipment, real estate and fixtures); Documents;
Instruments; letters of credit, bankers’ acceptances or guaranties;
cash moneys, deposits; securities, bank
accounts, deposit accounts, credits and other property now or hereafter owned or
held in any capacity by Debtor, as well as agreements or property
securing or relating to any of the items referred to above;

    

                                                   
(ii)           Goods:  All now owned and hereafter
acquired right, title and interest of Debtor in, to and in respect of goods,
including, but not limited to:

    

    (a)           All Inventory, wherever located, whether
now owned or hereafter acquired, of whatever kind, nature or
description, including all
raw materials, work-in-process, finished goods, and materials to be used or
consumed in Debtor’ business; finished goods, timber cut or
to be cut, oil, gas, hydrocarbons, and minerals extracted or to be extracted,
and all names or marks affixed to or to be affixed thereto for
purposes of selling same by the seller, manufacturer, lessor or licensor thereof
and all Inventory which may be returned to any Debtor by its customers or
repossessed by Debtor and all of Debtor’s right, title and interest in and to the foregoing
(including all of a Debtor’s rights as a seller of
goods);

    

    (b)           All Equipment and fixtures, wherever
located, whether now owned or hereafter acquired, including, without limitation,
all machinery, furniture and fixtures, and any and all additions, substitutions,
replacements (including spare parts), and accessions thereof and thereto
(including, but not limited to Debtor’s rights to acquire any of the foregoing,
whether by exercise of a purchase option or otherwise);

    

    (iii)           Property:  All now owned and hereafter
acquired right, title and interests of Debtor in, to and in respect of any other
personal property in or upon which a Debtor has or may hereafter have a security
interest, lien or right of setoff;

    

                                    (iv)           Books and
Records:  All present and future books
and records relating to any of the above including, without limitation, all
computer programs, printed output and computer readable data in the possession
or control of the Debtor, any computer service bureau or other
third party;
and

    

                                    (v)           Products and
Proceeds:  All
products and Proceeds of the foregoing in whatever form and wherever located,
including, without limitation, all insurance proceeds and all claims against
third parties for loss or destruction of or damage to any of the
foregoing.

    

    (B)           All now owned and hereafter acquired
right, title and interest of Debtor in, to and in respect of the
following:

    

    (i)           Debtor will deliver to the Collateral Agent, the shares of stock, partnership
interests, member interests or other equity interests at any time and
from time to time acquired by Debtor of any and all entities now or
hereafter existing, (such entities, being hereinafter referred to collectively
as the "Pledged Issuers" and individually as a "Pledged Issuer"), including but not limited to 100% of the
equity ownership of each
Guarantor, the certificates representing such
shares, partnership interests, member interests or other interests all options
and other rights, contractual or otherwise, in respect thereof and all dividends, distributions, cash,
instruments, investment property and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares, partnership interests, member interests or other interests;

     

    
      
        
        

      

      
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    (ii)           all additional shares of stock,
partnership interests, member interests or other equity interests from time to
time acquired by Debtor, of any Pledged Issuer, the
certificates representing such additional shares, all options and
other rights, contractual
or otherwise, in respect thereof and all dividends, distributions, cash,
instruments, investment property and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such additional shares, interests or
equity; and

    

    (iii)           all security entitlements of
Debtor in, and all Proceeds of any and all of
the foregoing in each case, whether now owned or hereafter acquired by a Debtor
and howsoever its interest therein may arise or appear (whether by ownership,
security interest, lien, claim or otherwise).

     

         
3.3           The Collateral Agent is hereby
specifically authorized, after the Maturity Date (defined in the Notes)
accelerated or otherwise, or after the occurrence of an Event of Default (as defined herein) and the
expiration of any applicable cure period, to transfer any Collateral into the
name of the Collateral Agent and to take any and all action deemed advisable to
the Collateral Agent to remove any transfer restrictions affecting the Collateral.

    

    4.           Perfection of Security
Interest.

     

         
4.1           Debtor
shall prepare, execute and deliver to the Collateral Agent UCC-1 Financing
Statements.  The Collateral Agent is instructed to prepare and file at
Debtor’s cost and expense, financing statements in such jurisdictions deemed
advisable to the Collateral Agent, including but not limited to the State of
Nevada.  The Financing Statements are deemed to have been filed for
the benefit of the Collateral Agent and Lenders identified on Schedule A
hereto.

     

         
4.2           Upon the
execution of this Agreement, Debtor shall deliver to Collateral Agent stock
certificates representing all of the shares of outstanding capital stock of the
Guarantors (the "Securities").  All such certificates shall be held by
or on behalf of Collateral Agent pursuant hereto and shall be delivered in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers executed in blank,
all in form and substance satisfactory to Collateral Agent.

    

         
4.3           All other
certificates and instruments constituting Collateral from time to time required
to be pledged to Collateral Agent pursuant to the terms hereof (the "Additional
Collateral") shall be delivered to Collateral Agent promptly upon receipt
thereof by or on behalf of Debtor.  All such certificates and
instruments shall be held by or on behalf of Collateral Agent pursuant hereto
and shall be delivered in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment or undated
stock powers executed in blank, all in form and substance satisfactory to
Collateral Agent.  If any Collateral consists of uncertificated
securities, unless the immediately following sentence is applicable thereto,
Debtor shall cause Collateral Agent (or its custodian, nominee or other
designee) to become the registered holder thereof, or cause each issuer of such
securities to agree that it will comply with instructions originated by
Collateral Agent with respect to such securities without further consent by
Debtor.  If any Collateral consists of security entitlements, Debtor
shall transfer such security entitlements to Collateral Agent (or its custodian,
nominee or other designee) or cause the applicable securities intermediary to
agree that it will comply with entitlement orders by Collateral Agent without
further consent by Debtor.

    

    
      
        
        

      

      
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4.4           Within five
(5) days after the receipt by a Debtor of any Additional Collateral, a Pledge
Amendment, duly executed by such Debtor, in substantially the form of Annex I
hereto (a "Pledge Amendment"), shall be delivered to Collateral Agent in respect
of the Additional Collateral to be pledged pursuant to this Agreement. Debtor
hereby authorizes Collateral Agent to attach each Pledge Amendment to this
Agreement and agrees that all certificates or instruments listed on any Pledge
Amendment delivered to Collateral Agent shall for all purposes hereunder
constitute Collateral.

    

         
4.5           If Debtor
shall receive, by virtue of Debtor being or having been an owner of any
Collateral, any (i) stock certificate (including, without limitation, any
certificate representing a stock dividend or distribution in connection with any
increase or reduction of capital, reclassification, merger, consolidation, sale
of assets, combination of shares, stock split, spin-off or split-off),
promissory note or other instrument, (ii) option or right, whether as an
addition to, substitution for, or in exchange for, any Collateral, or otherwise,
(iii) dividends payable in cash (except such dividends permitted to be retained
by Debtor pursuant to Section 5.2 hereof) or in securities or other property or
(iv) dividends or other distributions in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, Debtor shall receive such stock certificate,
promissory note, instrument, option, right, payment or distribution in trust for
the benefit of Collateral Agent, shall segregate it from Debtor's other property
and shall deliver it forthwith to Collateral Agent, in the exact form received,
with any necessary endorsement and/or appropriate stock powers duly executed in
blank, to be held by Collateral Agent as Collateral and as further collateral
security for the Obligations.

    

    5.           Distribution.

    

         
5.1           So long as an Event of Default does not exist, Debtor shall be entitled to exercise all voting power pertaining
to any of the Collateral, provided such exercise is not contrary to
the interests of the
Lenders and does not impair the Collateral.

    

          5.2.          At any time an Event of Default exists or has occurred, all rights of Debtor, upon notice given by Collateral Agent,
to exercise the voting power and receive payments, which it would
otherwise be entitled to
pursuant to Section 5.1, shall cease and all such rights shall
thereupon become vested in Collateral Agent, which shall thereupon have the sole
right to exercise such voting power and receive such
payments.

    

          5.3          
All dividends, distributions, interest and other payments
which are received by Debtor contrary to the provisions of Section
5.2 shall be received in trust for the
benefit of Collateral Agent
as security and Collateral for payment of the Obligations shall be segregated from
other funds of Debtor, and shall be forthwith paid over to
Collateral Agent as Collateral in the exact form received with any necessary
endorsement and/or appropriate stock powers duly executed in blank, to be held
by Collateral Agent as Collateral and as further collateral security for the
Obligations.

    

    6.           Further
Action By Debtor; Covenants
and Warranties.

    

         
6.1           Except for Permitted Liens, Collateral Agent at all times shall have
a perfected security interest in the Collateral.  Debtor represents that it has and will continue to have full title to
the Collateral free from any liens, leases, encumbrances, judgments or other
claims.  The Collateral Agent's security interest in
the Collateral constitutes and will continue to constitute a first, prior and
indefeasible security
interest in favor of Collateral Agent.  Debtor will do all acts and things, and will
execute and file all instruments (including, but not limited to, security
agreements, financing statements, continuation statements, etc.) reasonably
requested by Collateral
Agent to establish, maintain and continue the perfected security interest of
Collateral Agent in the perfected Collateral, and will promptly
on demand, pay all costs and expenses of filing and recording, including the
costs of any searches
reasonably deemed necessary by Collateral Agent from time to time to establish
and determine the validity and the continuing priority of the security interest
of Collateral Agent, and also pay all other claims and charges that, in the
opinion of Collateral Agent, exercised in good faith, are
reasonably likely to materially prejudice, imperil or otherwise affect the
Collateral or Collateral Agent’s or Lenders’ security interests
therein.

    

    
      
        
        

      

      
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6.2           Except in connection with sales of
Collateral, subject to Permitted Liens or other than in the ordinary course of
business, for fair value
and in cash, and except for
Collateral which is substituted by assets of identical or greater
value (with the consent of
the Collateral Agent) or
which is inconsequential in value, Debtor will not sell, transfer, assign or
pledge those items of Collateral (or allow any such items to be sold,
transferred, assigned or pledged), without the prior written consent of
Collateral Agent other than a transfer of the Collateral to a
wholly-owned United States formed and located
subsidiary or to another
Debtor on prior notice to
Collateral Agent, and provided the Collateral remains subject to the security
interest herein described.  Although Proceeds of
Collateral are covered by this Agreement, this shall not be construed to mean that
Collateral Agent consents to any sale of the Collateral, except as provided
herein.  Sales of Collateral in the ordinary course of business shall
be free of the security interest of Lenders and Collateral Agent and
Lenders and Collateral Agent shall
promptly execute such documents (including without limitation releases and
termination statements) as may be required by Debtor to evidence or effectuate the
same.

    

         
6.3           Debtor will, at all reasonable times during
regular business hours and
upon reasonable notice, allow Collateral Agent or its representatives free and
complete access to the Collateral and all of such Debtor's records which in any
way relate to the Collateral, for such inspection and examination as
Collateral Agent reasonably deems
necessary.

    

         
6.4           Debtor, at its sole cost and expense, will
protect and defend this Security Agreement, all of the rights of Collateral
Agent and Lenders hereunder, and the Collateral against the claims and demands
of all other persons.

    

         
6.5           Debtor will promptly notify Collateral Agent
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral, and of any threatened or filed claims or proceedings
that are reasonably likely to affect or impair any of the rights of Collateral Agent
under this Security Agreement in any material respect.

    

         
6.6           Debtor, at its own expense, will obtain and
maintain in force insurance policies covering losses or damage to those items of
Collateral which constitute physical personal property, which insurance
shall be of the types customarily insured against by companies in the same or
similar business, similarly situated, in such amounts (with such deductible
amounts) as is customary for such companies under the same or similar circumstances, similarly
situated.  Debtor shall make the Collateral Agent a loss
payee thereon to the extent of its interest in the Collateral. Collateral Agent
is hereby irrevocably (until the Obligations are paid in full) appointed
Debtor’s attorney-in-fact to endorse any check or draft
that may be payable to such Debtor so that Collateral Agent may collect the
proceeds payable for any loss under such insurance.  The proceeds of
such insurance, less any costs and expenses incurred or paid by
Collateral Agent in the collection thereof,
shall be applied either toward the cost of the repair or replacement of the
items damaged or destroyed, or on account of any sums secured hereby, whether or
not then due or payable.

    

         
6.7           Collateral
Agent may, at its option,
and without any obligation to do so, pay, perform and discharge any and all
amounts, costs, expenses and liabilities herein agreed to be paid or performed
by Debtor upon
Debtor’s
failure
to do so.  All
amounts expended by Collateral Agent in so doing
shall become part of the Obligations secured hereby, and shall be immediately
due and payable by Debtor to Collateral Agent upon demand
and
shall bear interest at the lesser of 15% per annum or the highest legal amount
from the dates of such expenditures until
paid.

    

    
      
        
        

      

      
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6.8           Upon the request of Collateral Agent,
Debtor will furnish to Collateral Agent within
five (5) business days thereafter, or to any proposed assignee of this Security
Agreement, a written statement in form reasonably satisfactory to
Collateral Agent, duly
acknowledged, certifying the amount of the principal and interest and any other
sum then owing under the Obligations, whether to its knowledge any claims,
offsets or defenses exist against the Obligations or against this Security
Agreement, or any of the terms and provisions of
any other agreement of Debtor securing the Obligations.  In
connection with any assignment by Collateral Agent of this Security Agreement,
Debtor hereby agrees to cause the insurance
policies required hereby to be carried by such Debtor, if any, to be
endorsed in form satisfactory to Collateral Agent or to such assignee, with loss
payable clauses in favor of such assignee, and to cause such endorsements to be
delivered to Collateral Agent within ten (10) calendar days after request therefor by Collateral
Agent.

    

         
6.9           Debtor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other reasonable assurances or instruments and take further steps relating to
the Collateral and other property or rights covered by the security interest
hereby granted, as the Collateral Agent may
reasonably require to perfect its security interest
hereunder.

    

         
6.10         Debtor represent and warrant that they are the
true and lawful exclusive owners of the Collateral, free and clear of any liens
and encumbrances.

    

         
6.11         Debtor hereby agrees not to divest itself of
any right under the Collateral except as permitted herein absent prior written
approval of the Collateral Agent, except to a subsidiary organized and located
in the United
States on prior notice to Collateral
Agent provided the
Collateral remains subject to the security interest herein described.

    

         
6.12         Debtor shall cause each Subsidiary of such
Debtor in existence on the date hereof and each Subsidiary not in existence on
the date hereof to execute and deliver to Collateral Agent promptly and in any
event within 10 days after the formation, acquisition or change in status
thereof (A) a guaranty guaranteeing the Obligations and (B) if requested by
Collateral Agent, a security and pledge agreement substantially in
the form of this Agreement together with
(x) certificates evidencing all of the capital stock of each Subsidiary of and
any entity owned by such Subsidiary, (y) undated stock powers executed in blank
with signatures guaranteed, and (z) such opinion of
counsel and such approving
certificate of such Subsidiary as Collateral Agent may reasonably request in
respect of complying with any legend on any such certificate or any other matter
relating to such shares and
(C) such other agreements, instruments, approvals, legal opinions or other documents
reasonably requested by Collateral Agent in order to create, perfect, establish
the first priority of or otherwise protect any lien purported to be covered by
any such pledge and security agreement or otherwise to effect the intent that all property and assets
of such Subsidiary shall become Collateral for the Obligations.  For
purposes of this Agreement, “Subsidiary” means, with respect to any entity at
any date, any corporation, limited or general partnership, limited
liability company, trust,
estate, association, joint venture or other business entity) of which more
than 25% of (A) the outstanding capital
stock having (in the absence of contingencies) ordinary voting power to elect a
majority of the board of directors or other managing body of such entity,
(B) in the case of a partnership or limited liability company, the interest
in the capital or profits of such partnership or limited liability company or
(C) in the case of a trust, estate, association, joint venture
or other entity, the beneficial interest
in such trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity. As of the date of
this Agreement, the Debtor
does not have any Subsidiaries.

    

    
      
        
        

      

      
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    7.           Power of
Attorney.

     

          At any time
an Event of
Default has
occurred and is
continuing, Debtor hereby irrevocably constitutes and
appoints the Collateral Agent as the true and lawful attorney of such
Debtor, with full power of
substitution, in the place and stead of such Debtor and in the name of such
Debtor or otherwise, at any time or times, in the discretion of the Collateral
Agent, to take any action and to execute any instrument or document which the
Collateral Agent may deem necessary or
advisable to accomplish the purposes of this Agreement.  This power of
attorney is coupled with an interest and is irrevocable until the Obligations
are satisfied.

    

    8.           Performance
By The Collateral Agent.

     

          If a Debtor
fails to perform any
material covenant, agreement, duty or obligation of such Debtor under this
Agreement, the Collateral Agent may, after any applicable cure period, at any
time or times in its discretion, take action to effect performance of such
obligation.  All reasonable expenses
of the Collateral Agent incurred in connection with the foregoing authorization
shall be payable by Debtor as provided in Paragraph 12.1
hereof.  No discretionary right, remedy or power granted to the
Collateral Agent under any
part of this Agreement shall be deemed to impose any obligation whatsoever on
the Collateral Agent with respect thereto, such rights, remedies and powers
being solely for the protection of the Collateral Agent.

    

    9.           Event of
Default.

    

          An event of
default ("Event of
Default") shall be deemed to have occurred hereunder upon the occurrence of any
event of default as defined and described in this Agreement,
in the Notes, the Subscription Agreement, and any other
agreement to which Debtor and a Lender are parties.   Upon and after any
Event of Default, after the applicable cure period, if any, any or all of the
Obligations shall become immediately due and payable at the option of the
Collateral Agent, for the benefit of the Lenders, and the Collateral Agent may dispose of Collateral as provided
below.  A default
by Debtor of any of its material obligations pursuant to this Agreement and any
of the Transaction Documents (as defined in the Subscription Agreement) shall be
an Event of Default hereunder and an “Event of Default” as defined in the Notes, and
Subscription Agreement.

    

    10.         Disposition
of Collateral.

     

          Upon and after
any Event of Default which is then continuing,

    

         
10.1         The Collateral Agent may exercise its
rights with respect to each and every component of the Collateral, without regard to the
existence of any other security or source of payment for the
Obligations.  In addition to other rights and remedies provided for
herein or otherwise available to it, the Collateral Agent shall have all of the
rights and remedies of a lender on default under
the Uniform Commercial Code then in effect in the State of New York.

    

         
10.2         If any notice to Debtor of the sale or other disposition of
Collateral is required by then applicable law, five business (5) days prior written notice (which Debtor agree is reasonable notice within the
meaning of Section 9.612(a) of the Uniform Commercial Code) shall be given to
Debtor of the time and place of any sale of
Collateral which Debtor hereby agree may be by private
sale.  The rights granted in this Section are in addition
to any and all rights available to Collateral Agent under the Uniform Commercial
Code.

    

         
10.3         The Collateral Agent is authorized, at
any such sale, if the Collateral Agent deems it advisable to do so, in order to
comply with any applicable
securities laws, to restrict the prospective bidders or purchasers to persons
who will represent and agree, among other things, that they are purchasing the
Collateral for their own account for investment, and not with a view to
the distribution or resale thereof, or
otherwise to restrict such sale in such other manner as the Collateral Agent
deems advisable to ensure such compliance.  Sales made subject to such
restrictions shall be deemed to have been made in a commercially
reasonable manner.

    

    
      
        
        

      

      
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10.4         All proceeds received by the Collateral
Agent for the benefit of the Lenders in respect of any sale, collection or other
enforcement or disposition of Collateral, shall be applied (after deduction of
any amounts payable to the Collateral Agent pursuant to Paragraph 12.1 hereof)
against the Obligations pro rata among the Lenders in proportion to their
interests in the Obligations.   Upon payment in full of all
Obligations, Debtor shall be entitled to the return of all
Collateral, including cash,
which has not been used or applied toward the payment of Obligations or used or
applied to any and all costs or expenses of the Collateral Agent incurred in
connection with the liquidation of the Collateral (unless another person is
legally entitled thereto).  Any assignment of
Collateral by the Collateral Agent to Debtor shall be without representation or
warranty of any nature whatsoever and wholly without recourse.  To the
extent allowed by law, each Lender may purchase the Collateral and pay for
such purchase by offsetting
up to such Lender’s pro rata portion of the purchase price
with sums owed to such Lender by Debtor arising under the Obligations or any
other source.

    

    11.         Waiver of
Automatic Stay.   Debtor acknowledges
and agrees that should a proceeding under any bankruptcy or
insolvency law be commenced by or against Debtor, or if any of the Collateral
should become the subject of any bankruptcy or insolvency proceeding, then the
Collateral Agent should be entitled to, among other relief to which the Collateral Agent or Lenders may be
entitled under the Note, Subscription Agreement and any other agreement to which
the Debtor, Lenders or Collateral Agent are parties, (collectively "Loan
Documents") and/or applicable law, an order from the court granting immediate relief from the
automatic stay pursuant to 11 U.S.C. Section 362 to permit the Collateral Agent
to exercise all of its rights and remedies pursuant to the Loan Documents and/or
applicable law.  Debtor EXPRESSLY WAIVES THE BENEFIT OF THE
AUTOMATIC STAY IMPOSED BY 11 U.S.C.
SECTION 362.  FURTHERMORE, Debtor EXPRESSLY ACKNOWLEDGES AND AGREES
THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE
OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C.
SECTION 105) SHALL STAY, INTERDICT, CONDITION,
REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE COLLATERAL AGENT TO ENFORCE ANY
OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE
LAW.  Debtor hereby consents to any motion for relief from stay
which may be filed by the Collateral Agent
in any bankruptcy or insolvency proceeding initiated by or against Debtor, and
further agrees not to file any opposition to any motion for relief from stay
filed by the Collateral Agent.  Debtor represents, acknowledges and agrees that this provision is a
specific and material aspect of this Agreement, and that the Collateral Agent
would not agree to the terms of this Agreement if this waiver were not a part of
this Agreement.  Debtor further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Collateral Agent
nor any person acting on behalf of the Collateral Agent has made any
representations to induce this waiver, that Debtor has been represented
(or has had the opportunity to be
represented) in the signing of this Agreement and in the making of this waiver
by independent legal counsel selected by Debtor and that Debtor has had the
opportunity to discuss this waiver with counsel.   Debtor further
agrees that any bankruptcy or insolvency
proceeding initiated by Debtor will only be brought in the Federal Court within
the Southern District of New York.

    

    12.         Miscellaneous.

     

          12.1         Expenses.  Debtor shall pay to the Collateral Agent, on
demand, the amount of any
and all reasonable expenses, including, without limitation, attorneys' fees,
legal expenses and brokers' fees, which the Collateral Agent may incur in
connection with (a) sale, collection or other enforcement or disposition of
Collateral; (b) exercise or enforcement of any the rights,
remedies or powers of the Collateral Agent hereunder or with respect to any or
all of the Obligations upon breach or threatened breach; or (c) failure by
Debtor to perform and observe any agreements
of Debtor contained herein which are performed by the
Collateral Agent.

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

            12.2         Waivers,
Amendment and Remedies.  No course of dealing by the
Collateral Agent and no failure by the Collateral Agent to exercise, or delay by
the Collateral Agent in exercising, any right, remedy or power hereunder shall operate as a
waiver thereof, and no single or partial exercise thereof shall preclude any
other or further exercise thereof or the exercise of any other right, remedy or
power of the Collateral Agent.  No amendment, modification or
waiver of any provision of this Agreement
and no consent to any departure by Debtor therefrom, shall, in any event, be
effective unless contained in a writing signed by the Collateral Agent, and then
such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given.  The rights, remedies and powers of the
Collateral Agent, not only hereunder, but also under any instruments and
agreements evidencing or securing the Obligations and under applicable law are
cumulative, and may be exercised by the
Collateral Agent from time to time in such order as the Collateral Agent may
elect.

    

    

          12.3         Notices.  All notices or other
communications given or made hereunder shall be in writing and shall be
personally delivered or deemed delivered the first business day
after being faxed (provided that a copy is delivered by first class mail) to the
party to receive the same at its address set forth below or to such other
address as either party shall hereafter give to the other by notice duly made under this
Section:

    
 

    To Debtor:                                             Ido
Security Inc.

    17 State Street

    New York, NY 10004

    Fax: (646) 285-0026

    

    With a copy by telecopier only
to:

    

    Aboudi & Brounstein

    3 Gavish St.

    Kfar Saba, Israel

    Fax: 972-9-764-4834

    

    To
Lenders:                                           To the addresses and telecopier numbers
set forth

    on Schedule A

    

    

    To the Collateral
Agent:                      Barbara R. Mittman,
Esq.

    551 Fifth Avenue, Suite
1601

    New York, New York 10176

    Fax: (212) 697-3575

    

    If to Debtor, Lender or Collateral
Agent,

    with a copy by telecopier only
to:

    

    Grushko & Mittman,
P.C.

    551 Fifth Avenue, Suite
1601

    New York, New York 10176

    Fax: (212) 697-3575

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    Any party may change its address by
written notice in accordance with this paragraph.

     

          12.4         Term;
Binding Effect.  This Agreement shall (a)
remain in full force and effect until payment and satisfaction in full of all of
the Obligations; (b) be binding upon Debtor, and its successors and permitted
assigns; and (c) inure to the benefit of the Collateral Agent, for the
benefit of the Lenders and their respective successors and
assigns.

     

          12.5         Captions.  The captions of Paragraphs,
Articles and Sections in this Agreement have been included for convenience of
reference only, and shall not define or limit the provisions hereof
and have no legal or other significance whatsoever.

    

          12.6         Governing
Law; Venue; Severability.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to conflicts of
laws principles that would
result in the application of the substantive laws of another
jurisdiction, except to the extent that the perfection of the security
interest granted hereby in respect of any item of Collateral may be governed by
the law of another jurisdiction.  Any legal action or
proceeding against a Debtor with respect to this Agreement may be brought in the
courts in the State of New York or of the United States for the Southern District
of New York, and, by execution and delivery of this Agreement, Debtor hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts.  Debtor hereby irrevocably waives any objection
which they may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement brought in the aforesaid courts and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.  If any provision of
this Agreement, or the application thereof to any person or circumstance, is
held invalid, such invalidity shall not affect any other provisions which can be given effect without the
invalid provision or application, and to this end the provisions hereof shall be
severable and the remaining, valid provisions shall remain of full force and
effect.

    

          12.7        
Entire
Agreement.  This
Agreement contains the
entire agreement of the parties and supersedes all other agreements and
understandings, oral or written, with respect to the matters contained
herein.

    

          12.8        
Counterparts/Execution.  This Agreement may be
executed in any number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same
instrument.  This Agreement may be executed by facsimile signature and
delivered by facsimile
transmission.

    

    13.         Intercreditor
Terms.   As
between the Lenders, any distribution under paragraph 10.4 shall be made
proportionately based upon the remaining principal amount (plus accrued and
unpaid interest) to each as to the total amount then owed to the Lenders as a
whole.  The rights of each Lender hereunder are pari
passu to the rights of the
other Lenders hereunder.  Any recovery hereunder shall be shared
ratably among the Lenders according to the then remaining principal amount
owed to each (plus accrued
and unpaid interest) as to the total amount then owed to the Lenders as a
whole.

    

    14.         Termination;
Release.  When
the Obligations have been indefeasibly paid and performed in full or all
outstanding Convertible Notes have been converted to common stock pursuant to
the terms of the Convertible Notes and the Subscription Agreements, this Agreement shall terminated, and
the Collateral Agent, at the request and sole expense of the Debtor, will execute and deliver to the
Debtor the proper instruments (including UCC
termination statements) acknowledging the termination of the Security Agreement,
and duly assign, transfer and deliver to the Debtor, without recourse, representation or
warranty of any kind whatsoever, such of the Collateral, including, without limitation,
Securities and any Additional Collateral, as may be in the possession of the
Collateral Agent.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    15.         Collateral
Agent.

     

          15.1         Collateral
Agent Powers.  The powers conferred on the
Collateral Agent hereunder are solely to protect its interest (on behalf of the
Lenders) in the Collateral and shall not impose any duty on it to exercise any
such powers.

     

          15.2         Reasonable
Care.  The
Collateral Agent is required to exercise reasonable care in the custody and
preservation of any Collateral in its possession; provided,
however, that the Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of any of the Collateral if it takes such
action for that purposes as any owner thereof reasonably requests in writing at times other than upon
the occurrence and during the continuance of any Event of Default, but failure
of the Collateral Agent, to comply with any such request at any time shall not
in itself be deemed a failure to exercise reasonable care.

    

    

    [THIS SPACE INTENTIONALLY LEFT
BLANK]

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    IN WITNESS WHEREOF,
the undersigned have
executed and delivered this Security Agreement, as of the date first written
above.

    

    "DEBTOR"                                                                                                                 "THE COLLATERAL
AGENT"

    IDO SECURITY
INC.                                                                                                             BARBARA R. MITTMAN

    a  Nevada corporation

    

    

    

    By:
_____________________________________                                                                                              
    _____________________________________

    

    Its:
_____________________________________

    

     

                                        APPROVED BY “LENDERS”:

    

    

    Name of
Lender
(Print):                                                                                                                  
         Name of Lender
(Print):

    

    ________________________________________                                                                                                      
 ______________________________________

    

    

    

    By:____________________________________                                                                                                           By:____________________________________

    

    Print
Name of
Signator:_____________________                                                                                                          
Print Name of Signator:____________________

    

    

    

    

     

    

    

    

    This Security Agreement may be signed by facsimile signature
and

    delivered by confirmed facsimile
transmission.

     

    12ex10-1.htm

    
      

    

    Exhibit
10.1

     

     

    Agreement

    

    Executed
in Petach Tikvah, this 31st day of December, 2007

    

    BETWEEN:   Isramco
Inc., a company incorporated according to the laws of Delaware

    whose
address for the purpose of this Agreement is:

    Isramco
Inc., Israeli branch, 8 Granite St., P.O.B. 10188,

    Petach
Tikvah 49002

    
      (hereinafter:
"Isramco”)

       

    

    
      of the one
part

    

     

    
      	
              AND:

            	
              I.O.C
      - Israel Oil Company Ltd., a company incorporated according to the laws of
      the State of Israel whose address for the purpose of this Agreement is: 8
      Granite St., P.O.B. 10188, Petach Tikvah
49002

            

    

    
      (hereinafter:
"IOC”)

    

    
      of the other
part

    

    

    
      WHEREAS:

    

    

    
      	 
      	
              (1)

            	
              IOC
      and Isramco are subsidiaries of Naphtha Israel Oil Company Ltd.,
      (hereinafter: “Naphtha”) that holds
      some 99.99% of the paid-up share capital of IOC and some 48.4% of the
      paid-up capital of Isramco;

            
	 
      	 
      	 
      
	 
      	
              (2)

            	
              Isramco
      is an American company whose shares are traded on the Nasdaq and whose
      principal activity is exploration, development and production of oil and
      gas in the United States;

            
	 
      	 
      	 
      
	 
      	
              (3)

            	
              Isramco
      is also active in oil and gas exploration in Israel, that is carried out
      through Isramco’s Israeli branch (hereinafter: “the Branch”) and also
      holds rights and assets in Israel;

            
	 
      	 
      	 
      
	 
      	
              (4)

            	
              IOC
      similarly has activity in the field of oil and gas exploration in Israel
      and real estate and acts as the executive arm of Naphtha’s activity in
      Israel;

            
	 
      	 
      	 
      
	 
      	
              (5)

            	
              Due
      to a significant increase in 2007 in Isramco’s activity in the field of
      oil and gas in the United States with the completion of the acquisition of
      some 650 oil and gas wells in the United States (hereinafter: “the Five States
      Transaction”), the volume of its activity in Israel is currently
      minor compared with that of its activity in the United
    States;

            
	 
      	 
      	 
      
	 
      	
              (6)

            	
              In
      order to finance the Five States Transaction Isramco took various loans
      including inter
      alia, a loan in the sum of $12 million from IOC that was intended
      to be secured by a charge over Jay Petroleum’s assets, a subsidiary of
      Isramco in the United States (hereinafter: “the IOC Loan”) and also
      a loan in the sum of $30 million from Naphtha (hereinafter: “the Naphtha
      Loan”);

            
	 
      	 
      	 
      
	 
      	
              (7)

            	
              Following
      the significant growth mentioned that occurred in Isramco’s activity in
      the United States and the minor volume of its current activity in Israel,
      Isramco wishes to concentrate its activity in the United States, including
      the purchase of further oil and gas assets in respect of which it will
      require further financing and to charge Jay Petroleum’s assets in order to
      liquidate its activity in Israel and sell and transfer to IOC the Branch
      activity, including its rights, obligations and assets, including real
      estate, as set out below in this Agreement (hereinafter: “the Activity, Assets,
      Obligations and Rights Transferred”), in a manner whereby the
      proceeds of the sale thereof will be applied to fully repay the IOC Loan
      and the interest accrued thereon, and to partially pay the interest that
      has accrued in respect of the Naphtha Loan, as more particularly set out
      in this Agreement;

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 
      	
              (8)

            	
              IOC
      wishes to acquire and take by transfer from Isramco the Activity, Assets,
      Obligations and Rights Transferred in a manner whereby the entire activity
      of the Naphtha Group in Israel will be concentrated through it, as more
      particularly set out below in this
Agreement.

            

    

    

    It
is therefore declared, stipulated and agreed between the parties as
follows:

    

    
      	
              1.

            	
              General

            
	 
      	 
      	 
      
	 
      	
              1.1

            	
              The
      preamble to this Agreement and the Appendices thereto constitute an
      integral part thereof.

            
	 
      	 
      	 
      
	 
      	
              1.2

            	
              The
      headings to the clauses contained in this Agreement are designed for ease
      of reference and be of no significance in the interpretation
      thereof.

            
	 
      	 
      	 
      
	
              2.

            	
              The Activity, Assets,
      Obligations and Rights Transferred from Isramco to IOC and the
      consideration payable in respect thereof

            
	 
      	 
      	 
      
	 
      	
              Isramco
      hereby sells, transfers and assigns to IOC the Activity, Assets,
      Obligations and Rights Transferred on the conditions and for the
      consideration hereinafter set forth:

            
	 
      	 
      	 
      
	 
      	
              Participation
      units in the limited oil partnerships - Isramco Negev 2 (some 8.12%), IOC
      Dead Sea (some 24.97%) and Naphtha Exploration (some 0.12%) (hereinafter:
      the “Participation
      Certificates”). The Participation Certificates will be transferred
      to IOC on December 31, 2007 by an off-the-exchange sale for an aggregate
      consideration of NIS 47,846,832 that sum having been fixed according
      to the stock exchange value thereof on December 30, 2007 at a 10% discount
      with respect to the IOC Dead Sea Participation Units, a 7% discount with
      respect to the Isramco Negev 2 Participation Units and with no discount
      with respect to the Naphtha Exploration Participation Units. These
      discounts were fixed based on an independent appraiser’s evaluation, a
      copy of which is attached as Appendix 2.1 (hereinafter: “the Appraiser’s
      Evaluation”).

            
	 
      	 
      	 
      
	 
      	
              All
      the operating activity of the Israeli Branch, including receiving the sums
      payable to the Branch by the operator of the Med Yavneh holding, the
      amounts payable to the Branch in respect of the provision of the
      management services to the General Partner of the Isramco Negev 2
      partnership, the amounts due to the Branch as operator of the Samson licence and the
      preliminary Hof
      permit and provision of all the services in respect thereof (hereinafter:
      “the Operation”).
      The Operation will be transferred to IOC in consideration of the sum of
      NIS 1,580,000, as fixed according to the Appraiser’s Evaluation (Appendix
      2.1).

            
	 
      	 
      	 
      
	 
      	
              Participation
      rights at the rate of 1% of the Marine 332/Samson Licence (“Samson Licence”) that
      will be transferred to IOC against IOC’s undertaking to bear its
      proportionate share of the geological and geophysical costs that were
      expended in the area of the Samson Licence in the sum of NIS 4,358 ($1,130
      out of the sum of $113,000) and the expenses that will apply in the future
      in the field of the Samson Licence or any other oil asset that will
      replace the same. This consideration is the same as that at which Isramco
      transferred rights in the Samson Licence to third parties (including to
      the oil partnerships, Isramco Negev 2, IOC Dead Sea and Naphtha
      Exploration).

            
	 
      	 
      	 
      
	 
      	
              Participation
      rights at the rate of 1% in the preliminary marine permit 189/Hof (“Hof Permit”) that will
      be transferred to IOC against IOC’s undertaking to bear 1.25% of the
      geological and geophysical costs that were made in the area of the Hof
      Permit, in the sum of NIS 6,750 ($1,750 out of the sum of $140,000) and
      also 1.25% of the exploration and development expenses that will apply in
      the future in the field of the Hof Permit or any other oil asset that will
      replace the same, up to an aggregate amount of $4 million, following which
      the Partners in the Hof Permit will bear the exploration and development
      costs in accordance with the percentage of their rights in the permit (the
      foregoing reflecting bearing Isramco Inc’s share in the Hof Permit by the
      remaining partners to the permit, including amongst them IOC). The
      consideration is the same as that at which Isramco transferred rights in
      the Hof Permit to third parties (including to the oil partnerships:
      Isramco Negev 2, IOC Dead Sea and Naphtha Exploration).

            
	 
      	 
      	 
      
	 
      	
              All
      the holdings (100%) of Isramco in Oil and Gas, that will be sold to IOC
      according to the market value of the Oil and Gas assets in the sum of NIS
      290,242. The parties will sign on the execution of this Agreement a share
      transfer instrument in Oil and Gas from Isramco to IOC, in the form
      attached hereto as Appendix 2.5.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 
      	
              Furniture,
      equipment and vehicles of the Branch described in Appendix 2.6 hereto
      (hereinafter: “the Fixed
      Assets”) that are being purchased at the price of amortized cost,
      in the sum of NIS 360,940.

            
	 
      	 
      	 
      
	 
      	
              The
      remaining liabilities in respect of auditing, legal and general services
      as of December 31, 2007, described in Appendix 2.7 hereof (hereinafter:
      “Outstanding
      Liabilities”) that will be transferred to IOC according to the
      value thereof as of the date of the execution of this Agreement in the sum
      of NIS 721,067.

            

    

    

    
      	 
      	
              The
      capital note in the sum of NIS 722,300 that bears no interest and/or
      linkage and is payable on call, that was issued by Oil and Gas to Isramco
      in respect of a loan advanced by Isramco to Oil and Gas (hereinafter:
      “the Capital
      Note”) that will be transferred to IOC against the face value
      thereof. Isramco assigns and transfers to IOC on the execution of this
      Agreement all of its rights in the Capital Note.

            
	 
      	 
      	 
      
	 
      	
              Tradable
      securities that are held by the Branch as listed in Appendix 2.9 attached
      hereto (hereinafter: “Tradable Securities”)
      that are transferred to IOC according to market value as of the execution
      date of this Agreement, in the aggregate sum of
      NIS 3,110,500.

            
	 
      	 
      	 
      
	 
      	
              Two
      loans taken by the Branch from Bank Leumi le-Israel B.M. in the aggregate
      amount of NIS 3,403,072 repayable on January 2, 2008 and January 23, 2008
      (hereinafter: “the
      Loans”) that will be repaid by IOC.

            
	 
      	 
      	 
      
	 
      	
              Undertakings
      in the sum of NIS 434,873 in connection with the Branch employees
      enumerated in Appendix 2.11 (hereinafter: “the Employees”) that
      will be employed by IOC as from January 1, 2008 while retaining continuity
      of rights, as set out in clause 4 below.

            
	 
      	 
      	 
      
	 
      	
              Land
      in the area of some 31 dunams in Petach Tikvah known as Parcel 2, in Block
      6350 (hereinafter: “the
      Land”) that is sold to IOC at the price of NIS 3,702,720 as set out
      in the sale agreement of even date, signed contemporaneously with the
      execution of this Agreement, a copy of which is attached as Appendix 2.12.
      The consideration in respect of the Land was fixed based on the appraisal
      of an independent land appraiser, a copy of which appraisal is attached as
      Appendix 2.12(1).0

            
	 
      	 
      	 
      
	 
      	
              Value
      Added Tax,  to the extent it applies in respect of the Activity,
      Assets, Obligations and Rights Transferred or any part thereof will be
      borne and paid by IOC.

            
	 
      	 
      	 
      
	
              3.

            	
              Declarations of the
      parties

            
	 
      	 
      	 
      
	 
      	
              Isramco
      declares and warrants as follows:

            
	 
      	 
      	 
      
	 
      	
              The
      Activity, Assets, Obligations and Rights Transferred will be transferred
      to IOC free and clear of all and any attachments, mortgages, charges or
      other right intended to secure payment.

            
	 
      	 
      	 
      
	 
      	
              Isramco’s
      board of directors has approved its entering under this
      Agreement.

            
	 
      	 
      	 
      
	 
      	
              There
      is nothing by law or agreement to prevent it from entering into this
      Agreement.

            
	 
      	 
      	 
      
	 
      	
              IOC
      declares and warrants as follows:

            
	 
      	 
      	 
      
	 
      	
              That
      it is well acquainted with the Activity, Assets, Obligations and Rights
      Transferred, that all the factual, legal, accounting and professional data
      relating to the transaction to which this Agreement relates are known and
      familiar to it, and has found them to be suitable for its needs and
      purposes, and subject to the truthfulness of Isramco’s declarations above,
      it is purchasing the Activity, Assets, Obligations and Rights Transferred
      “as is” on the date of the execution of this Agreement, and subject as
      provided in this Agreement, it neither has nor will have any claims and/or
      demands in connection with the Activity, Assets, Obligations and Rights
      Transferred.

            
	 
      	 
      	 
      
	 
      	
              There
      is nothing by law or agreement to prevent it from entering into this
      Agreement.

            
	 
      	 
      	 
      
	 
      	
              IOC’s
      board of directors as well as the Board of Naphtha has approved its
      entering into this Agreement.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              4.

            	
              Employees

            
	 
      	 
      	 
      
	 
      	
              4.1

            	
              In
      consequence of the transfer of Isramco’s activity and assets to IOC as set
      out in this Agreement, it is agreed between the parties that from January
      1, 2008 onwards, all the Employees (set out in Appendix 2.11) will be
      employed by IOC.

            
	 
      	
              4.2

            	
              The
      Employees will continue to carry out their duties on the same terms and
      continuity of their rights will be preserved.

            
	 
      	 
      	 
      
	 
      	
              4.3

            	
              IOC
      hereby undertakes that all the terms of their employment and the
      Employees’ remaining rights will be fully preserved in a manner whereby
      IOC will enter into Isramco’s shoes as employer in all
      respects.

            

    

    

    
      	 
      	
              4.4

            	
              Isramco
      will transfer managers insurance policy(ies) of the Employees (to the
      extent they exist) to IOC’s ownership. Isramco will pay IOC the amount of
      the liability for severance pay, recreation allowance and accrued vacation
      in respect of the Employees for the period culminating on December 31,
      2007 that is not covered by deposits made in severance pay funds - see
      also clause 2.11 above.

            
	 
      	 
      	 
      
	 
      	
              4.5

            	
              The
      parties undertake to sign any document and make any report that will be
      required in order to preserve continuity of the Employees’ rights and the
      terms of their employment.

            
	 
      	 
      	 
      
	
              5.

            	
              The Consideration and method of
      payment thereof

            
	 
      	 
      	 
      
	 
      	
              5.1

            	
              As
      set out in clause 2 above, in consideration of the Activity, Assets,
      Obligations and Rights Transferred, IOC will pay Isramco the following
      amounts:

            

    

    

    
      	
              Asset

            	
              Consideration
      (in

              NIS
      )

            
	
              Participation
      Units (clause 2.1 above)

            	
              47,846,832

            
	
              Operation
      (clause 2.2 above)

            	
              1,580,000

            
	
              Participation
      rights (1%) in the Samson Licence (clause 2.3 above)

            	
              4,358

            
	
              Participation
      rights (1%) in the Hof Permit (clause 2.4 above)

            	
              6,750

            
	
              Holdings
      in Isramco Oil and Gas Ltd., (clause 2.5 above)

            	
               (290,242
      )

            
	
              The
      Fixed Assets (clause 2.6 above)

            	
              360,940

            
	
              The
      Outstanding Liabilities (clause 2.7 above)

            	
              (721,067
      )

            
	
              The
      Capital Note (clause 2.8 above)

            	
              722,300

            
	
              Tradable
      Securities (clause 2.9 above)

            	
              3,110,500

            
	
              Loans
      (clause 2.10 above)

            	
               (3,403,072)

            
	
              Liabilities
      to the Employees (clause 2.11 above)

            	
              (434,873
      )

            
	
              The
      Land (clause 2.12 above)

            	
              3,702,720

            
	
              Total

            	
              52,485,146

            

    

     

    
      	
            	
               
      

            	
              (hereinafter:
      “the
      Consideration”)

            

    

    

    
      	 
      	
              5.2

            	
              The
      Consideration will be paid as follows:

            
	 
      	 
      	 
      	 
      
	 
      	 
      	
              5.2.1

            	
              The
      sum of NIS 49,781,045 ($12,906,675), will be deemed to be full repayment
      of the IOC Loan (including accrued interest) in a manner whereby the IOC
      Loan will be fully repaid on December 31, 2007.

            
	 
      	 
      	 
      	 
      
	 
      	 
      	
              5.2.2

            	
              The
      balance of the Consideration in the sum of NIS 2,704,101 ($701,089), will
      be transferred at Isramco’s instruction, on December 31, 2007, to
      partially repay the interest that has accrued in respect of the Naphtha
      Loan.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 
      	
              5.3

            	
              Out
      of each amount paid according to this Agreement as repayment on account of
      interest in respect of loans that were taken by Isramco, tax at source
      will be deducted (if and to the extent it is required).

            
	 
      	 
      	 
      	 
      
	
              6.

            	
              Assets and Rights not
      Transferred to IOC

            

    

    

    
      	 
      	
              For
      the avoidance of any doubt, it is hereby agreed and declared that the
      following assets/rights are not included within the scope of the Activity,
      Assets, Obligations and Rights Transferred to IOC covered by this
      Agreement and which will remain the exclusive property of
      Isramco:

            
	 
      	
              1.

            	
              Isramco’s
      rights of participation in the Med Yavneh holding at the rate of
      0.4584%.

            
	 
      	
              2.

            	
              Right
      to receive a royalty at the rate of 5% in relation to the container
      licences and grant of the Samson Licence which, as of the execution of
      this Agreement, has been assigned by Oil and Gas by complete and
      irrevocable final assignment to Isramco Inc.

            
	 
      	
              3.

            	
              All
      the royalties of all and any kind whatsoever to which Isramco is entitled
      from various oil assets in Israel.

            

    

    

    
      	
              7.

            	
              Assignment of
      Isramco’s undertaking in connection with the provision of a bank
      guaranty:

            
	 
      	 
      	 
      
	 
      	
              Isramco
      declares and acknowledges that in its capacity of operator of the “Gad 1”
      Drill, it imported tools and parts for the purpose of the drill free of
      customs duty and that it provided to Customs Collection Jaffa, a bank
      guaranty of Bank Leumi le-Israel B.M. (hereinafter: “the Bank”), in the sum
      of NIS 1 million (hereinafter: “the Bank Guaranty”) to
      secure payments of customs duties in respect of those tools and parts, if
      and to the extent it transpires that no use will have been made thereof
      for purposes of the drilling and they will not be re-exported. Isramco is
      proceeding to file the necessary reports with the customs authorities in
      order to enable them to provide a release and cancel the Bank Guaranty,
      and to the best of its estimation, the Bank Guaranty will be returned and
      cancelled during a period not exceeding 12 months from the date of the
      execution of this Agreement.

            
	 
      	 
      	 
      
	 
      	
              Within
      the framework of the transaction to which this Agreement relates and in
      order to enable Isramco to conclude its activity in Israel and close its
      bank accounts, it has been agreed between the parties that Isramco will
      assign to IOC and IOC will assume Isramco’s liabilities towards the Bank
      in connection with the Bank Guaranty and will sign any document that will
      be required for that purpose, subject to Isramco’s indemnity undertaking
      set out in clause 7.3 hereof.

            
	 
      	 
      	 
      
	 
      	
              Isramco
      hereby finally and irrevocably undertakes to IOC to indemnify IOC in
      respect of any sum or expense that IOC will be liable for in connection
      with the Bank Guaranty, and the same to be paid by Isramco to IOC within 7
      days of the date of IOC’s first demand.

            
	 
      	 
      	 
      
	
              8.

            	
              Miscellaneous

            
	 
      	 
      	 
      
	 
      	
              8.1

            	
              The
      parties undertake to sign any document that will be required, make any
      report to any competent authority and act to the extent necessary as
      required by law for the purpose of performing this Agreement and
      transferring the Assets Transferred from Isramco to IOC, including to the
      Register of Companies.

            
	 
      	 
      	 
      
	 
      	
              8.2

            	
              This
      Agreement encompasses everything that has been agreed between the parties
      and the parties hereby acknowledge that save as herein provided, nothing
      has been verbally agreed between them.

            
	 
      	 
      	 
      
	 
      	
              8.3

            	
              No
      amendment, modification, addition or supplement will be made to this
      Agreement nor any waiver in relation to anything mentioned herein will be
      of any effect unless made in writing and signed by the
      parties.

            
	 
      	 
      	 
      
	 
      	
              8.4

            	
              No
      extension and/or concession and/or waiver will affect any of the rights of
      any of the parties nor will any waiver be deemed to be acquiescence or
      admission nor constitute any impediment to the exercise of any
      rights.

            
	 
      	 
      	 
      
	 
      	
              8.5

            	
              Each
      party will bear the taxes and/or payments applicable to it, (to the extent
      they apply by law) in respect of this Agreement.

            
	 
      	 
      	 
      
	 
      	
              8.6

            	
              The
      addresses of the parties for the purpose of this Agreement are as set out
      at the head of this Agreement. Any notice sent by one party to the other
      by registered mail will be deemed to have been received after 72 hours
      have elapsed from the date of dispatch. Notices sent by fax or by
      messenger will be deemed to have been received upon the transfer or
      delivery thereof.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    In
witness whereof the parties have set their hands:

    

     

    
      	
              ______________________

            	
              ____________________________

            
	
              Isramco
      Inc.

            	
              I.O.C
      - Israel Oil Company Ltd.

            

    

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Addendum

    

    Executed
in Petach Tikvah, this 1st day of January, 2008

    

    
      BETWEEN:  I.O.C -
Israel Oil Company Ltd.,

    

    
      	
               
      

            	
              of
      8 Granite St., P.O.B. 10188,

            

    

    
      	
               
      

            	
              Petach
      Tikvah 49002

            

    

    
      	
               
      

            	
              (hereinafter:
      "IOC”)

            

    

    

    
      of the one
part

    

    

    

    AND:             Isramco
Inc.,

    whose
address for the purpose of this Agreement is:

    c/o
Naphtha, at 8 Granite St., P.O.B. 10188,

    Petach
Tikvah 49002

    
      	
               
      

            	
              (hereinafter:
      "Isramco”)

            

    

    
      of the other
part

    

    

    
      	
               
      

            	
              WHEREAS:

            

    

    

    
      	 
      	
              (1)

            	
              IOC
      and Isramco are consolidated companies of Naphtha;

            
	 
      	 
      	 
      
	 
      	
              (2)

            	
              An
      agreement was signed between the parties on December 31, 2007 whereby
      Isramco sold and transferred to IOC the activity in the assets,
      obligations and rights of Isramco’s Israeli branch (hereinafter: “the Principal
      Agreement”) the original of such Agreement being attached hereto as
      Appendix A.

            
	 
      	 
      	 
      
	 
      	
              (3)

            	
              Following
      the signature of the Principal Agreement it transpired that an error had
      occurred in the method in which (in the sixth recital) it had been noted
      that the IOC Loan as defined in the Principal Agreement was meant to be
      secured by a charge over Jay Petroleum’s assets (hereinafter: “Jay”)
      whereas in practice it was the loan that had been advanced by IOC’s parent
      company,  Naphtha Israel Oil Company Ltd., (hereinafter: “Naphtha”) to Isramco
      that was meant to be secured by a charge over Jay’s
  assets.

            
	 
      	 
      	 
      
	 
      	
              (4)

            	
              In
      consequence of the foregoing, the parties wish to amend the Principal
      Agreement as hereinafter set forth in this Addendum to the
      Agreement;

            
	 
      	 
      	 
      
	 
      	
              It
      is therefore declared, stipulated and agreed between the parties as
      follows:

            

    

    

    
      	
              1.

            	
              The
      preamble to the Addendum to this Agreement and the Appendices thereto
      constitute an integral part thereof.

            
	 
      	 
      	 
      
	
              2.

            	
              The
      sixth recital contained in the Principal Agreement will be replaced by the
      following:  “ For the purpose of financing the Five States
      Transaction Isramco took various loans including inter alia, a loan in
      the sum of $12 million from IOC (hereinafter: “the IOC Loan”) and a
      loan in the sum of $18.5 million from Naphtha that is meant to be secured
      by a charge over Jay Petroleum’s assets, a subsidiary of Isramco in the
      United States (hereinafter: “the Naphtha
      Loan”).

            
	
              3.

            	
              The
      seventh recital contained in the Principal Agreement will be amended in a
      manner whereby the sentence: “In a manner whereby the proceeds in respect
      thereof will be applied in fully repaying the IOC Loan and the interest
      accrued thereon, and to partially repay the interest that has accrued in
      respect of the Naphtha Loan”, will be replaced by: “In a manner whereby
      the proceeds in respect thereof will be applied in partially repaying the
      Naphtha Loan and the interest that has accrued in respect
      thereof”.

            
	 
      	 
      	 
      
	
              4.

            	
              Clause
      5.2 of the Principal Agreement will be replaced by the
      following:

            
	 
      	
              5.2

            	
              The
      Consideration will be paid as
follows:

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              The
      full amount of the Consideration in its dollar value ($13,865.89) will be
      deemed to be partial repayment of the Naphtha Loan (including accrued
      interest) in a manner whereby the amount of the Consideration mentioned
      will be reduced on December 31, 2007 from the sum of the Naphtha Loan as
      of December 31, 2007.

            
	 
      	 
      	 
      
	
              5.

            	
              Following
      clause 5.3 will be added clause 5.4, as follows:

            
	 
      	
              “5.4

            	
              IOC
      declares and acknowledges that it received the consent of Naphtha to that
      stated in clause 5.2 above and to Isramco being released from the
      undertaking to charge the Jay Assets in respect of the Naphtha
      Loan.”

            
	 
      	 
      	 
      
	
              6.

            	
              All
      the remaining terms and conditions of the Principal Agreement will remain
      in full force and effect.

            

    

     

    In
witness whereof the parties have set their hands:

     

    
      	
              ______________________

            	
              ____________________________

            
	
              Isramco
      Inc.

            	
              I.O.C
      - Israel Oil Company Ltd.

            

    

    

    

    We, the
undersigned, Naphtha Oil Company Ltd., hereby confirm our consent to that stated
in clause 5.2 of the Addendum to the above Agreement and hereby finally and
irrevocably acknowledge our agreement to release Isramco from the undertaking to
charge the Jay Assets in respect of the Naphtha Loan (as defined above) in a
manner whereby to the extent the charge has yet to be registered over the Jay
Assets pursuant to the loan agreement that was signed between us and Isramco in
respect of the Naphtha Loan, Isramco is hereby released from the undertaking to
register the same and if the charge has been registered, we will sign any
document that will be required to cancel and remove the same.

    

    

    __________________________

    Naphtha
Israel Oil Company Ltd.

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