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<SEC-DOCUMENT>0001144204-06-035481.txt : 20060823
<SEC-HEADER>0001144204-06-035481.hdr.sgml : 20060823
<ACCEPTANCE-DATETIME>20060823161920
ACCESSION NUMBER:		0001144204-06-035481
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20060817
ITEM INFORMATION:		Other Events
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20060823
DATE AS OF CHANGE:		20060823

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DATA SYSTEMS & SOFTWARE INC
		CENTRAL INDEX KEY:			0000880984
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER PROGRAMMING SERVICES [7371]
		IRS NUMBER:				222786081
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-19771
		FILM NUMBER:		061051171

	BUSINESS ADDRESS:	
		STREET 1:		200 RTE 17
		CITY:			MAHWAH
		STATE:			NJ
		ZIP:			07430
		BUSINESS PHONE:		2015292026

	MAIL ADDRESS:	
		STREET 1:		200 ROUTE 17
		CITY:			MAHWAH
		STATE:			NJ
		ZIP:			07430

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DEFENSE SOFTWARE & SYSTEMS INC
		DATE OF NAME CHANGE:	19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>v050655_8k.txt
<TEXT>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K
                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


        Date of Report (Date of earliest event reported) August 17, 2006
                                                         ---------------


                          DATA SYSTEMS & SOFTWARE INC.
           (Exact name of Registrants as Specified in their Charters)


           Delaware                     0-19771                 22-2786081
- --------------------------------------------------------------------------------
(States or Other Jurisdiction   (Commission file Numbers)     (IRS Employer
      of Incorporation)                                    Identification Nos.)


                 200 Route 17, Mahwah, New Jersey           07430
             -------------------------------------------------------
             (Address of Principal Executive Offices)     (Zip Code)


        Registrants' telephone number, including area code (201) 529-2026
                                                           --------------


Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions:

[_]  Written communications pursuant to Rule 425 under the Securities Act
     (17 CFR 230.425)

[_]  Soliciting material pursuant to Rule 14a-2 under the Exchange Act
     (17 CFR 240.14a-2)

[_]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

[_]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))


<PAGE>


Item 8.01         Other Events.

         On August 7, 2006 we consummated the purchase of an  approximately  23%
interest in Paketeria GmbH. A description of the transaction can be found in the
Company's  Quarterly  Report on Form 10-Q for the three  months  ended  June 30,
2006,  filed with the SEC on August 11,  2006.  The  agreements  entered into in
connection with the purchase are attached as exhibits hereto.


Item 9.01         Financial Statements and Exhibits

(d)      Exhibits

Exhibit No.       Description
- -----------       -----------

10.1              Form of Common Stock Purchase Agreement

10.2              Form of Note Purchase Agreement with Form of Convertible
                  Promissory Note attached

10.3              Form of Stock Purchase Agreement

10.4              Form of Investors' Rights Agreement

10.5              Form of Non-Plan Option Agreement


<PAGE>


                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized on this 23rd day of August, 2006.


                                    DATA SYSTEMS & SOFTWARE INC.


                                    By:      /s/ Sheldon Krause
                                             -----------------------------
                                    Name:    Sheldon Krause
                                    Title:   Secretary and General Counsel

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v050655_ex10-1.txt
<TEXT>


                                                                    EXHIBIT 10.1



                                 PAKETERIA GMBH


                         COMMON STOCK PURCHASE AGREEMENT
                         -------------------------------



<PAGE>


                                TABLE OF CONTENTS
                                -----------------

                                                                           Page
                                                                           ----

0.Shareholder Structure.......................................................1


1.Purchase and Sale of Common Stock...........................................2

  1.1      Issuance of Common Stock...........................................2
  1.2      Closing; Delivery..................................................3
  1.3      Use of Proceeds....................................................3
  1.4      Defined Terms Used in this Agreement...............................3

2.Representations and Warranties of the Company...............................5

  2.1      Organization, Good Standing, Corporate Power and Qualification.....5
  2.2      Capitalization, Articles and Commercial Register...................5
  2.3      Subsidiaries.......................................................6
  2.4      Authorization......................................................6
  2.5      Valid Issuance of Shares...........................................6
  2.6      Governmental Consents and Filings..................................7
  2.7      Litigation.........................................................7
  2.8      Intellectual Property..............................................7
  2.9      Compliance with Other Instruments..................................8
  2.10     Agreements; Actions................................................8
  2.11     Certain Transactions...............................................9
  2.12     Rights of Registration and Voting Rights...........................9
  2.13     Absence of Liens...................................................9
  2.14     Financial Statements..............................................10
  2.15     Changes...........................................................10
  2.16     Employee Matters..................................................11
  2.17     Tax Returns and Payments..........................................12
  2.18     Insurance.........................................................12
  2.19     Confidential Information and Invention Assignment Agreements......12
  2.20     Permits...........................................................12
  2.21     Corporate Documents...............................................12
  2.22     Environmental and Safety Laws.....................................13
  2.23     Disclosure........................................................13

3.Representations and Warranties of the Purchasers...........................13

  3.1      Authorization.....................................................13

4.Conditions to the Purchasers' Obligations at Closing.......................13

  4.1      Representations and Warranties....................................13
  4.2      Performance.......................................................14
  4.3      Qualifications....................................................14
  4.4      Investors' Rights Agreement.......................................14
  4.5      Long Term Note....................................................14
  4.6      Long Term Note Option Agreement...................................14


                                       -i-
<PAGE>


                                TABLE OF CONTENTS
                                -----------------
                                   (continued)

  4.7      M&R Option Agreement..............................................14
  4.8      Roesch Employment Agreement.......................................14
  4.9      Roesch Release....................................................14
  4.10     Capital Increase and Restated Articles............................14
  4.11     Proceedings and Documents.........................................14

5.Conditions of the Company's Obligations at Closing.........................14

  5.1      Representations and Warranties....................................14
  5.2      Performance.......................................................14

6.Miscellaneous..............................................................15

  6.1      Survival of Warranties............................................15
  6.2      Successors and Assigns............................................15
  6.3      Governing Law.....................................................15
  6.4      Titles and Subtitles; Interpretation..............................15
  6.5      Notices...........................................................15
  6.6      No Finder's Fees..................................................15
  6.7      Attorney's Fees...................................................15
  6.8      Amendments and Waivers............................................16
  6.9      Severability......................................................16
  6.10     Delays or Omissions...............................................16
  6.11     Entire Agreement..................................................16
  6.12     Dispute Resolution................................................16
  6.13     Waiver of Jury Trial..............................................17

  Exhibit A -       Capital Increase
  Exhibit B -       Form of Amended and Restated Articles
  Exhibit C -       Form of Investors' Rights Agreement
  Exhibit D -       Form of Long Term Note
  Exhibit E -       Form of Long Term Note Option Agreement
  Exhibit F -       Form of Roesch Employment Agreement
  Exhibit G -       Roesch Releases
  Exhibit H -       Disclosure Schedule
  Exhibit I -       Current Articles of Association of the Company
  Exhibit J -       Excerpt from the Commercial Register


                                      -ii-
<PAGE>

                         COMMON STOCK PURCHASE AGREEMENT
                         -------------------------------


         THIS COMMON STOCK PURCHASE  AGREEMENT (this  "Agreement") is made as of
the 7th day of August, 2006 among

1.       Paketeria GmbH, a limited  liability company  incorporated  under the
         laws of Germany,

2.       Andy Roesch (the "Principal")

3.       Ralf Budde

4.       Joseph Benson

5.       John Moore

6.       Richard Rimer

     - the parties 2. through 6 jointly hereinafter: "Current Shareholders" -

         and

7.       Data Systems & Software Inc., a Delaware corporation (the "Purchaser").

         The parties hereby agree as follows:

         0.       Shareholder Structure

         The share  capital of the Company in the total amount of (euro)  37,450
         currently is held as follows:

         Shareholder                     Shares           Total Amount of Shares
         -------------            -------------           ----------------------
         Andy Rosch               (euro) 18,750
                                   (euro) 4,950                    (euro) 23,700
         -------------            -------------           ----------------------
         Ralf Budde                (euro) 1,600
                                   (euro) 1,400                     (euro) 3,000
         -------------            -------------           ----------------------
         Joseph Benson               (euro) 950                       (euro) 950
         -------------            -------------           ----------------------
         John Moore                (euro) 3,300
                                     (euro) 950
                                     (euro) 650                     (euro) 4,900
         -------------            -------------           ----------------------
         Richard Rimer             (euro) 3,350
                                     (euro) 900
                                     (euro) 650                     (euro) 4,900
         -------------            -------------           ----------------------
         Total                           37,450                           37,450


<PAGE>


      1.    Purchase and Sale of Common Stock.

            1.1.  Issuance of Common Stock.


                  (a) The Current  Shareholders  shall adopt by way of notarized
shareholders'  resolution,  and the  Company  shall  file  with  the  Commercial
Register  of the Lower  Court  ("Amtsgericht")  of Berlin  Charlottenburg  on or
before the Closing (as defined below):

                    (i) an increase  of the share  capital of the Company by way
of the  issuance  of a new  share  with a par  value of  (euro)  13,800  against
contribution  of the par value of (euro) 13,800 in cash plus an additional  agio
("Aufgeld") of (euro) 536,426 also in cash,  resulting in a total aggregate cash
contribution of (euro) 550,226 (the "Contribution"), along with the admission of
the  Purchaser as sole  subscriber  of such share,  all in the form of Exhibit A
(the "Capital Increase"); and

                    (ii)  the  Amended  and  Restated  Articles  in the  form of
Exhibit B attached to this Agreement (the "Restated Articles").

                  The   Current   Shareholders   shall   waive  their  right  to
participate in this capital increase.

                  (b) Subject to the terms and conditions of this Agreement, the
Purchaser  agrees to subscribe at the Closing and the Company agrees to issue to
the Purchaser a partial share with a par value of (euro) 11,800 of the new share
with a par value of (euro)  13,800 of the Common Stock  ("Stammkapital")  of the
Company pursuant to subsection (a)  subparagraph  (i) above,  against payment of
the cash  contribution as stipulated in subsection (a)  subparagraph  (i) above.
The share of Common Stock issued at the Closing is sometimes referred to in this
Agreement as the "Share".

                  (c) In  accordance  with the terms of the M&R  Stock  Purchase
Agreement,  the  Purchaser  shall  acquire a partial  share  with a par value of
(euro)  2,000 of the new share  with a par value of (euro)  13,800 of the Common
Stock as a result of the Purchaser's  acquisition of certain subscription rights
of John Moore and Richard Rimer to acquire a (euro) 2,000 share against  payment
of its par value (the "Subscription  Rights") which John Moore and Richard Rimer
assigned to the Purchaser  under the M&R Stock Purchase  Agreement.  The Company
and the Current  Shareholders  each hereby  confirms the valid  existence of the
Subscription  Rights as well as the valid assignment  hereunder to the Purchaser
of such  Subscription  Rights subject to the execution of the M&R Stock Purchase
Agreement and the exercise of the option contained therein.

                  (d) The parties  acknowledge  that the agio  stipulated  above
includes a  deduction  in the amount of (euro)  50,000 in  consideration  of the
advance payment made by the Purchaser to the Company  pursuant to the Memorandum
of Terms dated [ ]. Before such deduction, the total contribution (share capital
contribution  plus agio) would have amounted to (euro)  598,226,  resulting in a
purchase price of (euro) 50.70  (rounded) for each Euro of Common Stock (without
taking into account the (euro) 2,000 partial share  acquired at par value on the
basis of the Subscription Right).


                                       -2-
<PAGE>


            1.2. Closing; Delivery.

                  (a) The resolution and filing of the Capital Increase pursuant
to Sec. 1.1 (a) (i) and of the Restated  Articles  pursuant to Sec. 1.1 (a) (ii)
as well as the issuance and  subscription  of the Share pursuant to Sec. 1.1 (b)
shall take place before a German notary public,  at 10:00 a.m.  (EDT), on August
7,  2006,  or at such  other  time and place as the  Company  and the  Purchaser
mutually  agree upon,  orally or in writing (which time and place are designated
as the "Closing").

                  (b) At the Closing, the Purchaser shall arrange for payment of
the Contribution by check payable to the Company,  or by wire transfer to a bank
account designated by the Company.

            1.3.  Use of Proceeds.  The Company  will use the proceeds  from the
sale of the Shares for  Payment of  Permitted  Debt  Repayments  (as  defined in
Section 1.4) and ordinary working capital purposes.

            1.4. Defined Terms Used in this Agreement.  In addition to the terms
defined above,  the following terms used in this Agreement shall be construed to
have the meanings set forth or referenced below.

                  "Affiliate"  means, with respect to any specified Person,  any
other Person who or which,  directly or indirectly,  controls, is controlled by,
or is under  common  control  with such  specified  Person,  including,  without
limitation,  any partner,  officer,  director, member or employee of such Person
and any venture capital fund now or hereafter  existing that is controlled by or
under common control with one or more general  partners or managing  members of,
or shares the same management company with, such Person.

                  "Company  Intellectual  Property"  means all  patents,  patent
applications,  trademarks,  trademark applications,  service marks,  tradenames,
copyrights,  trade secrets,  licenses, domain names, mask works, information and
proprietary  rights  and  processes  as  are  necessary  to the  conduct  of the
Company's business as now conducted and as presently proposed to be conducted.

                  "Immediate   Family   Member"   means  a   child,   stepchild,
grandchild,  parent, stepparent,  grandparent,  spouse, sibling,  mother-in-law,
father-in-law,  son-in-law,  daughter-in-law,  brother-in-law, or sister-in-law,
including adoptive relationships, of a natural person referred to herein.

                  "Investors'  Rights  Agreement"  means the agreement among the
Company, the Purchaser and each other party listed therein, dated as of the date
of the Closing, in the form of Exhibit C attached to this Agreement.

                  "Key Employee" means any  executive-level  employee (including
division director and vice president-level positions) as well as any employee or
consultant  who  either  alone or in  concert  with  others  develops,  invents,
programs or designs any Company Intellectual Property.


                                      -3-
<PAGE>


                  "Knowledge",   including   the   phrase   "to  the   Company's
knowledge,"  shall mean the actual knowledge after  reasonable  investigation of
the following officers: the Principal and Viola Roesch.

                  "Long Term Note"  means the  promissory  note  executed by the
Company and delivered to the Principal,  dated as of the date of the Closing, in
the form of Exhibit D attached to this Agreement.

                  "Long Term Note Option  Agreement"  means the agreement  among
the Principal  and the  Purchaser,  dated as of the date of the Closing,  in the
form of Exhibit E attached to this Agreement.

                  "Material  Adverse Effect" means a material  adverse effect on
the business,  assets  (including  intangible  assets),  liabilities,  financial
condition, property, prospects or results of operations of the Company.

                  "M&R  Option  Agreement"  means the  agreement  among  John A.
Moore, Richard Rimer and the Purchaser,  dated as of the date of the Closing, in
a form satisfactory to the Purchaser.

                  "Person"  means  any  individual,  corporation,   partnership,
trust, limited liability company, association or other entity.

                  "Permitted Debt  Repayments"  means payments by the Company to
the  following  Persons in the amounts set forth  opposite  such  Person's  name
below:

               Person                            Amount
               Andy Roesch                       (euro) 54,442
               Viola Roesch                      (euro) 25,000
               Berliner Volksbank eG             (euro) 88,605.06
                        Guarantee                (euro) 14,781
                                                 (euro) 94.34 (credit)
               Deutsche Bank AG                  (euro) 30,767

               Total                             (euro) 213,500.72


                  "Roesch  Employment  Agreement"  means the agreement among the
Company and the  Principal  dated as of the date of the Closing,  in the form of
Exhibit F attached to this Agreement.

                  "Roesch  Release"  means the release  delivered by each of the
Principal and Viola Roesch,  in the form of Exhibit G-1 and Exhibit G-2 attached
to this Agreement.

                  "Transaction  Agreements" means this Agreement, the Investors'
Rights Agreement,  the Long Term Note, the Long Term Note Option Agreement,  the
M&R Stock Purchase  Agreement,  the Roesch Employment  Agreement and each Roesch
Release.


                                      -4-
<PAGE>


      2.  Representations  and  Warranties  of the Company.  The Company and the
Principal, hereby represent and warrant, jointly and severally, to the Purchaser
that,  except as set forth on the Disclosure  Schedule  attached as Exhibit H to
this   Agreement   which   exceptions   shall  be  deemed  to  be  part  of  the
representations and warranties made hereunder, the following representations are
true and complete as of the date of the Closing,  except as otherwise indicated.
The  Disclosure  Schedule  shall be arranged in  sections  corresponding  to the
numbered and lettered sections and subsections  contained in this Section 2, and
the  disclosures in any section or subsection of the  Disclosure  Schedule shall
qualify other  sections and  subsections in this Section 2 only to the extent it
is readily  apparent from a reading of the  disclosure  that such  disclosure is
applicable to such other sections and subsections.  The disclosures contained in
the due  diligence  report  entitled  "Summary of the Financial  Statements  and
Contractual  Obligations  of  Paketeria  GmbH"  that is  part of the  Disclosure
Schedule  qualify  against all  Sections  of this  Section 2 to the extent it is
readily  apparent from a reading of the due diligence report that its content is
applicable to the representations and warranties contained in this Section 2.

            2.1. Organization, Good Standing, Corporate Power and Qualification.
The Company is a limited liability company duly organized,  validly existing and
in good standing under the laws of the Republic of Germany and has all requisite
corporate  power and  authority to carry on its business as presently  conducted
and as  proposed to be  conducted.  The  Company is duly  qualified  to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect.

            2.2. Capitalization, Articles, Commercial Register.

                  (a) The  authorized  capital of the Company has a par value of
(euro)  37,450,  split as set  forth in the  table in Sec.  0 above in shares of
common stock (the "Common  Stock") with an aggregate par value of (euro) 37,450,
all of which are issued and outstanding. All of the outstanding shares of Common
Stock  have been duly  authorized,  are fully  paid and  nonassessable  and were
issued in compliance with all applicable  securities laws. Except for the Common
Stock described in the immediately  preceding sentence,  there is no other class
of capital stock or equity security of the Company authorized or issued. None of
the shares of Common  Stock in the Company are subject to any lien or  otherwise
encumbered  with any other third party rights or subject to any  restriction  of
assignment or transfer other than those restrictions expressly stipulated in the
current articles of association.

                  (b)  The  Company  has no  employee  stock  option  or  equity
incentive plan. There are no outstanding  options,  warrants,  rights (including
conversion or preemptive  rights and rights of first refusal or similar  rights)
or agreements, orally or in writing, to purchase or acquire from the Company any
shares of Common Stock, or any securities  convertible  into or exchangeable for
shares of Common Stock.

                  (c) Section 2.2(c) of the  Disclosure  Schedule sets forth the
capitalization  table of the  Company  effective  as of the entry of the capital
increase pursuant to Sec. 1.1 (a) (i) above in the commercial register.


                                      -5-
<PAGE>


                  (d) A true  and  complete  copy  of the  current  articles  of
association of the Company is attached to this Agreement as Exhibit I. There are
no additional  documents such as by laws, rules of procedure or the like dealing
with topics that are addressed,  or would usually be addressed,  in the articles
of association.

                  (e) The excerpt from the commercial  register  attached hereto
as Exhibit J is up to date.  There are no events  that can be  entered  into the
commercial register but have not been entered,  and there are no pending filings
to the commercial register.

                  (f) the Company is not party to any control agreement,  profit
and loss transfer agreement, profit pooling or other kind of corporate agreement
("Unternehmensvertrag").

            2.3.  Subsidiaries.  The Company does not  currently own or control,
directly or  indirectly,  any  interest in any other  corporation,  partnership,
trust, joint venture, limited liability company,  association, or other business
entity.  The Company is not a participant in any joint  venture,  partnership or
similar arrangement.

            2.4. Authorization. All corporate action required to be taken by the
Company's  managing directors  ("Geschaftsfuhrer")  and stockholders in order to
authorize the Company to enter into the Transaction Agreements, and to issue the
Shares at the Closing, has been taken or will be taken prior to the Closing. All
action on the part of the officers of the Company and stockholders necessary for
the execution and delivery of the Transaction Agreements, the performance of all
obligations of the Company under the  Transaction  Agreements to be performed as
of the  Closing,  and the  issuance and delivery of the Shares has been taken or
will be taken prior to the Closing.  Each Transaction  Agreement,  when executed
and delivered by their  respective  parties,  shall constitute valid and legally
binding  obligations  of the Company and (to the extent  they are  parties)  the
Current  Shareholders and Viola Roesch,  enforceable  against them in accordance
with their respective terms.

            2.5.  Valid  Issuance of Shares.  The Share,  when issued,  sold and
delivered in accordance  with the terms and for the  consideration  set forth in
this Agreement, will be validly issued, fully paid and nonassessable and free of
any liens or encumbrances or restrictions on transfer,  other than  restrictions
on transfer under the Transaction  Agreements and liens or encumbrances  created
by or imposed by the  Purchaser.  The shares of Common Stock  issuable  upon the
conversion of the Long Term Note will upon the execution of the conversion right
in  accordance  with the terms of the Long Term Note, be validly  issued,  fully
paid and  nonassessable and free of any liens or encumbrances or restrictions on
transfer other than  restrictions on transfer under the Transaction  Agreements,
applicable  laws  and  liens  or  encumbrances  created  by or  imposed  by  the
Purchaser.  The shares of Common  Stock  that are the  subject of the M&R Option
Agreement are currently and validly  issued,  fully paid and  nonassessable  and
free of any  liens or  encumbrances  or  restrictions  on  transfer  other  than
restrictions  on  transfer  under  the  Transaction  Agreements,  and  liens  or
encumbrances  created  by or  imposed  by  the  Purchaser  and  were  issued  in
compliance   with  all   applicable   laws.   Assuming   the   accuracy  of  the
representations  of the Purchaser in Section 3 of this  Agreement and subject to
the filings  described  in Section  2.6(ii)  below,  the Share and the shares of
Common Stock  issuable upon the  conversion of the Long Term Note will be issued
in compliance with all applicable laws.


                                      -6-
<PAGE>


            2.6. Governmental Consents and Filings. Assuming the accuracy of the
representations  made  by the  Purchaser  in  Section  3 of this  Agreement,  no
consent,  approval,  order or authorization of, or registration,  qualification,
designation,  declaration or filing with, any governmental authority is required
on  the  part  of  the  Company  in  connection  with  the  consummation  of the
transactions  contemplated  by the  Transaction  Agreements,  except for (i) the
filing of the  Restated  Articles and the Capital  Increase  pursuant to Section
1.1(a)(i), which will have been filed as of the Closing, and (ii) the filings of
the capital  increase(s) upon execution of the conversion  right(s)  pursuant to
the terms of the Long Term Note.

            2.7.  Litigation.  There  is no  claim,  action,  suit,  proceeding,
arbitration,  complaint,  charge or  investigation  pending or to the  Company's
knowledge, currently threatened (i) against the Company or any officer, director
or Key  Employee of the  Company;  or (ii) that  questions  the  validity of the
Transaction  Agreements  or the right of the  Company to enter into them,  or to
consummate the transactions contemplated by the Transaction Agreements; or (iii)
that  would  reasonably  be  expected  to have,  either  individually  or in the
aggregate,  a Material Adverse Effect. Neither the Company nor, to the Company's
knowledge,  any of its  officers,  directors  or Key  Employees is a party or is
named as subject to the provisions of any order, writ,  injunction,  judgment or
decree of any court or  government  agency  or  instrumentality  (in the case of
officers,  directors or Key Employees,  such as would affect the Company). There
is no action, suit,  proceeding or investigation by the Company pending or which
the Company intends to initiate.  The foregoing  includes,  without  limitation,
actions,  suits,  proceedings or investigations pending or threatened in writing
(or any basis therefor known to the Company)  involving the prior  employment of
any of the Company's  employees,  their services provided in connection with the
Company's business,  or any information or techniques  allegedly  proprietary to
any of their former  employers,  or their  obligations under any agreements with
prior employers.

            2.8.  Intellectual  Property.  The Company  owns or possesses or can
acquire on commercially  reasonable terms sufficient legal rights to all Company
Intellectual  Property  without any known conflict with, or infringement of, the
rights of others.  No product or service  marketed  or sold (or  proposed  to be
marketed  or sold) by the  Company  violates  or will  violate  any  license  or
infringes or will infringe any intellectual  property rights of any other party.
Other than with  respect  to  commercially  available  software  products  under
standard  end-user  object code  license  agreements,  there are no  outstanding
options,  licenses,   agreements,   claims,  encumbrances  or  shared  ownership
interests of any kind relating to the Company Intellectual  Property, nor is the
Company  bound by or a party to any options,  licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets,  licenses,  information,  proprietary rights and processes of any
other Person. The Company has not received any communications  alleging that the
Company has violated or, by conducting  its  business,  would violate any of the
patents, trademarks, service marks, tradenames,  copyrights, trade secrets, mask
works or other proprietary  rights or processes of any other Person. The Company
has obtained and possesses  valid  licenses to use all of the software  programs
present on the computers and other  software-enabled  electronic devices that it
owns or leases or that it has otherwise  provided to its employees for their use
in connection with the Company's  business.  It will not be necessary to use any
inventions  of any of its  employees  or  consultants  (or Persons it  currently
intends to hire) made prior to their  employment by the Company.  Each employee,
officer and  consultant  (including  the  Principal  and Viola  Roesch) and each
former  employee,  officer  and  consultant  has  assigned  to the  Company  all
intellectual  property  rights he or she owns that are related to the  Company's
business as now conducted and as presently proposed to be conducted. Section 2.8
of the Disclosure Schedule lists all Company Intellectual Property.


                                      -7-
<PAGE>


            2.9.  Compliance  with  Other  Instruments.  The  Company  is not in
violation  or  default  (i)  of  any  provisions  of  its  current  articles  of
association,  (ii) of any instrument,  judgment,  order,  writ or decree,  (iii)
under any note,  indenture  or  mortgage,  or (iv) under any  lease,  agreement,
contract or  purchase  order to which it is a party or by which it is bound that
is required to be listed on the Disclosure  Schedule,  or, to its knowledge,  of
any provision of any statute,  rule or regulation applicable to the Company, the
violation of which would have a Material Adverse Effect. The execution, delivery
and  performance  of the  Transaction  Agreements  and the  consummation  of the
transactions  contemplated by the Transaction  Agreements will not result in any
such violation or be in conflict with or constitute, with or without the passage
of time and giving of notice,  either  (i) a default  under any such  provision,
instrument,  judgment,  order,  writ,  decree,  contract or agreement or (ii) an
event which results in the creation of any lien,  charge or encumbrance upon any
assets of the Company or the suspension,  revocation,  forfeiture, or nonrenewal
of any material permit or license applicable to the Company.

            2.10. Agreements; Actions.

                  (a)  Except  for  the  Transaction  Agreements,  there  are no
agreements,  understandings,  instruments, contracts or proposed transactions to
which  the  Company  is a  party  or by  which  it is  bound  that  involve  (i)
obligations  (contingent or otherwise) of, or payments to, the Company in excess
of (euro) 50,000, (ii) the license of any patent,  copyright,  trademark,  trade
secret or other  proprietary  right to or from the  Company,  (iii) the grant of
rights to manufacture,  produce, assemble, license, market, or sell its products
to any  other  Person  that  limit the  Company's  exclusive  right to  develop,
manufacture,  assemble,  distribute,  market  or  sell  its  products,  or  (iv)
indemnification  by the Company with  respect to  infringements  of  proprietary
rights.

                  (b) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to the Common Stock, or
any class or series of capital stock,  (ii) incurred any  indebtedness for money
borrowed  or incurred  any other  liabilities  individually  in excess of (euro)
50,000 or in excess of (euro) 200,000 in the aggregate,  (iii) made any loans or
advances to any Person,  other than ordinary  advances for travel  expenses,  or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other
than the sale of its  inventory  in the  ordinary  course of  business.  For the
purposes  of  this  subsection  (b) of  this  Section  2.10,  all  indebtedness,
liabilities,  agreements,  understandings,  instruments,  contracts and proposed
transactions involving the same Person (including Persons the Company has reason
to believe are  affiliated  with each other) shall be aggregated for the purpose
of meeting the individual  minimum dollar  amounts of such  subsection.  Section
2.10(b) of the Disclosure  Schedule  describes all  indebtedness  of the Company
individually in excess of (euro) 50,000.

                  (c)  The  Company  is not a  guarantor  or  indemnitor  of any
indebtedness of any other Person.


                                      -8-
<PAGE>


            2.11. Certain Transactions.

                  (a) Other than (i) standard employee  benefits  generally made
available to all employees,  (ii) standard director and officer  indemnification
agreements approved by the Board of Directors, (iii) the Long Term Note, in each
instance,   approved  in  the  written  minutes  of  the  Shareholders'  Meeting
(previously provided to the Purchaser or its counsel),  there are no agreements,
understandings  or  proposed  transactions  between  the  Company and any of its
officers,  directors,  consultants  or Key  Employees,  or any  member  of their
respective Immediate Families, or any Affiliate thereof.

                  (b)  Except  for the Long Term Note and the debts to be repaid
with the Permitted  Debt  Repayments,  the Company is not indebted,  directly or
indirectly,  to any of its  directors,  officers or  employees  or to members of
their respective Immediate Families or to any Affiliate of any of the foregoing.
None of the Company's directors,  officers or employees, or any members of their
Immediate  Families,  or any  Affiliate of the  foregoing  (i) are,  directly or
indirectly,  indebted to the Company or, (ii) to the Company's  knowledge,  have
any direct or indirect  ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship,
or any firm or  corporation  which  competes with the Company.  To the Company's
knowledge,  none of the  Company's  Key Employees or directors or any members of
their immediate  families or any Affiliate of any of the foregoing are, directly
or indirectly, interested in any material contract with the Company. None of the
directors  or  officers,  or any members of their  immediate  families,  has any
material  commercial,   industrial,   banking,  consulting,  legal,  accounting,
charitable  or  familial  relationship  with  any  of the  Company's  customers,
suppliers, service providers, joint venture partners, licensees and competitors.

            2.12.  Rights of Registration and Voting Rights.  Except as provided
in the Investors' Rights  Agreement,  the Company is not under any obligation to
register  for public sale any of its  currently  outstanding  securities  or any
securities  issuable upon  exercise or  conversion of its currently  outstanding
securities. To the Company's knowledge, except as contemplated in the Investors'
Rights Agreement,  no stockholder of the Company has entered into any agreements
with respect to the voting of capital shares of the Company.

            2.13.  Absence of Liens.  The  property  and assets that the Company
owns are free and  clear of all  mortgages,  deeds of  trust,  liens,  loans and
encumbrances,  except for  customary  retention of title arising in the ordinary
course of business that does not  materially  impair the Company's  ownership or
use of such  property  or assets.  With  respect to the  property  and assets it
leases,  the Company is in  compliance  with such leases and, to its  knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances other
than those of the lessors of such property or assets.


                                      -9-
<PAGE>


            2.14. Financial  Statements.  The Company has delivered to Purchaser
its unaudited pro forma financial statements as of December 31, 2005 and for the
fiscal year then ended  (collectively,  the "Pro Forma  Financial  Statements").
Save to the extent  disclosed  in the Pro Forma  Financial  Statements,  the Pro
Forma  Financial  Statements  have  been  prepared  in  accordance  with  German
generally  accepted   accounting   principles  applied  on  a  consistent  basis
throughout the periods indicated.  Save to the extent disclosed in the Pro Forma
Financial  Statements,  the Pro Forma Financial Statements fairly present in all
material  respects the financial  condition and operating results of the Company
as of the dates, and for the periods,  indicated therein, subject in the case of
the  unaudited  Pro  Forma   Financial   Statements  to  normal  year-end  audit
adjustments.  Except  as set  forth  or  disclosed  in the Pro  Forma  Financial
Statements,  the Company has no material liabilities or obligations,  contingent
or  otherwise,  other than (i)  liabilities  incurred in the ordinary  course of
business subsequent to December 31, 2005 and (ii) liabilities and obligations of
a type or  nature  not  required  under  German  generally  accepted  accounting
principles to be reflected in the Pro Forma Financial Statements,  which, in all
such cases,  individually and in the aggregate would not have a Material Adverse
Effect. The Company maintains and will continue to maintain a standard system of
accounting  established and  administered  in accordance  with German  generally
accepted  accounting  principles.  As  per  December  31,  2005,  the  Company's
shareholder  equity  (subscribed  capital plus  capital  reserve less loss carry
forward less loss of the current  fiscal year,  all as defined in Sec. 266 para.
(3) lit.  A of the German  Commercial  Code)  shall be not less  (i.e.  not more
negative) than - (euro) 284,940.33.

            2.15. Changes. Since December 31, 2005 there has not been:

                  (a) any change in the assets, liabilities, financial condition
or  operating  results  of the  Company  from that  reflected  in the  Financial
Statements,  except  changes in the  ordinary  course of business  that have not
caused, in the aggregate, a Material Adverse Effect;

                  (b) any damage, destruction or loss, whether or not covered by
insurance, that would have a Material Adverse Effect;

                  (c) any  waiver or  compromise  by the  Company  of a valuable
right or of a material debt owed to it;

                  (d) any  satisfaction  or  discharge  of any lien,  claim,  or
encumbrance or payment of any obligation by the Company,  except in the ordinary
course of business and the  satisfaction  or discharge of which would not have a
Material Adverse Effect;

                  (e) any material change to a material contract or agreement by
which the Company or any of its assets is bound or subject;

                  (f) any material  change in any  compensation  arrangement  or
agreement with any employee, officer, director or stockholder;

                  (g)  any  resignation  or  termination  of  employment  of any
officer or Key Employee of the Company;

                  (h) any mortgage,  pledge, transfer of a security interest in,
or lien, created by the Company,  with respect to any of its material properties
or assets, except liens for taxes not yet due or payable and liens that arise in
the  ordinary  course of business  and do not  materially  impair the  Company's
ownership or use of such property or assets;

                  (i) any payments,  loans or guarantees  made by the Company to
or for the benefit of its  employees,  officers or directors,  or any members of
their immediate families,  other than travel advances and other advances made in
the ordinary course of its business;


                                      -10-
<PAGE>


                  (j)  any  declaration,  setting  aside  or  payment  or  other
distribution in respect of any of the Company's  capital stock, or any direct or
indirect redemption,  purchase, or other acquisition of any of such stock by the
Company;

                  (k)  any  sale,   assignment   or   transfer  of  any  Company
Intellectual  Property that could reasonably be expected to result in a Material
Adverse Effect;

                  (l)  receipt  of  notice  that  there  has been a loss of,  or
material order cancellation by, any major customer of the Company;

                  (m) to the Company's  knowledge,  any other event or condition
of any  character,  other than events  affecting  the  economy or the  Company's
industry  generally,  that could  reasonably be expected to result in a Material
Adverse Effect; or

                  (n) any  arrangement or commitment by the Company to do any of
the things described in this Section 2.15.

            2.16. Employee Matters.

                  (a) As of the date  hereof,  the Company  employs 22 full-time
employees and 2 part-time  employees and engages 4  consultants  or  independent
contractors.  Section  2.16 of the  Disclosure  Schedule  sets  forth a detailed
description of all compensation,  including salary, bonus, severance obligations
and deferred compensation paid or payable for each officer, employee, consultant
and independent contractor of the Company who received compensation in excess of
(euro) 50,000 for the fiscal year ended  December 31, 2005 or is  anticipated to
receive  compensation  in excess of (euro)  50,000  for the fiscal  year  ending
December 31, 2006.

                  (b) To the  Company's  knowledge,  none  of its  employees  is
obligated under any contract  (including  licenses,  covenants or commitments of
any nature) or other agreement,  or subject to any judgment,  decree or order of
any court or administrative  agency,  that would materially  interfere with such
employee's ability to promote the interest of the Company or that would conflict
with  the  Company's  business.   Neither  the  execution  or  delivery  of  the
Transaction  Agreements,  nor the carrying on of the  Company's  business by the
employees  of the  Company,  nor the  conduct of the  Company's  business as now
conducted  and as presently  proposed to be  conducted,  will,  to the Company's
knowledge,  conflict  with or result in a breach of the  terms,  conditions,  or
provisions  of, or  constitute  a  default  under,  any  contract,  covenant  or
instrument under which any such employee is now obligated.

                  (c) The  Company is not  delinquent  in payments to any of its
employees,  consultants,  or independent  contractors  for any wages,  salaries,
commissions, bonuses, or other direct compensation for any service performed for
it to the date hereof or amounts  required to be reimbursed  to such  employees,
consultants,  or  independent  contractors.  The  Company  has  complied  in all
material respects with all applicable equal employment opportunity laws and with
other laws  related to  employment,  including  those  related to wages,  hours,
worker classification,  and collective bargaining.  The Company has withheld and
paid to the  appropriate  governmental  entity or is holding for payment not yet
due to such  governmental  entity  all  amounts  required  to be  withheld  from
employees  of the  Company  and is not liable for any  arrears of wages,  taxes,
penalties, or other sums for failure to comply with any of the foregoing.


                                      -11-
<PAGE>


                  (d) The Company does not have a present intention to terminate
the employment of any Key Employee, nor to the Company's knowledge, does any Key
Employee intend to terminate  employment with the Company or is otherwise likely
to become  unavailable to continue as a Key Employee.  Other than in the case of
the  Principal,  the employment of each employee of the Company is terminable at
the will of the Company.  Upon the  termination  of the  employment  of any such
employees,  no severance or other  payments  will become due. The Company has no
policy,  practice,  plan,  or  program  of paying  severance  pay or any form of
severance   compensation  in  connection  with  the  termination  of  employment
services.

            2.17. Tax Returns and Payments.  There are no taxes, social security
contributions  and other public  charges  dues and payable by the Company  which
have not been timely  paid.  There are no accrued and unpaid  country,  local or
foreign taxes of the Company which are due, whether or not assessed or disputed.
There have been no examinations or audits of any tax returns or matters relating
to social  security  contributions  or other  public  charges  or reports by any
applicable federal, state, local or foreign governmental agency. The Company has
duly and timely filed all tax returns,  social security  contributions and other
public  charges  required  to have  been  filed by it and there are in effect no
waivers of applicable  statutes of limitations  with respect to taxes and social
security contributions for any year.

            2.18.  Insurance.  The Company has in full force and effect fire and
casualty  insurance  policies  with  extended  coverage,  sufficient  in  amount
(subject to reasonable  deductions) to allow it to replace any of its properties
that might be damaged or destroyed.

            2.19. Confidential  Information and Invention Assignment Agreements.
Each  current  and former  employee,  consultant  and officer of the Company has
executed an agreement with the Company regarding confidentiality and proprietary
information  substantially in the form or forms delivered to the counsel for the
Purchaser (the "Confidential Information Agreements").  No current or former Key
Employee  has  excluded  works  or  inventions  from  his or her  assignment  of
inventions pursuant to such Key Employee's  Confidential  Information Agreement.
The Company is not aware that any of its Key Employees is in violation thereof.

            2.20. Permits. The Company has all franchises, permits, licenses and
any similar  authority  necessary for the conduct of its  business,  the lack of
which  could  reasonably  be  expected to have a Material  Adverse  Effect.  The
Company is not in default in any material  respect under any of such franchises,
permits, licenses or other similar authority.

            2.21.  Corporate  Documents.  The  copy of the  minute  books of the
Company provided to the Purchaser  contains minutes of all meetings of directors
and  stockholders  and all actions by written  consent  without a meeting by the
directors  and  stockholders  since  the date of  incorporation  and  accurately
reflects  in all  material  respects  all  actions  by the  directors  (and  any
committee  of  directors)  and  stockholders  with  respect to all  transactions
referred to in such minutes.


                                      -12-
<PAGE>


            2.22.  Environmental and Safety Laws. Except as could not reasonably
be expected to have a Material  Adverse Effect,  (a) the Company is and has been
in  compliance  with all  Environmental  Laws;  (b) there has been no release or
threatened release of any pollutant, contaminant or toxic or hazardous material,
substance or waste,  or petroleum  or any fraction  thereof,  (each a "Hazardous
Substance")  on,  upon,  into or from any site  currently or  heretofore  owned,
leased or otherwise used by the Company.

            For purposes of this Section  2.22,  "Environmental  Laws" means any
law,  regulation,  or other applicable  requirement  relating to (a) releases or
threatened  release of  Hazardous  Substance;  (b)  pollution or  protection  of
employee  health  or  safety,  public  health  or the  environment;  or (c)  the
manufacture,  handling,  transport,  use,  treatment,  storage,  or  disposal of
Hazardous Substances.

            2.23.  Disclosure.  The Company has made  available to the Purchaser
all the information  reasonably  available to the Company that the Purchaser has
requested  for  deciding  whether to acquire the Shares.  No  representation  or
warranty  of the  Company  contained  in this  Agreement,  as  qualified  by the
Disclosure  Schedule,  and  no  certificate  furnished  or  to be  furnished  to
Purchaser  at the Closing  contains any untrue  statement of a material  fact or
omits to  state a  material  fact  necessary  in  order  to make the  statements
contained herein or therein not misleading in light of the  circumstances  under
which  they  were  made.  The due  diligence  report  entitled  "Summary  of the
Financial Statements and Contractual Obligations of Paketeria GmbH" that is part
of the Disclosure Schedule does not contain any material misstatements.

      3.  Representations and Warranties of the Purchaser.  The Purchaser hereby
represents and warrants to the Company, severally and not jointly, that:

            3.1.  Authorization.  The  Purchaser has full power and authority to
enter into the Transaction Agreements.  The Transaction Agreements to which such
Purchaser  is a party,  when  executed  and  delivered  by the  Purchaser,  will
constitute valid and legally binding  obligations of the Purchaser,  enforceable
in accordance with their terms, except (a) as limited by applicable  bankruptcy,
insolvency,  reorganization,  moratorium,  fraudulent conveyance,  and any other
laws  of  general  application   affecting   enforcement  of  creditors'  rights
generally,  and as limited by laws  relating  to the  availability  of  specific
performance,  injunctive  relief,  or other  equitable  remedies,  or (b) to the
extent  the  indemnification  provisions  contained  in  the  Investors'  Rights
Agreement may be limited by applicable federal or state securities laws.

      4. Conditions to the Purchaser's  Obligations at Closing.  The obligations
of the  Purchaser to  subscribe  the Share and to make the  Contribution  at the
Closing are subject to the  fulfillment,  on or before such Closing,  of each of
the following conditions, unless otherwise waived:

            4.1.   Representations  and  Warranties.   The  representations  and
warranties  of the Company  contained  in Section 2 shall be true and correct in
all  respects  as of such  Closing,  except  that any such  representations  and
warranties  shall be true and correct in all respects where such  representation
and warranty is qualified with respect to materiality.


                                      -13-
<PAGE>


            4.2. Performance. The Company shall have performed and complied with
all  covenants,  agreements,   obligations  and  conditions  contained  in  this
Agreement  that are required to be performed or complied  with by the Company on
or before such Closing.

            4.3.  Qualifications.  All authorizations,  approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection  with the lawful  issuance and sale of
the Shares pursuant to this Agreement shall be obtained and effective as of such
Closing.

            4.4. Investors' Rights Agreement. The Company, the Purchaser and the
other  stockholders  of the Company named as parties thereto shall have executed
and delivered the Investors' Rights Agreement.

            4.5.  Long Term Note.  The Company shall have executed and delivered
the Long Term Note to the Principal.

            4.6. Long Term Note Option Agreement.  The Company and the Principal
shall have executed and delivered the Long Term Note Option Agreement.

            4.7. M&R Option  Agreement.  The Company,  John A. Moore and Richard
Rimer shall have executed and delivered the M&R Option Agreement.

            4.8.  Roesch  Employment  Agreement.  The Company and the  Principal
shall have executed and delivered the Roesch Employment Agreement.

            4.9.  Roesch  Release.  Each of the Principal and Viola Roesch shall
have executed and delivered a Roesch Release to the Company.

            4.10.  Capital Increase and Restated Articles.  At the Closing,  the
Current Shareholders shall adopt and the Company shall file the Capital Increase
and the Restated  Articles  with the  Commercial  Register of the Lower Court of
Berlin Charlottenburg as part of the Closing.

            4.11. Proceedings and Documents. All corporate and other proceedings
in  connection  with  the  transactions  contemplated  at the  Closing  and  all
documents  incident  thereto  shall  be  reasonably  satisfactory  in  form  and
substance  to the  Purchaser,  and the  Purchaser  (or its  counsel)  shall have
received all such  counterpart  original  and  certified or other copies of such
documents as  reasonably  requested.  Such  documents  may include good standing
certificates.

      5. Conditions of the Company's  Obligations at Closing. The obligations of
the  Company to sell Shares to the  Purchaser  at the Closing are subject to the
fulfillment,  on or before the  Closing,  of each of the  following  conditions,
unless otherwise waived:

            5.1.   Representations  and  Warranties.   The  representations  and
warranties of the Purchaser  contained in Section 3 shall be true and correct in
all respects as of such Closing.

            5.2.   Performance.  The Purchaser shall have performed and complied
with all covenants,  agreements,  obligations  and conditions  contained in this
Agreement  that are required to be performed or complied  with on or before such
Closing.


                                      -14-
<PAGE>


      6. Miscellaneous.

            6.1.   Survival of  Warranties.  Unless  otherwise set forth in this
Agreement,  the  representations and warranties of the Company and the Purchaser
contained in or made pursuant to this Agreement  shall survive the execution and
delivery  of this  Agreement  and the Closing and shall in no way be affected by
any  investigation  or  knowledge  of the subject  matter  thereof made by or on
behalf of the Purchaser or the Company.

            6.2.   Successors  and  Assigns.  The terms and  conditions  of this
Agreement  shall  inure to the  benefit  of and be binding  upon the  respective
successors  and assigns of the parties.  Nothing in this  Agreement,  express or
implied,  is intended to confer upon any party other than the parties  hereto or
their respective successors and assigns any rights,  remedies,  obligations,  or
liabilities under or by reason of this Agreement,  except as expressly  provided
in this Agreement.

            6.3.   Governing  Law.  This  Agreement  shall  be  governed  by and
construed in accordance with the law of the State of New York, without regard to
its conflicts of laws.

            6.4.  Titles and Subtitles; Interpretation. The titles and subtitles
used  in  this  Agreement  are  used  for  convenience  only  and  are not to be
considered in construing or interpreting this Agreement.

            6.5.  Notices.  All notices and other  communications  given or made
pursuant to this Agreement  shall be in writing and shall be deemed  effectively
given: (a) upon personal delivery to the party to be notified,  (b) when sent by
confirmed  electronic  mail or facsimile if sent during normal business hours of
the recipient, and if not so confirmed,  then on the next business day, (c) five
(5) days after having been sent by registered or certified mail,  return receipt
requested,  postage  prepaid,  or (d) one business (1) day after  deposit with a
nationally recognized overnight courier,  specifying next business day delivery,
with written  verification of receipt.  All communications  shall be sent to the
respective  parties at their address as set forth on the  signature  page, or to
such e-mail address,  facsimile  number or address as  subsequently  modified by
written notice given in accordance  with this Section 6.5. If notice is given to
the Purchaser, a copy shall also be given to Reitler Brown & Rosenblatt LLC, 800
Third Avenue,  21st Floor, New York, New York 10022, (212) 371-5500,  Attention:
Scott H. Rosenblatt, Esq.

            6.6.  No Finder's Fees. Each party represents that it neither is nor
will be obligated for any finder's fee or  commission  in  connection  with this
transaction.  The Purchaser agrees to indemnify and to hold harmless the Company
from any  liability  for any  commission  or  compensation  in the  nature  of a
finder's or broker's  fee  arising  out of this  transaction  (and the costs and
expenses of defending  against such  liability or asserted  liability) for which
the  Purchaser  or  any  of  its  officers,  employees,  or  representatives  is
responsible.  The Company  agrees to indemnify  and hold  harmless the Purchaser
from any  liability  for any  commission  or  compensation  in the  nature  of a
finder's or broker's  fee  arising  out of this  transaction  (and the costs and
expenses of defending  against such  liability or asserted  liability) for which
the Company or any of its officers, employees or representatives is responsible.

            6.7.  Attorney's Fees. If any action at law or in equity  (including
arbitration)  is  necessary  to  enforce  or  interpret  the terms of any of the
Transaction  Agreements,  the  prevailing  party shall be entitled to reasonable
attorney's  fees,  costs and  necessary  disbursements  in addition to any other
relief to which such party may be entitled.


                                      -15-
<PAGE>


            6.8.  Amendments and Waivers.  Except as set forth in Section 1.3 of
this Agreement, any term of this Agreement may be amended,  terminated or waived
only with the written consent of the Company and the Purchaser. Any amendment or
waiver  effected in  accordance  with this Section 6.8 shall be binding upon the
Purchaser and each  transferee of the Shares (or the Common Stock  issuable upon
conversion thereof), each future holder of all such securities, and the Company.

            6.9.   Severability.  The  invalidity  or  unenforceability  of  any
provision  hereof shall in no way affect the validity or  enforceability  of any
other provision.

            6.10.   Delays or  Omissions.  No delay or omission to exercise  any
right,  power or remedy  accruing  to any party under this  Agreement,  upon any
breach or default of any other party under this Agreement, shall impair any such
right, power or remedy of such  non-breaching or non-defaulting  party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein,  or of or in any similar breach or default  thereafter  occurring;  nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default  theretofore  or  thereafter  occurring.  Any waiver,  permit,
consent or  approval  of any kind or  character  on the part of any party of any
breach or default under this  Agreement,  or any waiver on the part of any party
of any provisions or conditions of this Agreement,  must be in writing and shall
be effective  only to the extent  specifically  set forth in such  writing.  All
remedies,  either under this  Agreement  or by law or otherwise  afforded to any
party, shall be cumulative and not alternative.

            6.11.  Entire  Agreement.  This  Agreement  (including  the Exhibits
hereto), the Restated Articles and the other Transaction  Agreements  constitute
the full and entire understanding and agreement between the parties with respect
to the subject matter hereof,  and any other written or oral agreement  relating
to the  subject  matter  hereof  existing  between  the  parties  are  expressly
canceled.

            6.12.  Dispute  Resolution.  The parties (a) hereby  irrevocably and
unconditionally  submit to the  jurisdiction of the state courts of New York and
to the  jurisdiction  of the  United  States  District  Court  for the  Southern
District  of New York for the  purpose of any suit,  action or other  proceeding
arising out of or based upon this Agreement, (b) agree not to commence any suit,
action or other proceeding arising out of or based upon this Agreement except in
the  state  courts  of New York or the  United  States  District  Court  for the
Southern District of New York, and (c) hereby waive, and agree not to assert, by
way of  motion,  as a  defense,  or  otherwise,  in any  such  suit,  action  or
proceeding,  any claim that it is not subject  personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment or
execution,  that the suit,  action or proceeding  is brought in an  inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.


                                      -16-
<PAGE>


            6.13.   Waiver of Jury Trial.  Each party hereto waives any right it
may have to a trial by jury in any action or  proceeding  directly or indirectly
arising out of or relating to this  Agreement or the  transactions  contemplated
hereby (whether based on contract, tort, equity or any other theory). Each party
certifies  that no  representative,  agent or  attorney  of the other  party has
represented,  expressly  or  otherwise,  that the other party to this  Agreement
would not, in the event of litigation,  seek to enforce the foregoing waiver and
acknowledges  that all  parties  hereto  have been  induced  to enter  into this
Agreement by, among other things,  the waivers and  certifications  contained in
this Section 6.13.

                          [Signature Page(s) Follow(s)]


                                      -17-
<PAGE>


         IN WITNESS  WHEREOF,  the  parties  have  executed  this  Common  Stock
Purchase Agreement as of the date first written above.

                               COMPANY:

                               PAKETERIA GmbH


                               --------------------------------------------

                               By:
                                    ---------------------------------------

                               Name:
                                    ---------------------------------------
                                                      (print)
                               Title:
                                     --------------------------------------

                               Address:


                               PRINCIPAL:


                               --------------------------------------------
                               Andy Roesch

                               Address:


                               PURCHASER:

                               DATA SYSTEMS & SOFTWARE INC.


                               --------------------------------------------

                               By:
                                  -----------------------------------------

                               Name:
                                    ---------------------------------------
                                                      (print)
                               Title:
                                     --------------------------------------

                               Address:


<PAGE>


                               CURRENT SHAREHOLDERS:


                               --------------------------------------------
                               Name:
                                    ---------------------------------------
                                                      (print)

                               Address:



                               --------------------------------------------
                               Name:
                                    ---------------------------------------
                                                      (print)

                               Address:



                               --------------------------------------------
                               Name:
                                    ---------------------------------------
                                                      (print)

                               Address:



                               --------------------------------------------
                               Name:
                                    ---------------------------------------
                                                      (print)

                               Address:

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>v050655_ex10-2.txt
<TEXT>


                                                                    EXHIBIT 10.2

                             NOTE PURCHASE AGREEMENT
                             -----------------------

      THIS NOTE PURCHASE AGREEMENT (this "Agreement"), is made as of the 7th day
of August 2006,  by and between Andy Roesch (the  "Seller"),  and Data Systems &
Software, Inc., a Delaware corporation (the "Purchaser").

                                    RECITALS
                                    --------

      WHEREAS,  in connection with that certain Common Stock Purchase Agreement,
dated as of the date hereof (the "Purchase  Agreement"),  between Paketeria GmbH
("Paketeria")  and Purchaser,  and the transactions  contemplated  thereby,  the
parties hereto are entering into this Agreement;

      WHEREAS,  the  Purchase  Agreement  states  that,  as a  condition  to its
effectiveness, the Seller and the Purchaser enter into this Agreement; and

      WHEREAS,  the Seller wishes to sell,  transfer and assign to the Purchaser
all of its  rights,  titles,  interests,  duties and  obligations  in, to and in
connection with, that certain Convertible  Promissory Note, dated as of the date
hereof,  issued by Paketeria to the Seller,  in the  principal  amount of (euro)
210,000 (the  "Note"),  a copy of which is annexed  hereto as Exhibit A, and the
Purchaser,  subject  to the  terms of this  Agreement,  wishes to  purchase  and
receive from the Seller all of the Seller's rights,  titles,  interests,  duties
and  obligations  in,  to and in  connection  with,  the Note on the  terms  and
conditions set forth herein.

      NOW, THEREFORE, the parties hereby agree as follows:

      1. SALE, PURCHASE, ASSIGNMENT AND ASSUMPTION.

            1.1 Sale and Purchase. Subject to Section 1.2, the Seller shall sell
and transfer to the Purchaser and its  successors and assigns  forever,  and the
Purchaser  shall  purchase  and  accept  from  the  Seller  for  itself  and its
successors and assigns forever, all of the Seller's rights, titles and interests
in and to (i) upon the  delivery  by the  Purchaser  of an  Exercise  Notice (as
defined  below) with  respect to the entire  Note,  the Note,  for an  aggregate
purchase price of Two Hundred and Ten Thousand Euros ((euro)  210,000),  or (ii)
upon the delivery by the Purchaser of an Exercise Notice (as defined below) with
respect to a portion of the Note or upon the occurrence of a Milestone Event (as
defined below), a portion of the Note,  including related accrued interest,  for
an amount equal to the portion of the principal of the Note to be purchased plus
accrued  interest as per the date of the event  pursuant to Section 1.2 (in each
case, the "Purchase  Price").  The purchase of the Note may occur in one or more
closings.

            1.2 Condition Precedent.  Purchaser shall not be obligated hereunder
to purchase all or any portion of the Note (and pay the  corresponding  Purchase
Price to the Seller) until such time as:


<PAGE>


                  (a) the  Purchaser  delivers  a written  notice,  at any time,
advising  Seller of its intention to complete the purchase of the Note, in whole
or in part (the "Exercise Notice" together with this Agreement and the Note, the
"Transaction  Documents"),  substantially in the form attached hereto as Exhibit
B;

                  (b) with respect to one-third (1/3) of the principal amount of
the Note, upon Complete  Execution (as defined below) of a licence agreement for
the sixtieth (60th) Paketeria store;

                  (c)  with  respect  to an  additional  one-third  (1/3) of the
principal  amount of the Note,  upon Complete  Execution (as defined below) of a
licence agreement for the seventy-fifth (75th) Paketeria store; and

                  (d) with respect to the final one-third (1/3) of the principal
amount of the Note,  upon  Complete  Execution  (as defined  below) of a licence
agreement for the one-hundred and fifteenth  (115th)  Paketeria store (the event
set forth in this clause (d),  together with the events set forth in clauses (b)
and (c) above, the "Milestone Events" and each a "Milestone Event").

For purposes of this Section 1.2, "Complete  Execution" shall mean, with respect
to each license  agreement  executed by Paketeria,  (i) a fully executed license
agreement  between  Paketeria  and a  licensee,  and (ii)  delivery  of evidence
reasonably  satisfactory to the Company that the licensee has adequate resources
to perform under the license  agreement,  including payment of a license fee and
"build-out"  of the  licensee's  store,  if such  "build-out" is required by the
standard operating procedures of Paketeria.

            1.3 Closing.  Following  the delivery of the Exercise  Notice or the
occurrence  of a Milestone  Event,  a closing of the  transactions  described in
Section 1.1 (a "Closing") shall take place.

                  (i) Subject to the immediately following sentence, the Closing
shall take place at the offices of Reitler  Brown &  Rosenblatt,  LLC, 800 Third
Avenue,  21st Floor,  New York,  New York at such time or at such other place as
the Seller and the Purchaser may mutually agree,  but in any event no later than
forty-five  (45) calendar days after the Exercise  Notice has been  delivered or
the Milestone Event has taken place.

                  (ii)  If  the  Purchaser  has in the  Exercise  Notice,  or by
separate written notice,  announced its intention to exercise, in respect of the
Note or the partial  amount of the Note to be  acquired,  its  conversion  right
fully or with regard to a permitted partial amount, the closing shall take place
at such time as the parties  shall  mutally  agree,  before a German Notary upon
whom the parties shall mutually agree, but in any event no later than forty-five
(45) calendar days after the Exercise Notice containing such announcement or the
separate written notice has been delivered to the Seller.


                                      -2-
<PAGE>


            1.4 Closing Deliveries. At each Closing:

                  (a) the Purchaser shall pay to the Seller or its designee,  by
wire transfer to an account designated in writing by the Seller at least two (2)
business days prior to such Closing, the Purchase Price in immediately available
funds;

                  (b) the Seller  shall  deliver to the  Purchaser  the Note (or
cause  Paketeria to issue a new  promissory  note  evidencing the portion of the
Note so transferred), free and clear of all liens, claims or encumbrances (other
than any liens, claims or encumbrances in favor of the Purchaser) together with,
confirmation  that title to the Note (or such  portion as is to be  transferred)
has irrevocably  transferred to the Purchaser in a form reasonably  satisfactory
to the Purchaser; and

                  (c)  each  of the  parties  shall  have  delivered  all  other
documents,  instruments and writing  required by the other party to be delivered
to them pursuant to this Agreement,  in form and substance  satisfactory to such
party.

                  (d) In the  event  the  Closing  takes  place  before a German
notary public pursuant to Section 1.3(ii) above:  (i) the Seller shall take care
that all such  documentation  necessary to effect entry,  in due course,  of the
capital  increase  for  the  conversion  in the  commercial  register  including
(without  limitation) a unanimous  notarized  shareholders'  resolution  and the
filing by the Company of such capital  increase to the commercial  register,  is
duly executed at such Closing and (ii) the Purchaser  shall  subscribe the share
to be issued in such capital  increase and shall arrange for payment of the cash
contribution  by check  payable to the  Company,  or by wire  transfer to a bank
account designated by the Company


            1.5 Assignment and Transfer.

                  The Seller hereby assigns and transfers all of his present and
future  rights and  obligations  under the Note to the  Purchaser as of the date
hereof. The assignment and transfer shall become valid if (condition precedent):

                    (i) the Note is delivered by the Seller to the Purchaser, in
which case the transfer and assignment becomes immediately effective in relation
to all of the rights represented by the Note; or

                    (ii)  a new  promissory  note  issued  by  the  Company  and
evidencing  a portion of the Note is  delivered  by the Seller or the Company to
the  Purchaser,  in which case the transfer and assignment  becomes  immediately
effective in relation to such portion of the Note along with related interest as
evidenced by the new promissory note.


The Purchaser hereby accepts such transfer and assignment as of the date hereof.


                                      -3-
<PAGE>


      2. REPRESENTATIONS AND WARRANTIES.

            2.1 Construction.  For purposes of this Section 2, a person shall be
deemed to have "knowledge" of a particular fact or other matter if the person is
actually  aware,  or should in the exercise of reasonable  judgment be aware, of
such fact or other matter. A person that is a corporation,  partnership or other
business  entity shall be deemed to have  "knowledge"  of a  particular  fact or
other matter if any officer,  director,  manager,  managing member or partner of
such person has knowledge (as described in the preceding  sentence) of such fact
or other matter.

            2.2  Seller's  Representations  and  Warranties.  The Seller  hereby
represents  and  warrants  to the  Purchaser  as of the date of the  Closing  as
follows:

                  (a) Authorization; Valid and Binding Agreement. Except for any
notices  required to be delivered to Purchaser in  connection  therewith and any
consent required to be obtained from the Purchaser, the Seller has all requisite
power and authority to execute and deliver this Agreement, to perform all of its
obligations and  undertakings  hereunder and  thereunder,  and to consummate the
transactions  contemplated hereby and thereby. The execution and delivery by the
Seller of this  Agreement,  the performance by the Seller of its obligations and
undertakings  hereunder and the  consummation by the Seller of the  transactions
contemplated  hereby,  have been duly and validly  authorized  by all  necessary
action of the  Seller  and no other  proceedings  on the part of the  Seller are
necessary  to  authorize  the  execution  or  delivery  by the  Seller  of  this
Agreement,  the performance by the Seller of its  obligations  and  undertakings
hereunder,  or the consummation by the Seller of the  transactions  contemplated
hereby.  This Agreement has been duly executed and delivered by the Seller,  and
constitutes the legal, valid and binding obligations of the Seller,  enforceable
against the Seller in accordance with its terms.

                  (b)  Conflicts;  Consents.  The  execution and delivery by the
Seller of this  Agreement,  the performance by the Seller of its obligations and
undertakings  hereunder,  and the consummation by the Seller of the transactions
contemplated  hereby,  do not and will  not  conflict  with,  or  result  in any
violation  of, or  default  under,  or result  in the  creation  of any Lien (as
defined in Section 2.2(c)) on the properties or assets of the Seller under,  any
provision of (i) any contract, agreement, instrument or arrangement to which the
Seller  is a party or by which any of the  Seller's  properties  or  assets  are
bound, (ii) any license,  franchise,  permit or other similar authorization held
by the Seller, or (iii) to the knowledge of the Seller,  any judgment,  order or
decree, statute, law, ordinance,  rule or regulation applicable to the Seller or
the Seller's properties or assets.

                  (c) Title to Properties and Assets; Liens, Etc. Except for any
Lien arising out of this  Agreement,  as of the Closing,  Seller is the owner of
all right,  title and  interest in and to the Note,  and the Note is free of any
mortgage,  pledge,  lien,  encumbrance,  charge or other adverse claim (each,  a
"Lien") other than Liens in favor of the Purchaser.

            2.3  Purchaser's  Representations,  Warranties  and  Covenants.  The
Purchaser  hereby  represents,  warrants  and  covenants to the Seller as of the
Closing as follows:


                                      -4-
<PAGE>


                  (a) Organization and Standing.  The Purchaser is a corporation
duly  incorporated,  validly  existing  and in good  standing  under the laws of
Delaware.

                  (b) Authorization;  Valid and Binding Agreement. The Purchaser
has all requisite power and authority to execute and deliver this Agreement,  to
perform its  obligations  and  undertakings  hereunder,  and to  consummate  the
transactions contemplated hereby. The execution and delivery by the Purchaser of
this  Agreement,  the  performance  by  the  Purchaser  of its  obligations  and
undertakings   hereunder,   and  the   consummation  by  the  Purchaser  of  the
transactions  contemplated  hereby, have been duly and validly authorized by all
necessary  action on the part of the Purchaser and no other  proceedings  on the
part of the  Purchaser  are  necessary to authorize the execution or delivery by
the  Purchaser  of this  Agreement,  the  performance  by the  Purchaser  of its
obligations and  undertakings  hereunder or the consummation by the Purchaser of
the transactions  contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser, and constitutes the valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with its terms.

                  (c)  Conflicts;  Consents.  The  execution and delivery by the
Purchaser of this Agreement, the performance by the Purchaser of its obligations
and undertakings  contemplated hereunder,  and the consummation by the Purchaser
of the transactions  contemplated  hereby, do not and will not conflict with, or
result in any  violation  of, or default  under or result in the creation of any
Lien on the  properties or assets of the Purchaser  under,  any provision of (i)
the Certificate of Incorporation,  Bylaws of the Purchaser, each as the same has
been amended to date, (ii) any contract, agreement, instrument or arrangement to
which the Purchaser is a party or by which any of the Purchaser's  properties or
assets  are  bound,  (iii)  any  license,  franchise,  permit  or other  similar
authorization held by the Purchaser,  or (iv) to the knowledge of the Purchaser,
any  judgment,  order or decree,  statute,  law,  ordinance,  rule or regulation
applicable to the Purchaser or the Purchaser's properties or assets.

      3. MISCELLANEOUS.

            3.1 Benefits of Agreement.  Except as otherwise  expressly  provided
herein,  the  provisions  hereof shall inure to the benefit of, be binding upon,
and be enforceable  by, the parties hereto and their  respective  successors and
assigns.

            3.2  Assignment.  This  Agreement  and the  rights  and  obligations
hereunder  shall not be assignable or  transferable  by either party without the
prior written consent of the other party.  Any instrument  purporting to make an
assignment in violation of this Section 3.2 shall be void.

            3.3  Entire  Agreement.  This  Agreement,  together  with the  other
Transaction  Documents,  and the exhibits hereto and thereto constitute the full
and entire  understanding  and agreement  between the parties with regard to the
subject matter hereof.


                                      -5-
<PAGE>


            3.4 Severability. In case any provision of this Agreement or portion
hereof, shall be invalid, illegal or unenforceable,  the validity,  legality and
enforceability  of the remaining  provisions shall not in any way be affected or
impaired thereby.

            3.5 Amendment and Waiver. This Agreement and any provision hereof or
right or obligation  hereunder may be amended,  modified or waived only with the
prior written consent of the Seller and the Purchaser.

            3.6 Delays or  Omissions;  Remedies.  It is agreed  that no delay or
omission to exercise any right,  power or remedy accruing to any party, upon any
breach,  default or  noncompliance  by the other  party,  shall  impair any such
right,  power or remedy,  nor shall it be  construed  to be a waiver of any such
breach,  default or noncompliance,  or any acquiescence therein, or of or in any
similar breach, default or noncompliance thereafter occurring.

            3.7  Notices.  All  notices and other  communications  given or made
pursuant to this Agreement  shall be in writing and shall be deemed  effectively
given: (a) upon personal delivery to the party to be notified,  (b) when sent by
confirmed  electronic  mail or facsimile if sent during normal business hours of
the recipient, and if not so confirmed,  then on the next business day, (c) five
(5) days after having been sent by registered or certified mail,  return receipt
requested,  postage  prepaid,  or (d) one business (1) day after  deposit with a
nationally recognized overnight courier,  specifying next business day delivery,
with written  verification of receipt.  All communications  shall be sent to the
respective  parties at their address as set forth on the  signature  page, or to
such e-mail address,  facsimile  number or address as  subsequently  modified by
written notice given in accordance  with this Section 3.7. If notice is given to
the Seller, a copy shall also be sent to Kornblumenring 3, 12357 Berlin,  and if
notice is given to the Purchaser,  a copy shall also be given to Reitler Brown &
Rosenblatt LLC, 800 Third Avenue,  21st Floor,  New York, New York 10022,  (212)
371-5500, Attention: Scott H. Rosenblatt, Esq.

            3.8 Expenses.  Except as otherwise provided herein, each party shall
pay all costs and  expenses  that it incurs  with  respect  to the  negotiation,
execution, delivery, performance and consummation of this Agreement.

            3.9 Titles and Subtitles. The titles of the sections and subsections
of this  Agreement  are for  convenience  of  reference  only  and are not to be
considered in construing this Agreement.

            3.10 Pronouns.  All pronouns  contained  herein,  and any variations
thereof,  shall be  deemed  to  refer to the  masculine,  feminine  or  neutral,
singular or plural, as the identity of the parties may require.

            3.11  Dispute  Resolution.  The parties (a) hereby  irrevocably  and
unconditionally  submit to the  jurisdiction of the state courts of New York and
to the  jurisdiction  of the  United  States  District  Court  for the  Southern
District  of New York for the  purpose of any suit,  action or other  proceeding
arising out of or based upon this Agreement, (b) agree not to commence any suit,
action or other proceeding arising out of or based upon this Agreement except in
such courts, and (c) hereby waive, and agree not to assert, by way of motion, as
a defense, or otherwise, in any such suit, action or proceeding,  any claim that
it is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from  attachment or  execution,  that the suit,
action or proceeding is brought in an inconvenient  forum, that the venue of the
suit,  action or  proceeding  is improper or that this  Agreement or the subject
matter hereof may not be enforced in or by such court.


                                      -6-
<PAGE>


            3.12 Waiver of Jury Trial. Each party hereto waives any right it may
have to a trial by jury in any  action  or  proceeding  directly  or  indirectly
arising out of or relating to this  Agreement or the  transactions  contemplated
hereby (whether based on contract, tort, equity or any other theory). Each party
certifies  that no  representative,  agent or  attorney  of the other  party has
represented,  expressly  or  otherwise,  that the other party to this  Agreement
would not, in the event of litigation,  seek to enforce the foregoing waiver and
acknowledges  that all  parties  hereto  have been  induced  to enter  into this
Agreement by, among other things,  the waivers and  certifications  contained in
this Section 3.12.

            3.13 Delays or  Omissions.  No delay or  omission  to  exercise  any
right,  power, or remedy  accruing to any party under this  Agreement,  upon any
breach or default of any other party under this Agreement, shall impair any such
right,  power, or remedy of such nonbreaching or nondefaulting  party, nor shall
it be construed to be a waiver of or acquiescence to any such breach or default,
or to any similar breach or default thereafter  occurring,  nor shall any waiver
of any  single  breach or  default  be  deemed a waiver  of any other  breach or
default theretofore or thereafter  occurring.  All remedies,  whether under this
Agreement or by law or otherwise  afforded to any party, shall be cumulative and
not alternative.


                          [Signature Page(s) Follow(s)]


                                      -7-
<PAGE>


         IN WITNESS  WHEREOF,  each of the  undersigned  parties has caused this
NOTE  PURCHASE  AGREEMENT to be duly executed and delivered as of the date first
above written.


                                 SELLER:


                                 -------------------------------
                                 Andy Roesch

                                 Address:  Kornblumenring 3
                                           12357 Berlin

                                 PURCHASER:

                                 DATA SYSTEMS & SOFTWARE INC.



                                 By:_____________________________
                                 Name:
                                 Title:

                                 Address:  200 Route 17
                                           Mahwah, New Jersey 07430
                                           Attention:  John A. Moore
                                           President and Chief Executive Officer


<PAGE>


                                    EXHIBIT A
                                    ---------


                                 PAKETERIA GmbH

                           CONVERTIBLE PROMISSORY NOTE

(euro) 210,000                                                   BERLIN, GERMANY
                                                                  August 7, 2006

         FOR VALUE RECEIVED, PAKETERIA GmbH, a German limited liability company,
and its successors and assigns  (collectively,  the "Company"),  hereby promises
unconditionally  to pay to ANDY  ROESCH (the  "Holder"),  or  permitted  assigns
pursuant to Section 3 hereof,  in immediately  available and lawful money of the
Republic of Germany  ("Euros" or "(euro)"),  the principal amount of Two Hundred
and Ten Thousand Euros ((euro) 210,000) (the "Principal"),  plus any accrued and
unpaid  Interest  thereon,  or such other  amount as may be  outstanding  on the
Maturity Date (as such terms are defined below). The following is a statement of
the rights of the Holder under this  secured  convertible  promissory  note (the
"Note")  and the  conditions  to which  this Note is  subject,  and to which the
Holder, by accepting this Note, agrees:

         1.       CERTAIN DEFINITIONS.

                  As used herein,  the following  terms shall have the following
meanings:

                  "Affiliate"  means, with respect to any specified Person,  any
other Person who or which,  directly or indirectly,  controls, is controlled by,
or is under  common  control  with  such  specified  Person,  including  without
limitation any partner,  officer,  director,  manager or employee of such Person
and any venture capital fund now or hereafter  existing that is controlled by or
under common control with one or more general  partners or managing  members of,
or shares the same management company with, such Person.

                  "Business Day" means any day that is not a Saturday, Sunday or
a legal holiday in the State of New York.

                  "Common  Stock" means the common stock  ("Stammkapital")  or -
after   conversion   into  a  Stock   Corporation  -  the  base  equity  capital
("Grundkapital") of the Company.

                  "Equity   Securities"  means  any  limited  liability  company
interests or units representing such interests, common stock, preferred stock or
any  other  security   representing  equity  of  the  Company  or  any  security
convertible, exercisable or exchangeable for any of the foregoing.

                  "Event of Default" shall have meaning assigned to such term in
Section 4.1.

                  "Issue Date" means the first date written above,  which is the
date of execution and issuance of this Note.


<PAGE>


                  "Maturity  Date" means the three (3) year  anniversary  of the
Issue Date, as may be extended pursuant to Section 2.4.

                  "Person" means any individual,  corporation, limited liability
company,  partnership,  firm, joint venture,  association,  joint stock company,
trust or other  entity or  organization,  including a  government  or  political
subdivision or an agency or instrumentality thereof.

         2. REPAYMENT.

            2.1.  Principal.  Unless  earlier  converted  into  Common  Stock in
accordance with the provisions  hereof, the entire unpaid Principal shall be due
and payable on the Maturity Date.

            2.2. Interest. Interest on the Note ("Interest"),  during the period
from the Issue Date  through  the  Maturity  Date,  shall  accrue at a straight,
non-compounded rate equal to eight percent (8%) per annum (the "Initial Interest
Rate").  Interest  shall be computed on the basis of a 365-day  year  applied to
actual days elapsed.  Notwithstanding  the  foregoing,  upon the  occurrence and
during the continuation of an Event of Default,  the Initial Interest Rate shall
be increased by 2 percent (2%) per annum.  Unless earlier  converted into shares
of Common Stock in accordance with the provisions hereof, all accrued and unpaid
Interest  shall be due and payable on the  Maturity  Date.  The rate of Interest
payable  under this Note from time to time shall in no event  exceed the maximum
rate, if any,  permissible under applicable law. If the rate of Interest is ever
reduced as a result of the  preceding  sentence and at any time  thereafter  the
maximum  rate  permitted  by  applicable  law shall  exceed the rate of interest
provided  hereunder,  then the rate provided for hereunder shall be increased to
the maximum rate permitted  under  applicable law for such period as required so
that the total  amount of  interest  received  by the Holder is that which would
have been  received  by the  Holder  but for the  operation  of the  immediately
preceding sentence.

            2.3. Prepayment.  This Note may not be prepaid, in whole or in part,
by the Company,  without the prior written consent of the Conversion  Holder (as
defined in Section 3).

            2.4.  Extension of Maturity  Date.  If the Principal and accrued and
unpaid Interest become due and payable on any day other than a Business Day, the
Maturity Date shall be extended to the next succeeding Business Day, and to such
payable amounts shall be added the Interest which shall have accrued during such
extension period at the rate per annum herein specified.

            2.5  Limitation  on  Repayment.  The  Company is  entitled  to delay
repayment of the outstanding  Principal and the payment of any accrued  interest
if, to the extent and as long as the Company  will after such payment not retain
enough cash to finance its business.  The existence of such a situation shall be
proved by the  Company  by way of  written  confirmation  by its  auditor.  Such
confirmation  shall be renewed every three months unless waived by the Holder or
Conversion Holder, as the case may be.


                                      -2-
<PAGE>


            2.6.  Surrender  of  Note.   Promptly  following  the  repayment  or
conversion in full of all  outstanding  Principal  and  Interest,  the Holder or
Conversion Holder shall surrender this Note to the Company for cancellation.

            2.7. Release of Obligations.  As a condition to the issuance of this
Note,  the Holder has executed a release and waiver of any other amount owed, or
that may be owed, by the Company to the Holder or any of his  Affiliates,  other
than the amounts evidenced by this Note.

            2.8. Subordination.  Any rights and claims to payment the Holder has
or may have in the future against the Company under this Note including (without
limitation)  any  rights  and  claims to  principal  and  interest,  are  hereby
subordinated behind the rights and claims of any other creditors of the Company,
it being  understood  that such  rights  and  claims of the  Holder  may only be
fulfilled out of future  profits after any loss carry forward has been made good
("Bilanzgewinn"),   or  out   of  the   assets   remaining   after   liquidation
("Liquidationserlos"),  or out of other property in excess of other debts of the
Company, and it further being understood that the Holder shall be precluded from
participating  as a Creditor,  in  relation  to such  rights and claims,  in any
bankruptcy  proceedings against the Company in the event such proceedings should
be instituted.  The Holder shall  cooperate in any change to this  subordination
that may be necessary under  applicable  statutes and case law to make sure that
the  obligations  subject  to the  subordination  do not have to be  booked as a
liability  in a  balance  sheet  of  the  Company  set up for  the  purposes  of
determining  overindebtedeness  for the purpose of the determination  whether an
obligation to file for bankruptcy  exists for the Company's  managing  directors
("Uberschuldungsstatus").  For the avoidance of doubt,  it is hereby stated that
the  Conversion  right  pursuant to Section 5 hereof is in no way  precluded  or
affected by this Section 2.8 at any time.

         3. ASSIGNMENT.

            The Holder may not assign or transfer this Note to any Person, other
than to Data Systems & Software Inc., a Delaware  corporation  ("DSSI"),  or the
designee or successor of DSSI  (collectively,  the  "Conversion  Holder").  Such
permitted  assignment  may take place in relation to the entire  principal  plus
related  interest or in relation to any partial  amounts of such  principal,  in
each case plus related interest.


                                       -3-
<PAGE>


         4. DEFAULT.

            4.1. Events of Default.  The following  events shall each constitute
an event of default under this Note (each, an "Event of Default"):

                  (a) the Company's failure to pay when due any Principal of, or
Interest on, this Note, any fees or any other amount payable hereunder;

                  (b) the Company's  commencement  of a voluntary  case or other
proceeding seeking  liquidation,  reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter  in  effect  or  seeking  the  appointment  of  a  trustee,  receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property,  or the Company's consent to any such relief or to the appointment
of or taking  possession  by any such official in an  involuntary  case or other
proceeding  commenced  against it, or the Company's making a general  assignment
for the  benefit of  creditors,  or failure  generally  to pay its debts as they
become due, or the Company's  taking of any corporate action to authorize any of
the foregoing; and

                  (c) the  commencement  against the  Company of an  involuntary
case or other proceeding  seeking  liquidation,  reorganization  or other relief
with  respect  to it or its debts  under  any  bankruptcy,  insolvency  or other
similar law now or hereafter in effect or seeking the  appointment of a trustee,
receiver,  liquidator,  custodian  or  other  similar  official  of  it  or  any
substantial part of its property,  and such involuntary case or other proceeding
shall  remain  un-dismissed  for a period of sixty  (60)  days,  or an order for
relief shall be entered against the Company under the federal bankruptcy laws as
now or hereafter in effect.

            4.2.  Remedies.  Upon the  occurrence  of an Event of  Default,  the
Holder may, by written  notice to the Company,  declare this Note  together with
accrued  Interest  hereon,  to be due and payable without  presentment,  demand,
protest  or other  notice of any kind,  all of which  are  hereby  waived by the
Company;  provided,  however,  that in the case of any of the  Events of Default
specified in Section 4.1(a), the Company shall have twenty (20) Business Days to
cure such Event of  Default  (if  curable),  and  absent  such  cure,  this Note
together with accrued interest herein shall become  immediately due and payable;
provided, further, that in the case of any of the Events of Default specified in
Section 4.1(b) or Section 4.1(c), without any notice to the Company or any other
act by the Holder,  the Principal  together with accrued  Interest thereon shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Company.

         5. CONVERSION.

            5.1.  Conversion.  This Note may only be  converted  by a Conversion
Holder.  In the  event  this  Note is  assigned  to a  Conversion  Holder,  such
Conversion  Holder may at any time  convert  this Note,  at its  option,  (x) in
whole,  or (y) in partial amounts of outstanding  Principal  divisible by (euro)
70,000 plus  related  Interest,  into shares of Common  Stock.  The nominal Euro
amount of the share shall be obtained by dividing  (x) the  Principal or partial
amount  thereof to be  converted,  plus  related  Interest  by (y) the  Adjusted
Conversion Price. For purposes of this Note,  "Adjusted  Conversion Price" means
initially  a price of (euro)  50.70 for each Euro of Common  Stock  (subject  to
adjustment for any splits,  reverse  splits,  combinations  or similar  events),
subject to adjustment  pursuant to Section 5.6. If the nominal amount  resulting
from such  division  is not  divisible  by 50, it shall be  rounded  to the next
higher amount divisible by 50.


                                      -4-
<PAGE>


                  5.2. Form of Conversion.  The conversion shall be exercised by
written notice by the Conversion Holder to the Company.

                  5.3  Effect  of   Conversion.   Upon  the  conversion  of  any
outstanding  Principal or partial  amount  thereof along with related  Interest,
this Note shall, by virtue hereof, and without any further action being required
by any party, terminate and be discharged with respect to such converted portion
of this Note's  principal,  less the cash  contribution  to be made  pursuant to
Section 5.4(i),  and shall to the extent so terminated  represent only the right
to receive the Common Stock to be issued upon such conversion (Section 5.4).

                  5.4   Conversion   Mechanics.   Upon  the  conversion  of  any
outstanding  Principal  along with related  Interest,  the  shareholders  of the
Company shall adopt,  no later than  forty-five (45) calendar days after receipt
of the  notice  pursuant  to  Section  5.2,  by way of  notarized  shareholders'
resolution, and the Company shall file with the Commercial Register of the Lower
Court ("Amtsgericht") of Berlin Charlottenburg, an increase of the share capital
of the Company by an amount equal to the nominal amount determined in accordance
with Section 5.1. The  increase of the share  capital  shall have the  following
terms:

                  (i) the share shall be issued  against  payment in cash of its
nominal amount to the Company;

                  (ii) the share shall be issued to the Conversion Holder;

                  (iii)  the  share to be  issued  shall be  entitled  to profit
participation as from the beginning of the business year in which the conversion
is exercised.

                  If after any  conversion,  any Principal  and Interest  remain
outstanding,  upon the  submission  to the  Company of this  original  Note or a
replacement Note issued in accordance with Section 6, the Company shall issue to
the  Conversion  Holder  a duly  authorized,  validly  issued  replacement  note
evidencing  the portion of the  Principal  with  related  Interest  that was not
subject to the conversion.

                  5.5.  Release of Obligations  Under Note.  Upon  conversion or
satisfaction  in whole of the  Principal  and  Interest  and the issuance of all
securities  issuable in connection with the conversion hereof and the payment of
all amounts due hereunder, the Company shall be forever released from all of its
obligations,  undertakings and liabilities under this Note as it applies to this
Note.

                  5.6.  Adjustments.  (i) If at any  time or  from  time to time
after the date of this Note,  the Company  issues or sells,  or is deemed by the
express provisions of this Section 5.4 to have issued or sold, Additional Shares
of Common Stock (as defined in Section 5.4(iv)  hereof),  for an Effective Price
(as  defined  in  Section  5.6(iv))  less  than  the  then  applicable  Adjusted
Conversion  Price,  then in each such case, the Adjusted  Conversion Price to be
applied in any conversion  completed after such issue or sale, shall be reduced,
concurrently with such issue, to the Effective Price received by the Company for
such issue or deemed issue of Additional Shares of Common Stock.


                                      -5-
<PAGE>


                  (ii) For the  purpose of the  adjustment  required  under this
Section 5.6, the consideration  received by the Company for any issue or sale of
securities  shall (i) to the extent it consists of cash,  be computed at the net
amount of cash received by the Company after  deduction of any  underwriting  or
similar commissions,  compensation or concessions paid or allowed by the Company
in  connection  with such issue or sale but without  deduction  of any  expenses
payable by the  Company,  (ii) to the extent it consists of property  other than
cash, be computed at the fair value of that property as determined in good faith
by the  Managing  Directors of the Company,  and (iii) if  Additional  Shares of
Common Stock,  Convertible Securities (as defined in Section 5.6(iii)) or rights
or options to purchase either  Additional  Shares of Common Stock or Convertible
Securities  are issued or sold  together with other stock or securities or other
assets of the Company for a consideration  which covers both, be computed as the
portion of the  consideration  so received that may be reasonably  determined in
good faith by the Managing  Directors to be allocable to such Additional  Shares
of Common Stock, Convertible Securities or rights or options.

                  (iii) For the purpose of the  adjustment  required  under this
Section  5.6,  if the  Company  issues or sells  (i)  stock or other  securities
convertible  into,  Additional Shares of Common Stock (such convertible stock or
securities being herein referred to as "Convertible Securities"), or (ii) rights
or options for the purchase of Additional  Shares of Common Stock or Convertible
Securities and if the Effective Price of such Additional  Shares of Common Stock
is less than the Adjusted  Conversion  Price, in each case the Company shall not
be deemed to have issued the  Additional  Shares of Common  Stock at the time of
the issuance of such rights or options or Convertible Securities. The adjustment
to the  Adjusted  Conversion  Price shall  occur upon the  issuance of shares of
Common Stock issued due to the sale or upon the  conversion  or exercise of such
rights or options or Convertible Securities.

                  (iv) For purposes of this Note, the following terms shall have
the meaning assigned below:

                    (x)  "Additional  Shares of  Common  Stock"  shall  mean all
shares of Common Stock issued by the Company or deemed to be issued  pursuant to
this Section 5.6, other than Permitted Issuances.

                    (y) "Effective  Price" of Additional  Shares of Common Stock
shall mean the quotient  determined  by dividing the total number of  Additional
Shares of Common Stock issued or sold,  or deemed to have been issued or sold by
the Company under this Section 5.6, into the aggregate  consideration  received,
or deemed to have been  received  by the  Company,  for such  issue  under  this
Section 5.6 for such Additional Shares of Common Stock.

                    (z) "Permitted Issuances" shall have the meaning ascribed to
such term in that  certain  Investors'  Rights  Agreement,  dated as of the date
hereof, among the Company and each party signatory thereto.


                                      -6-
<PAGE>


         6. REPLACEMENT OF NOTE.

            Upon  receipt by the Company of evidence  satisfactory  to it of the
loss,  theft,  destruction or mutilation of this Note,  and (if mutilated)  upon
surrender and  cancellation  of this Note, the Company shall make and deliver to
the Holder or Conversion Holder, as the case may be, a new note of like tenor in
lieu of this Note. Any  replacement  note made and delivered in accordance  with
this Section 6 shall be dated as of the date hereof.

         7. MISCELLANEOUS.

            7.1.  Benefits of Note. The provisions of this Note shall be binding
upon the successors and assigns of the Company and shall inure to the benefit of
and be enforceable by each person who shall be a Holder from time to time.

            7.2.  Severability.  In case any  provision  of this  Note  shall be
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

            7.3.  Amendment and Waiver. No modification,  amendment or waiver of
any  provision  of, or consent  required  by, this Note,  nor any consent to any
departure herefrom, shall be effective unless it is in writing and signed by the
Company. Such modification, amendment, waiver or consent shall be effective only
in the specific instance and for the purpose for which given.

            7.4.  Delays or Omissions.  No delay by the Holder in exercising any
powers or rights hereunder shall operate as a waiver of such power or right, nor
shall any single or partial  exercise  of any power or right  preclude  other or
further exercise thereof,  or the exercise of any other power or right hereunder
or otherwise.

            7.5. Notices. All notices,  requests, and other communications given
or made  pursuant  to this  Agreement  shall be in  writing  and shall be deemed
effectively given (i) upon personal  delivery to the party to be notified;  (ii)
when sent by  confirmed  electronic  mail or  facsimile  if sent  during  normal
business  hours  of the  recipient,  and if not so  confirmed,  then on the next
business  day;  (iii)  five (5) days after  having  been sent by  registered  or
certified mail, return receipt requested,  postage prepaid;  or (iv) one (1) day
after  deposit  with  a  nationally  recognized  overnight  courier,  specifying
next-day  delivery,  with written  verification of receipt.  All  communications
shall be sent to the respective  parties at their  addresses as set forth on the
cover page or signature page hereto, or to such email address, facsimile number,
or address as  subsequently  modified by written notice given in accordance with
this Section 7.5.

            7.6.  Expenses of Conversion.  The Company shall be responsible  for
all expenses incurred by any Conversion Holder in connection with the conversion
of the Principal and accrued and unpaid  Interest  under this Note. The issuance
of shares of Common Stock or a replacement  note  representing  any Principal or
Interest  that  remains  outstanding  after a  conversion  shall be made without
charge to the  Conversion  Holder  for any fees,  costs or  expenses  in respect
thereof.


                                      -7-
<PAGE>


            7.7.  Expenses of Enforcement.  The Holder or Conversion  Holder, as
the case may be, shall be entitled to recover  from the Company all fees,  costs
and  expenses  of  enforcing  any  provisions  of this Note,  including  without
limitation,  such  reasonable  fees and expenses of attorneys  and  accountants,
which shall include, without limitation, all fees, costs and expenses of appeals
(except for any such fees, costs and expenses relating to any lawsuit brought by
the Holder or  Conversion  Holder,  as the case may be, in which the  Company is
finally determined to be the prevailing party).

            7.8.   Titles  and  Subtitles.   The  titles  of  the  sections  and
subsections of this Note are for convenience of reference only and are not to be
considered in construing this Note.

            7.9. Governing Law. This Note shall be construed in accordance with,
and governed by, the laws of the State of New York (without giving effect to its
conflict of laws principles).

            7.10.  Dispute  Resolution.  The Company (a) hereby  irrevocably and
unconditionally  submits to the jurisdiction of the state courts of New York and
to the  jurisdiction  of the  United  States  District  Court  for the  Southern
District  of New York for the  purpose of any suit,  action or other  proceeding
arising  out of or based upon this Note,  (b) agrees not to  commence  any suit,
action or other proceeding arising out of or based upon this Agreement except in
such courts,  and (c) hereby waives, and agrees not to assert, by way of motion,
as a defense,  or otherwise,  in any such suit, action or proceeding,  any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from  attachment  or  execution,  that the
suit,  action or proceeding is brought in an inconvenient  forum, that the venue
of the suit,  action or  proceeding  is improper or that this  Agreement  or the
subject matter hereof may not be enforced in or by such court.

            7.11. Waiver of Jury Trial. The Company waives any right it may have
to a trial by jury in any action or proceeding  directly or  indirectly  arising
out of or relating to this Note or the transactions contemplated hereby (whether
based on contract, tort, equity or any other theory). The Company certifies that
no  representative,  agent or  attorney of the Holder or  Conversion  Holder has
represented,  expressly or otherwise,  that the Holder or the Conversion  Holder
would not, in the event of litigation,  seek to enforce the foregoing waiver and
acknowledges  that the Holder and the Conversion Holder each has been induced to
purchase  this Note by,  among other  things,  the  waivers  and  certifications
contained in this Section 7.11.

            7.12.  Integration.  This Note  constitutes the entire agreement and
understanding  between the  Company  and the Holder with  respect to the subject
matters  hereof  and  supersedes  all  prior  agreements,   understandings,  and
representations and warranties with respect to such subject matters.

                            [Signature Page Follows]


                                      -8-
<PAGE>


         IN  WITNESS   WHEREOF,   the  Company  has  executed  and  issued  this
Convertible Promissory Note as of the date first set forth above.


                                 PAKETERIA GmbH


                                 By: ___________________________________
                                     Name:
                                     Title:


<PAGE>


                                    Exhibit B
                                    ---------

                           Form of Notice of Exercise
                           --------------------------

      Pursuant to Section 1.2 of the Note Purchase Agreement, dated as of August
____,  2006,  by and  between  Andy Roesch (the  "Seller"),  and Data  Systems &
Software,  Inc., a Delaware corporation (the "Purchaser"),  the Purchaser hereby
elects to purchase from the Seller,  a portion of the  principal  amount of that
certain  Convertible  Promissory  Note,  dated as of August __, 2006,  issued by
Paketeria GmbH (the "Company") to the Seller,  in the principal amount of (euro)
210,000 (the "Note") equal to (the  "Purchase  Price")  ________________________
Euros ((euro) _________),  for an aggregate purchase price equal to the Purchase
Price.

      Upon delivery of the Purchase Price, the Seller shall deliver the Note, or
shall cause the Company to reissue  and  deliver a new  promissory  note in like
tenor in the principal  amount of the portion of the Note so  purchased,  to the
Purchaser.


                                                       -------------------------

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>v050655_ex10-3.txt
<TEXT>


                                                                    EXHIBIT 10.3

                            STOCK PURCHASE AGREEMENT
                            ------------------------

         THIS STOCK PURCHASE AGREEMENT (this "Agreement"), is made as of the 7th
day of August  2006,  by and  between  John A. Moore  ("Moore"),  Richard  Rimer
("Rimer" and jointly hereinafter,  the "Sellers"),  and Data Systems & Software,
Inc., a Delaware corporation (the "Purchaser").

                                    RECITALS
                                    --------

         WHEREAS,   in  connection  with  that  certain  Common  Stock  Purchase
Agreement,  dated as of the date  hereof  (the  "Purchase  Agreement"),  between
Paketeria GmbH  ("Paketeria") and Purchaser,  and the transactions  contemplated
thereby, the parties hereto are entering into this Agreement;

         WHEREAS,  the Purchase  Agreement  states  that,  as a condition to its
effectiveness, the Sellers and the Purchaser enter into this Agreement;

         WHEREAS,  the share  capital of  Paketeria in the  aggregate  amount of
(euro) 37,450 currently is held as follows:

         Shareholder                   Shares             Total Amount of Shares
         -------------          -------------             ----------------------
         Andy Rosch             (euro) 18,750
                                 (euro) 4,950                      (euro) 23,700
         -------------          -------------             ----------------------
         Ralf Budde              (euro) 1,600
                                 (euro) 1,400                       (euro) 3,000
         -------------          -------------             ----------------------
         Joseph Benson             (euro) 950                         (euro) 950
         -------------          -------------             ----------------------
         John Moore              (euro) 3,300
                                   (euro) 950
                                   (euro) 650                       (euro) 4,900
         -------------          -------------             ----------------------
         Richard Rimer           (euro) 3,350
                                   (euro) 900
                                   (euro) 650                       (euro) 4,900
         -------------          -------------             ----------------------
         Total                         37,450                             37,450

The  aforementioned  shares of Moore in the aggregate  nominal  amount of (euro)
4,900 and the aforementioned  shares of Rimer in the aggregate nominal amount of
(euro) 4,900 are hereinafter, collectively, referred to as the "Securities".

         WHEREAS,  the Sellers are also entitled to receive new shares of common
stock of Paketeria  ("Stammkapital")  in the aggregate  nominal amount of (euro)
2,000  against  payment  of its par  value of  (euro)  2,000  with no agio  (the
"Subscription  Rights"),  of which Moore is  entitled  to the nominal  amount of
(euro)  1,000 and  Rimer is  entitled  to the  nominal  amount  of (euro)  1,000
(collectively, the "Subscription Rights Shares").


<PAGE>


         WHEREAS,   the  Sellers  have  caused   Paketeria   and  their  current
shareholders  to agree,  in the Purchase  Agreement,  to issue the  Subscription
Rights Shares  directly to the  Purchaser,  subject to the parties  execution of
this  agreement  and  Purchaser's  payment of the par value of the  Subscription
Rights Shares of (euro) 2,000 to Paketeria.

         WHEREAS,  each  Seller  wishes  to sell,  transfer  and  assign  to the
Purchaser all of his rights,  titles,  interests,  duties and obligations in, to
and in connection  with (i) the  Securities,  representing  all capital stock of
Paketeria held by the Sellers,  and (ii) the Subscription Rights, and the shares
issuable with respect thereto,  and the Purchaser,  subject to the terms of this
Agreement,  wishes to purchase and receive from each Seller all of such Seller's
rights, titles, interests, duties and obligations in, to and in connection with,
(i) the Securities and (ii) the Subscription Rights and the shares issuable with
respect thereto, on the terms and conditions set forth herein.

         NOW, THEREFORE, the parties hereby agree as follows:

         1. SALE, PURCHASE AND ASSIGNMENT.

            1.1 Sale and  Purchase.  Upon the delivery by the  Purchaser to each
Seller of a written notice,  (the "Exercise Notice") on or before August 7, 2007
(the "Trigger  Date"),  substantially  in the form attached hereto as Exhibit A,
each Seller shall sell,  transfer and assign to the Purchaser and its successors
and assigns  forever,  and the  Purchaser  shall  purchase  and accept from each
Seller for itself and its successors and assigns  forever,  all of such Seller's
rights,  titles and  interests  in and to (i) the  Securities,  for an aggregate
purchase  price of  (euro)  496,831  and (ii) the  Subscription  Rights,  for an
aggregate  purchase price of (euro) 101,394 (the aggregate  purchase price to be
paid for the Securities and  Subscription  Rights,  the "Purchase  Price").  The
rights sold include (without  limitation) the profit participation right for the
current  business  year as well as all rights to any  undistributed  profits (if
any) related to the Securities and the Subscription Rights Shares.

            1.2 Form of  Consideration.  The Purchase Price shall be paid by the
Purchaser  to each  Seller by the  issuance  to each  Seller,  pursuant to their
respective ownership interest in the Securities and the Subscription Rights, of:

                  (a) a number of validly issued,  fully paid and non-assessable
shares of common stock, par value $0.01 per share (the "Common  Stock"),  of the
Purchaser  equal to the  Purchase  Price  divided by Two Dollars and  Sixty-Five
Cents ($2.65) (such shares of Common Stock, the "Purchase Price Shares"); and

                  (b) a stock  purchase  warrant  exercisable  for a  number  of
shares of Common Stock equal to the Purchase  Price Shares  divided by four (4),
with an exercise price of Two Dollars and Seventy-Eight Cents ($2.78) per share,
in substantially the form issued by the Purchaser to the investors participating
in its most recent  private  placement  of Common  Stock that closed on or about
August 1, 2006 (the  "Purchase  Price  Warrant",  and together with the Purchase
Price  Shares and the shares of common  issuable  upon  exercise of the Purchase
Price Warrant, collectively, the "Purchase Price Securities").


                                      -2-
<PAGE>


The conversion  rate of Dollars ($) to Euros ((euro)) shall be determined at the
time of delivery of the Exercise  Notice by reference to the conversion  rate as
set forth in the Wall Street Journal.

            1.3  Closing.  Following  the  delivery of the  Exercise  Notice,  a
closing of the  transactions  described in Section 1.1 (a "Closing")  shall take
place before a German notary on whom the Sellers and the Purchaser will mutually
agree,  on such  date and at such  place as the  Seller  and the  Purchaser  may
mutually  agree,  but in any event no later  than two weeks  after the  Exercise
Notice has been delivered to the Seller.

            1.4 Closing Deliveries. At the Closing:

                  (a)  the  Purchaser  shall  deliver  to  each  Seller  or  his
designee,  certificates  representing  such Seller's  respective  Purchase Price
Shares and a warrant  certificate  evidencing such Seller's  respective Purchase
Price  Warrant,   in  each  case,  free  and  clear  of  all  liens,  claims  or
encumbrances;

                  (b)  each  Seller  shall  assign  to the  Purchaser  by way of
notarial  deed all of such Seller's  rights,  titles and interests in and to the
Securities and the Subscription Rights; and

                  (c) the  Purchaser  and each Seller shall have  delivered  all
other  documents,  instruments  and  writing  required  by the other party to be
delivered to them pursuant to this Agreement, in form and substance satisfactory
to such party.

         2. REPRESENTATIONS AND WARRANTIES.

            2.1 Construction.  For purposes of this Section 2, a person shall be
deemed to have "knowledge" of a particular fact or other matter if the person is
actually  aware,  or should in the exercise of reasonable  judgment be aware, of
such fact or other matter. A person that is a corporation,  partnership or other
business  entity shall be deemed to have  "knowledge"  of a  particular  fact or
other matter if any officer,  director,  manager,  managing member or partner of
such person has knowledge (as described in the preceding  sentence) of such fact
or other matter.

            2.2 Seller's  Representations  and  Warranties.  Each Seller  hereby
represents  and warrants to the Purchaser as of the date of the Closing,  solely
as to  himself  and his  assets  (and not as to the  other  Seller  or the other
Seller's assets) as follows:

            (a)  Authorization;  Valid and  Binding  Agreement.  Except  for any
notices  required to be delivered to the Purchaser in  connection  therewith and
any  consent  required to be obtained  from the  Purchaser,  such Seller has all
requisite power and authority to execute and deliver this Agreement,  to perform
all of its  obligations  and  undertakings  hereunder,  and  to  consummate  the
transactions  contemplated  hereby. The execution and delivery by such Seller of
this  Agreement,   the  performance  by  such  Seller  of  its  obligations  and
undertakings  hereunder and the  consummation by such Seller of the transactions
contemplated  hereby,  have been duly and validly  authorized  by all  necessary
action of such  Seller and no other  proceedings  on the part of such Seller are
necessary  to  authorize  the  execution  or  delivery  by such  Seller  of this
Agreement,  the performance by such Seller of its  obligations and  undertakings
hereunder,  or the consummation by such Seller of the transactions  contemplated
hereby.  This Agreement has been duly executed and delivered by such Seller, and
constitutes the legal, valid and binding obligations of such Seller, enforceable
against such Seller in accordance with its terms.


                                      -3-
<PAGE>


            (b) Conflicts;  Consents.  The execution and delivery by such Seller
of this  Agreement,  the  performance  by such  Seller  of his  obligations  and
undertakings hereunder,  and the consummation by such Seller of the transactions
contemplated  hereby,  do not and will  not  conflict  with,  or  result  in any
violation  of, or  default  under,  or result  in the  creation  of any Lien (as
defined in Section 2.2(c)) on the properties or assets of such Seller under, any
provision of (i) any contract,  agreement,  instrument or  arrangement  to which
such Seller is a party or by which any of such Seller's properties or assets are
bound, (ii) any license,  franchise,  permit or other similar authorization held
by such Seller, or (iii) to the knowledge of such Seller, any judgment, order or
decree, statute, law, ordinance, rule or regulation applicable to such Seller or
such Seller's properties or assets.

            (c) Title to Properties and Assets;  Liens, Etc. Except for any Lien
arising out of this  Agreement,  as of the Closing,  such Seller is the owner of
all right,  title and  interest in and to the  Securities  and the  Subscription
Rights owned by such Seller,  and such  Securities and  Subscription  Rights are
free of any mortgage,  pledge, lien, encumbrance,  charge or other adverse claim
(each, a "Lien") other than Liens in favor of the Purchaser.

            (d) Securities Law  Representations  and Warranties of Seller.  As a
condition to the issuance of the Purchase Price Securities,  except as otherwise
provided, each Seller represents and warrants to the Purchaser that:

                           (i) Such  Seller  is  acquiring  the  Purchase  Price
         Securities   for  his  own  account  and  not  with  a  view  to  their
         distribution  within the meaning of Section 2(11) of the Securities Act
         of  1933,  as  amended  (the  "Securities  Act").  Such  Seller  hereby
         acknowledges  and agrees that the Purchase  Price  Securities  have not
         been registered  under the Securities Act or under any state securities
         or  "blue  sky"  laws  and may not be sold,  transferred  or  otherwise
         disposed of except in compliance  with the provisions of the Securities
         Act and the rules and regulations promulgated thereunder and such state
         securities or "blue sky" laws and the Purchase Price Securities contain
         a restrictive  legend stating that the Purchase Price  Securities  have
         not been  registered  and may  only be sold  pursuant  to an  effective
         registration  statement  or a valid  exemption  from  the  registration
         requirements of the Securities Act. Moore further  understands  that he
         is an "affiliate" of the Purchaser.

                           (ii) Such Seller  agrees that he will not,  under any
         circumstances,  sell the Purchase Price  Securities in violation of any
         applicable law or regulation  promulgated  under the laws of the United
         States or any state or  jurisdiction.  Such Seller  acknowledges  that,
         from  time to time  and  under  various  circumstances,  such  laws may
         restrict  the  disposition  of  Purchase  Price  Securities  or  impose
         conditions upon such disposition.

                           (iii)  Such  Seller is an  "accredited  investor"  as
         defined in Regulation D of the Securities Act.


                                      -4-
<PAGE>


                           (iv) Such Seller has such  knowledge and expertise in
         financial  and business  matters that he is capable of  evaluating  the
         merits and risks of an investment in the Purchase Price  Securities and
         of making an informed investment decision.

            2.3  Purchaser's  Representations,  Warranties  and  Covenants.  The
Purchaser  hereby  represents,  warrants and  covenants to each Seller as of the
Closing as follows:

            (a) Organization  and Standing.  The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware.

            (b) Authorization;  Valid and Binding  Agreement.  The Purchaser has
all  requisite  power and  authority to execute and deliver this  Agreement,  to
perform its  obligations  and  undertakings  hereunder,  and to  consummate  the
transactions contemplated hereby. The execution and delivery by the Purchaser of
this  Agreement,  the  performance  by  the  Purchaser  of its  obligations  and
undertakings   hereunder,   and  the   consummation  by  the  Purchaser  of  the
transactions  contemplated  hereby, have been duly and validly authorized by all
necessary  action on the part of the Purchaser and no other  proceedings  on the
part of the  Purchaser  are  necessary to authorize the execution or delivery by
the  Purchaser  of this  Agreement,  the  performance  by the  Purchaser  of its
obligations and  undertakings  hereunder or the consummation by the Purchaser of
the transactions  contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser, and constitutes the valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with its terms.

            (c) Conflicts; Consents. The execution and delivery by the Purchaser
of this  Agreement,  the  performance  by the Purchaser of its  obligations  and
undertakings  contemplated  hereunder,  and the consummation by the Purchaser of
the  transactions  contemplated  hereby,  do not and will not conflict  with, or
result in any  violation  of, or default  under or result in the creation of any
Lien on the  properties or assets of the Purchaser  under,  any provision of (i)
the Certificate of Incorporation,  Bylaws of the Purchaser, each as the same has
been amended to date, (ii) any contract, agreement, instrument or arrangement to
which the Purchaser is a party or by which any of the Purchaser's  properties or
assets  are  bound,  (iii)  any  license,  franchise,  permit  or other  similar
authorization held by the Purchaser,  or (iv) to the knowledge of the Purchaser,
any  judgment,  order or decree,  statute,  law,  ordinance,  rule or regulation
applicable to the Purchaser or the Purchaser's properties or assets.

            (d) Valid Issuance of Shares. The Purchase Price Shares, when issued
and delivered in accordance with the terms and for the  consideration  set forth
in this Agreement, will be validly issued, fully paid and nonassessable and free
of any liens or encumbrances  or restrictions on transfer.  The shares of Common
Stock  issuable  upon  exercise of the Purchase  Price  Warrant  (the  "Warrants
Shares") will upon issuance in accordance  with the terms of the Purchase  Price
Warrant,  be validly issued,  fully paid and nonassessable and free of any liens
or  encumbrances  or  restrictions  on  transfer.  Assuming  the accuracy of the
representations  of the Seller in Section 2.2 of this  Agreement,  the  Purchase
Price  Shares  and the  Warrant  Shares  will be issued in  compliance  with all
applicable laws.


                                      -5-
<PAGE>


         3. Repurchase Option.

            3.1 Repurchase  Option on Subscription  Rights Shares.  In the event
that the Purchaser does not deliver  Exercise Notices on or prior to the Trigger
Date, at any time following such Trigger Date, each Seller shall have the option
to repurchase from the Purchaser one share in the nominal amount of (euro) 1,000
in the common stock of Paketeria (the Subsciption  Rights Shares) for a purchase
price of (euro) 1,000 (the "Repurchase Option").

            3.2 Exercise of Repurchase  Option.  The Repurchase  Option shall be
exercised  by  written  notice  signed by a Seller  and  delivered  or mailed as
provided in Section 4.7 to the Purchaser. Such notice shall notify the Purchaser
of the time,  place and date for  settlement  of such  purchase,  which shall be
scheduled  by the Seller  and shall be within  ninety  (90) days of the  written
notice of exercise of the  Repurchase  Option  delivered  by such  Seller.  Such
Seller shall pay for any the Subscription Rights Shares repurchased hereunder at
the Seller's option in cash by certified  check or wire transfer.  Upon delivery
of such  notice and  payment of the  relevant  purchase  price by a Seller,  the
Purchaser   shall  take  all  reasonable   action   required  to  transfer  such
Subscription Rights Shares to such Seller.

            3.3  Covenants.  Until the  earlier  of the date that the  Purchaser
delivers an Exercise  Notice to each Seller and the Trigger Date,  the Purchaser
shall not (i) sell, transfer or otherwise dispose of the Subscription Rights and
the  Subscription  Rights  Shares,  or (ii)  except  as may exist as of the date
hereof,  create,  incur, assume or suffer to exist any Liens on the Subscription
Rights and the Subscription Rights Shares,  without the prior written consent of
each Seller.

         4. MISCELLANEOUS.

            4.1 Benefits of Agreement.  Except as otherwise  expressly  provided
herein,  the  provisions  hereof shall inure to the benefit of, be binding upon,
and be enforceable  by, the parties hereto and their  respective  successors and
assigns.

            4.2  Assignment.  This  Agreement  and the  rights  and  obligations
hereunder  shall not be assignable or  transferable  by either party without the
prior written consent of the other party.  Any instrument  purporting to make an
assignment in violation of this Section 3.2 shall be void.

            4.3  Entire  Agreement.   This  Agreement  (including  any  Exhibits
hereto),  together  with the Exercise  Notice,  constitutes  the full and entire
understanding  and  agreement  between the parties  with  respect to the subject
matter hereof,  and any other written or oral agreement  relating to the subject
matter hereof existing between the parties is expressly canceled.

            4.4  Severability.  In case  any  provision  of this  Agreement,  or
portion  hereof,  shall be  invalid,  illegal or  unenforceable,  the  validity,
legality and enforceability of the remaining  provisions shall not in any way be
affected or impaired thereby.


                                      -6-
<PAGE>


            4.5 Amendment and Waiver. This Agreement and any provision hereof or
right or obligation  hereunder may be amended,  modified or waived only with the
prior written consent of the Seller and the Purchaser.

            4.6 Delays or  Omissions;  Remedies.  It is agreed  that no delay or
omission to exercise any right,  power or remedy accruing to any party, upon any
breach,  default or  noncompliance  by the other  party,  shall  impair any such
right,  power or remedy,  nor shall it be  construed  to be a waiver of any such
breach,  default or noncompliance,  or any acquiescence therein, or of or in any
similar breach, default or noncompliance thereafter occurring.

            4.7  Notices.  All  notices and other  communications  given or made
pursuant to this Agreement  shall be in writing and shall be deemed  effectively
given: (a) upon personal delivery to the party to be notified,  (b) when sent by
confirmed  electronic  mail or facsimile if sent during normal business hours of
the recipient, and if not so confirmed,  then on the next business day, (c) five
(5) days after having been sent by registered or certified mail,  return receipt
requested,  postage  prepaid,  or (d) one business (1) day after  deposit with a
nationally recognized overnight courier,  specifying next business day delivery,
with written  verification of receipt.  All communications  shall be sent to the
respective  parties at their address as set forth on the  signature  page, or to
such e-mail address,  facsimile  number or address as  subsequently  modified by
written notice given in accordance  with this Section 3.7. If notice is given to
the Purchaser, a copy shall also be given to Reitler Brown & Rosenblatt LLC, 800
Third Avenue,  21st Floor, New York, New York 10022, (212) 371-5500,  Attention:
Scott H. Rosenblatt, Esq.

            4.8 Expenses.  Except as otherwise provided herein, each party shall
pay all costs and  expenses  that it incurs  with  respect  to the  negotiation,
execution, delivery, performance and consummation of this Agreement.

            4.9 Titles and Subtitles. The titles of the sections and subsections
of this  Agreement  are for  convenience  of  reference  only  and are not to be
considered in construing this Agreement.

            4.10 Pronouns.  All pronouns  contained  herein,  and any variations
thereof,  shall be  deemed  to  refer to the  masculine,  feminine  or  neutral,
singular or plural, as the identity of the parties may require.

            4.11  Dispute  Resolution.  The parties (a) hereby  irrevocably  and
unconditionally  submit to the  jurisdiction of the state courts of New York and
to the  jurisdiction  of the  United  States  District  Court  for the  Southern
District  of New York for the  purpose of any suit,  action or other  proceeding
arising out of or based upon this Agreement, (b) agree not to commence any suit,
action or other proceeding arising out of or based upon this Agreement except in
such courts, and (c) hereby waive, and agree not to assert, by way of motion, as
a defense, or otherwise, in any such suit, action or proceeding,  any claim that
it is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from  attachment or  execution,  that the suit,
action or proceeding is brought in an inconvenient  forum, that the venue of the
suit,  action or  proceeding  is improper or that this  Agreement or the subject
matter hereof may not be enforced in or by such court.


                                      -7-
<PAGE>


            4.12 Waiver of Jury Trial. Each party hereto waives any right it may
have to a trial by jury in any  action  or  proceeding  directly  or  indirectly
arising out of or relating to this  Agreement or the  transactions  contemplated
hereby (whether based on contract, tort, equity or any other theory). Each party
certifies  that no  representative,  agent or  attorney  of the other  party has
represented,  expressly  or  otherwise,  that the other party to this  Agreement
would not, in the event of litigation,  seek to enforce the foregoing waiver and
acknowledges  that all  parties  hereto  have been  induced  to enter  into this
Agreement by, among other things,  the waivers and  certifications  contained in
this Section 3.13.

            4.13 Delays or  Omissions.  No delay or  omission  to  exercise  any
right,  power, or remedy  accruing to any party under this  Agreement,  upon any
breach or default of any other party under this Agreement, shall impair any such
right,  power, or remedy of such nonbreaching or nondefaulting  party, nor shall
it be construed to be a waiver of or acquiescence to any such breach or default,
or to any similar breach or default thereafter  occurring,  nor shall any waiver
of any  single  breach or  default  be  deemed a waiver  of any other  breach or
default theretofore or thereafter  occurring.  All remedies,  whether under this
Agreement or by law or otherwise  afforded to any party, shall be cumulative and
not alternative.

                          [Signature Page(s) Follow(s)]


                                      -8-
<PAGE>


         IN WITNESS  WHEREOF,  each of the  undersigned  parties has caused this
STOCK PURCHASE  AGREEMENT to be duly executed and delivered as of the date first
above written.


                                      SELLERS:


                                      -------------------------------
                                      John A. Moore

                                           Address:
                                                    -----------------
                                                    -----------------


                                      -------------------------------
                                      Richard Rimer

                                           Address:
                                                    -----------------
                                                    -----------------


                                      PURCHASER:

                                      DATA SYSTEMS & SOFTWARE INC.



                                      By:
                                         ----------------------------


                                           Address:
                                                    -----------------
                                                    -----------------

                    Stock Purchase Agreement Signature Page


<PAGE>


                                    EXHIBIT A
                                    ---------


                           Form of Notice of Exercise
                           --------------------------


            Pursuant to Section 1.1 of the Stock Purchase Agreement, dated as of
August  ____,  2006,  among John A.  Moore,  Richard  Rimer  (collectively,  the
"Sellers"),  and Data  Systems & Software,  Inc.,  a Delaware  corporation  (the
"Purchaser"),  the Purchaser  hereby  elects to purchase  from the Sellers,  all
shares of capital stock of Paketeria GmbH (the "Company") held by the Sellers.


                                                   Data Systems & Software, Inc.


                                                   By:_________________________
                                                      Name:
                                                      Title:

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>v050655_ex10-4.txt
<TEXT>


                                                                    EXHIBIT 10.4

                           INVESTORS' RIGHTS AGREEMENT
                           ---------------------------

                  THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made as
of the 7th day of August, 2006 among Paketeria GmbH, a limited liability company
incorporated under the laws of Germany, Data Systems & Software Inc., a Delaware
corporation (the "Investor"),  and each shareholder of the Company, all of which
are listed on Schedule A hereto  (each a  "Shareholder"  and  collectively,  the
"Shareholders"),  and  any  additional  Person  that  becomes  a  party  to this
Agreement in accordance with Section 8.1 and Section 9.1 hereof.

                                    RECITALS
                                    --------

                  WHEREAS,  the Company,  the  Shareholders and the Investor are
parties  to the Common  Stock  Purchase  Agreement  of even date  herewith  (the
"Purchase Agreement"); and

                  WHEREAS,  in order to induce  the  Company  to enter  into the
Purchase  Agreement  and to induce the  Investor to invest  funds in the Company
pursuant  to  the  Purchase  Agreement,  the  Investor,  the  Company  and  each
Shareholder  of the Company  hereby agree that this  Agreement  shall govern the
rights of the  Investor to cause the Company to register  shares of Common Stock
issuable to the Investor,  to receive certain information from the Company,  and
to  participate  in future  equity  offerings by the  Company,  and shall govern
certain other matters as set forth in this Agreement;

                  NOW, THEREFORE, the parties hereby agree as follows:

      1. Definitions. For purposes of this Agreement:

            1.1 "Affiliate"  means,  with respect to any specified  Person,  any
other Person who or which,  directly or indirectly,  controls, is controlled by,
or is under  common  control  with  such  specified  Person,  including  without
limitation any partner,  officer,  director,  manager or employee of such Person
and any venture capital fund now or hereafter  existing that is controlled by or
under common control with one or more general  partners or managing  members of,
or shares the same management company with, such Person.

            1.2  "Common  Stock"  means  shares of the  Company's  common  stock
("Stammkapital")  or - after conversion of the Company into a Stock  Corporation
("AG")- of its "Grundkapital".

            1.3   "Derivative   Securities"   means  any  securities  or  rights
convertible  into, or exercisable or exchangeable  for, Common Stock,  including
options and warrants.

            1.4 "Founders" means each of Andy Roesch and Viola Roesch

            1.5 "GAAP" means  generally  accepted  accounting  principles in the
United States.

            1.6 "Immediate Family Member" means a child, stepchild,  grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law,  father-in-law,
son-in-law,   daughter-in-law,   brother-in-law,  or  sister-in-law,   including
adoptive relationships, of a natural person referred to herein.


                                      -1-
<PAGE>


            1.7 "IPO" means the Company's first  underwritten  public  offering,
after its conversion into a Stock Corporation, of its Common Stock.

            1.8 "Key Employee"  means any  executive-level  employee  (including
division  director and vice  president-level  positions) as well as any employee
who, either alone or in concert with others,  develops,  invents,  programs,  or
designs  any  Company   Intellectual   Property  (as  defined  in  the  Purchase
Agreement).

            1.9 "New Securities" means,  collectively,  equity securities of the
Company,  whether or not currently  authorized,  as well as rights,  options, or
warrants  to  purchase  such  equity  securities,  or  securities  of  any  type
whatsoever  that  are,  or may  become,  convertible  or  exchangeable  into  or
exercisable for such equity securities.

            1.10 "Permitted  Issuances"  means (i) shares of Common Stock or the
Derivative  Securities  therefor  issued by reason of a dividend,  stock  split,
split-up,  conversion or other  distribution on shares of Common Stock; (ii) the
issuance of  securities  pursuant to the  conversion,  exercise,  or exchange of
Derivative  Securities  outstanding  on the date hereof;  (iii);  (iv) shares of
Common Stock issued in the IPO; or (v)  securities of the Company that otherwise
are excluded by the affirmative vote or consent of the Investor

            1.11 "Person" means any individual, corporation, partnership, trust,
limited liability company, association or other entity.

            1.12  "Prospective  Transferee"  means any  Person to whom a Founder
proposes to make a Proposed Founder Transfer.

            1.13  "Registrable  Securities" means (i) the shares of Common Stock
issued to the Investor  pursuant to the Purchase  Agreement;  (ii) the shares of
Common Stock  issuable upon  conversion of the Long Term Note (as defined in the
Purchase  Agreement),  (iii)  the  shares of Common  Stock  transferable  to the
Investor  pursuant to the M & R Option  Agreement  (as  defined in the  Purchase
Agreement),  (iv) any shares of Common Stock  acquired by the Investor after the
date hereof;  (v) any shares of Common Stock issued or issuable upon  conversion
of any capital  stock of the Company  acquired  by the  Investor  after the date
hereof;  and (vi) any shares of Common  Stock  issued as (or  issuable  upon the
conversion or exercise of any warrant,  right,  or other security that is issued
as) a  dividend  or other  distribution  or  otherwise  with  respect  to, or in
exchange for or in replacement of, the shares  referenced in clauses (i) through
(v) above.

      2. Registration Rights.

            2.1 Demand  Registration.  In the event that the  securities  of the
Company or any  successor  thereof  shall at any time be tradeable in any public
market, whether as a result of registration,  qualification,  or otherwise,  the
Company  shall,  at the request of the holders of a majority of the  Registrable
Securities, undertake and complete, at the sole cost and expense of the Company,
such  regulatory  and  other  procedures  as shall  permit  the  holders  of the
Registrable  Securities to resell the Registrable Securities held thereby (or by
their   transferees)   into  such  public  market  from  time  to  time  without
restriction.


                                      -2-
<PAGE>


      3. Information and Observer Rights.

            3.1 Delivery of Financial  Statements.  From the date hereof through
December 31, 2006,  the Company shall deliver to the Investor (i) each financial
statement the Company is required to produce  pursuant to German law,  including
any financial statement applicable to the year ended December 31, 2006, and (ii)
as soon as  practicable,  but in any event at least  thirty  (30) days  prior to
December 31, 2006, a budget and business plan for fiscal year 2007,  prepared on
a monthly basis, including balance sheets, income statements,  and statements of
cash flow for such months and,  promptly  after  prepared,  any other budgets or
revised  budgets  prepared by the Company.  Beginning as of January 1, 2007, the
Company shall deliver to the Investor:

               (a) as soon as  practicable,  but in any event within one hundred
twenty  (120)  days  after the end of each  fiscal  year of the  Company,  (i) a
balance sheet as of the end of such year; (ii) statements of profit and loss and
of cash flows for such year; and (iii) a statement of stockholders' equity as of
the end of such year, audited and certified by independent public accountants of
regionally   recognized   standing  selected  and  appointed  by  the  Company's
shareholders' meeting;

               (b) as soon as  practicable,  but in any event within thirty (30)
days of the end of each  fiscal  quarter,  an  unaudited  income  statement  and
statement  of cash  flows  for such  quarter,  an  unaudited  balance  sheet and
statement of stockholders' equity as of the end of such quarter, all prepared in
accordance  with GAAP  (except that the  financial  report may (i) be subject to
normal  year-end audit  adjustments  and (ii) not contain all notes thereto that
may  be  required  in  accordance  with  GAAP),  and a  management's  discussion
reporting on additional metrics, including employment;

               (c) as soon as  practicable,  but in any event  thirty  (30) days
before the end of each  fiscal  year,  a budget and  business  plan for the next
fiscal year,  prepared on a monthly  basis,  including  balance  sheets,  income
statements,  and  statements  of cash flow for such months and,  promptly  after
prepared, any other budgets or revised budgets prepared by the Company; and

               (d) such other information  relating to the financial  condition,
business,  prospects,  or  corporate  affairs of the Company as the Investor may
from time to time reasonably request.

If,  for  any  period,  the  Company  has  any  subsidiary  whose  accounts  are
consolidated  with those of the  Company,  then in  respect  of such  period the
financial  statements  delivered pursuant to the foregoing sections shall be the
consolidated and consolidating  financial statements of the Company and all such
consolidated subsidiaries.


                                      -3-
<PAGE>


            3.2  Inspection.  Without  prejudice  to the rights of the  Investor
under  Statutory  Law, the Company shall permit the Investor,  at the Investor's
expense,  to visit and inspect the  Company's  properties;  examine its books of
account and records; and discuss the Company's affairs,  finances,  and accounts
with its officers,  directors,  Key Employee and independent  public  accountant
during normal  business  hours of the Company as may be reasonably  requested by
the  Investor;  provided,  however,  that the  Company  shall  not be  obligated
pursuant  to this  Section  3.2 to  provide  access to any  information  that it
reasonably  considers to be a trade secret or confidential  information  (unless
covered by an enforceable  confidentiality  agreement, in form acceptable to the
Company) or the disclosure of which would adversely  affect the  attorney-client
privilege between the Company and its counsel.

            3.3 Further  Information.  The Company  shall  provide the  Investor
prompt written notice of material events and communications (oral or in writing)
with and from  any  Person  interested  in  acquiring  the  Company  or  forming
strategic relationships.

            3.4   Confidentiality.   The  Investor  agrees  that  it  will  keep
confidential and will not disclose,  divulge, or use for any purpose (other than
to monitor its investment in the Company) any confidential  information obtained
from  the  Company  pursuant  to  the  terms  of  this  Agreement,  unless  such
confidential  information (a) is known or becomes known to the public in general
(other than as a result of a breach of this Section 3.4 by the Investor), (b) is
or has been independently  developed or conceived by the Investor without use of
the  Company's  confidential  information,  or (c) is or has been made  known or
disclosed to the Investor by a third party without a breach of any obligation of
confidentiality  such third party may have to the  Company;  provided,  however,
that the Investor may disclose  confidential  information  (i) to its attorneys,
accountants,  consultants,  and other  professionals  to the extent necessary to
obtain their  services in  connection  with  monitoring  its  investment  in the
Company;  (ii) to any prospective  purchaser of any Registrable  Securities from
the Investor, if such prospective purchaser agrees to be bound by the provisions
of this Section 3.4; (iii) to any Affiliate,  partner, member,  stockholder,  or
wholly owned  subsidiary  of such  Investor in the ordinary  course of business,
provided  that the  Investor  informs  such  Person  that  such  information  is
confidential  and directs  such Person to maintain the  confidentiality  of such
information;  or (iv) as may  otherwise  be required by law,  provided  that the
Investor  promptly  notifies the Company of such disclosure and takes reasonable
steps to  minimize  the  extent of any such  required  disclosure.  The  Company
acknowledges  that  certain  officers  of the  Investor  are in the  business of
venture  capital  investing and therefore  review the business plans and related
proprietary information of many enterprises, including enterprises that may have
products or services  that  compete  directly  or  indirectly  with those of the
Company.  Nothing in this  Agreement  shall preclude or in any way restrict such
officers of the Investor  from  investing  or  participating  in any  particular
enterprise,  regardless of whether such enterprise has products or services that
compete with those of the Company.

      4. Rights to Future Stock Issuances.

            4.1 Right of First  Offer.  Subject to the terms and  conditions  of
this Section 4.1 and  applicable  securities  laws,  if the Company  proposes to
offer or sell  any New  Securities,  the  Company  shall  first  offer  such New
Securities  to the  Investor.  The Investor  shall be entitled to apportion  the
right of first offer  hereby  granted to it among itself and its  Affiliates  in
such proportions as it deems appropriate.

               (a) The Company  shall give  notice  (the "Offer  Notice") to the
Investor, stating (i) its bona fide intention to offer such New Securities, (ii)
the number of such New Securities to be offered,  and (iii) the price and terms,
if any, upon which it proposes to offer such New Securities.


                                      -4-
<PAGE>


               (b) By  notification to the Company within thirty (30) days after
the Offer Notice is given,  the Investor,  through itself and/or its Affiliates,
may  elect to  purchase  or  otherwise  acquire,  at the  price and on the terms
specified in the Offer Notice,  up to that portion of such New Securities  which
equals  the  proportion  that the  Common  Stock  issued  and held and any other
Derivative Securities then held, by the Investor bears to the total Common Stock
of the Company then  outstanding  (assuming full  conversion and exercise of all
Derivative Securities).  The closing of any sale pursuant to this Section 4.1(b)
shall occur within sixty (60) days of the date that the Offer Notice is given.

               (c) If all New Securities referred to in the Offer Notice are not
elected to be purchased or acquired as provided in Section  4.1(b),  the Company
may,  during the ninety (90) day period  following the  expiration of the period
provided in Section 4.1(b), offer and sell the remaining unsubscribed portion of
such New  Securities to any Person or Persons at a price not less than, and upon
terms no more  favorable  to the  offeree  than,  those  specified  in the Offer
Notice.  If the Company does not enter into an agreement for the sale of the New
Securities  within such period,  or if such agreement is not consummated  within
thirty (30) days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such New  Securities  shall not be offered unless first
reoffered to the Investor in accordance with this Section 4.1.

               (d) The  right of first  offer in this  Section  4.1 shall not be
applicable to Permitted Issuances.

            4.2  Termination.  The  covenants  set  forth in  Section  4.1 shall
terminate  and  be  of  no  further  force  or  effect  immediately  before  the
consummation of the IPO.

      5. Right of Co-Sale.

               (a)  Exercise of Right.  Subject to the terms and  conditions  of
this Section 5 and applicable  securities  laws, if any Founder  intends to sell
any capital stock  (including  any Common Stock) to any third party (a "Proposed
Founder  Transfer"),  such Founder must deliver  written  notice (the  "Proposed
Transfer  Notice") to the Investor not later than  forty-five (45) days prior to
the  consummation  of such Proposed  Founder  Transfer;  such Proposed  Transfer
Notice shall contain the material terms and conditions (including price and form
of  consideration)  of the  Proposed  Founder  Transfer  and the identity of the
Prospective Transferee.  The Investor shall have the right to, and may elect to,
participate on a pro rata basis in the Proposed  Founder Transfer (the "Right of
Co-Sale") as set forth in Section 5(b) below and otherwise on the same terms and
conditions  specified in the Proposed  Transfer  Notice  (provided  that if such
Founder is selling capital stock other than Common Stock, the price set forth in
the Proposed Transfer Notice shall be appropriately adjusted into Common Stock).
If the Investor desires to exercise its Right of Co-Sale, the Investor must give
the selling Founder written notice to that effect within fifteen (15) days after
receipt  of the  Proposed  Transfer  Notice,  and upon  giving  such  notice the
Investor shall be deemed to have effectively  exercised the Right of Co-Sale and
such selling Founder shall not consummate such Proposed Founder Transfer without
the  inclusion  of the shares of Common  Stock of the  Investor  as to which the
Right of Co-Sale has been exercised.


                                      -5-
<PAGE>


               (b) Shares Includable. Upon exercise of the Right of Co-Sale, the
Investor  may include in the Proposed  Founder  Transfer all or any part of such
Investor's  Common Stock equal to the product  obtained by  multiplying  (i) the
aggregate  number of shares of Common  Stock owned by the  Investor  immediately
before  consummation of the Proposed  Founder  Transfer by (ii) a fraction,  the
numerator  of which is the number of shares of  capital  stock to be sold in the
Proposed Founder  Transfer,  and the denominator of which is the total number of
shares  of  capital  stock  owned  by  the  Founders  immediately  prior  to the
consummation of the Proposed  Founder  Transfer.  In the event that the Investor
exercises such Right of Co-Sale in accordance  with the terms and conditions set
forth herein, and the Prospective Transferee is unwilling to purchase the shares
described  in the  Proposed  Transfer  Notice plus the number of shares that the
Investor  is entitled  to sell  pursuant to the Right of Co-Sale,  the number of
shares of  capital  stock  that the  selling  Founder  may sell in the  Proposed
Founder Transfer shall be reduced on a pro rata basis.

               (c)  Delivery of  Certificates.  The  Investor  shall  effect its
participation  in the Proposed  Founder  Transfer by  delivering  to the selling
Founder,  no later than fifteen (15) days after the  Investor's  exercise of the
Right of Co-Sale,  a duly executed power of attorney relating to the sale of the
number of shares of Common  Stock  that the  Investor  elects to  include in the
Proposed Founder Transfer.

               (d) Purchase  Agreement.  The parties hereby agree that the terms
and conditions of any sale pursuant to this Section 5 will be  memorialized  in,
and governed by, a written  purchase and sale agreement with customary terms and
provisions for such a transaction and the parties further  covenant and agree to
enter  into such an  agreement  as a  condition  precedent  to any sale or other
transfer pursuant to this Section 5.

               (e) Deliveries.  The shares covered by the power of attorney that
the Investor delivers to the selling Founder pursuant to Section 5(c) above will
be  transferred  to the  Prospective  Transferee  against  payment  therefor  in
consummation of the sale  contemplated by the Proposed Founder Transfer pursuant
to the terms and conditions  specified in the Proposed  Transfer  Notice and the
purchase  and  sale  agreement,  and  the  selling  Founder  shall  concurrently
therewith  remit or direct  payment to the  Investor of that portion of the sale
proceeds to which the  Investor is  entitled by reason of its  participation  in
such sale. If any  Prospective  Transferee or Transferees  refuse(s) to purchase
securities  subject to the Right of Co-Sale  from the  Investor  exercising  its
Right of  Co-Sale  hereunder,  no  Founder  may sell any  capital  stock to such
Prospective Transferee or Transferees unless and until, simultaneously with such
sale, such Founder purchases all securities subject to the Right of Co-Sale from
the Investor on the same terms and conditions  (including the proposed  purchase
price) as set forth in the Proposed Transfer Notice.


                                      -6-
<PAGE>


               (f) Additional  Compliance.  If any Proposed  Founder Transfer is
not  consummated  within sixty (60) days after receipt of the Proposed  Transfer
Notice by the Investor,  the Founder proposing the Proposed Founder Transfer may
not sell any capital stock unless they first comply in full with each  provision
of this  Section 5. The  exercise or election  not to exercise  any right by the
Investor  hereunder  shall not adversely  affect its right to participate in any
other purchases or sales of capital stock subject to this Section .

               (g) Violation of Co-Sale Right.  If any Founder  purports to sell
any  capital  stock in  contravention  of the Right of  Co-Sale  (a  "Prohibited
Transfer"),  the Investor  may, in addition to such remedies as may be available
by law,  in equity or  hereunder,  require  such  Founder to  purchase  from the
Investor the number of shares of Common Stock that the Investor  would have been
entitled  to sell to the  Prospective  Transferee  under this  Section 5 had the
Prohibited  Transfer been effected  pursuant to and in compliance with the terms
of Section  5. The sale will be made on the same  terms and  subject to the same
conditions  as would  have  applied  had the  Founder  not  made the  Prohibited
Transfer, except that the sale (including,  without limitation,  the delivery of
the  purchase  price)  must be made within  twenty (20) days after the  Investor
learns of the  Prohibited  Transfer,  as opposed to the timeframe  prescribed in
Section  5(f).  Such Founder  shall also  reimburse the Investor for any and all
reasonable and documented out-of-pocket fees and expenses,  including reasonable
legal fees and  expenses,  incurred  pursuant to the  exercise or the  attempted
exercise of the Investor's rights under Section 5.

      6. Anti-Dilution Protection.

               (a) If at any time or from  time to time  after  the date of this
Agreement,  the Company issues or sells, or is deemed by the express  provisions
of this Section 6 to have issued or sold,  Additional Shares of Common Stock (as
defined in Section 6(d) hereof),  for an Effective  Price (as defined in Section
6(d))  less than the then  applicable  Adjusted  Price Per Share (as  defined in
Section  6(d)),  then in each such  case,  in  consideration  of the  Investor's
payment of the requisite par value of the Common Stock to be issued  pursuant to
this Section 6.1(a), the Company shall issue an additional share of Common Stock
to the  Investor,  as of the  opening of  business  on the date of such issue or
sale, the nominal Euro value of such additional  share to be calculated by using
the following formula:

                           D = ((A * B)/C)  - B

                  For purpose of the foregoing formula:

                  A =    Adjusted Price Per Share.
                  B      Nominal  amount of the  Common  Stock of the  Company
                         issued  to  the  Investor   pursuant  to  the  Purchase
                         Agreement.
                  C =    Effective Price of Additional Shares of Common Stock.
                  D =    Nominal value of the  additional  share of Common Stock
                         to be issued to the  Investor.

      If D is not divisible by 50, the nominal value of the additional  share of
Common Stock to be issued to the  Investor  shall be the value that results from
rounding D to the next higher value divisible by 50.


                                      -7-
<PAGE>


               (b) For the purpose of the adjustment required under this Section
6, the consideration received by the Company for any issue or sale of securities
shall (i) to the extent it  consists  of cash,  be computed at the net amount of
cash  received by the Company  after  deduction of any  underwriting  or similar
commissions,  compensation  or  concessions  paid or allowed  by the  Company in
connection with such issue or sale but without deduction of any expenses payable
by the Company,  (ii) to the extent it consists of property  other than cash, be
computed at the fair value of that  property as  determined in good faith by the
managing  directors of the  Company,  and (iii) if  Additional  Shares of Common
Stock,  Convertible Securities (as defined in Section 6(c)) or rights or options
to purchase either Additional  Shares of Common Stock or Convertible  Securities
are issued or sold  together  with other stock or  securities or other assets of
the Company for a consideration which covers both, be computed as the portion of
the consideration so received that may be reasonably determined in good faith by
the  managing  directors to be  allocable  to such  Additional  Shares of Common
Stock, Convertible Securities or rights or options.

               (c) For the purpose of the adjustment required under this Section
6, if the  Company  issues or sells (i)  stock or other  securities  convertible
into,  Additional  Shares of Common Stock (such  convertible stock or securities
being herein referred to as "Convertible  Securities") or (ii) rights or options
for the purchase of Additional Shares of Common Stock or Convertible  Securities
and if the  Effective  Price of such  Additional  Shares of Common Stock is less
than the Price Per Share,  in each case the Company  shall not be deemed to have
issued the Additional Shares of Common Stock at the time of the issuance of such
rights or options or  Convertible  Securities.  The  adjustment  to the Adjusted
Price Per Share shall occur upon the  issuance of shares of Common  Stock issued
due to the sale or upon the  conversion or exercise of such rights or options or
Convertible Securities.

               (d) For  purposes of this  Section 6, the  following  terms shall
have the meaning assigned below:


                                    (i)  "Additional  Shares  of  Common  Stock"
                  shall mean all shares of Common Stock issued by the Company or
                  deemed to be issued  pursuant  to this  Section  6, other than
                  Permitted Issuances.

                                    (ii)  "Adjusted  Price Per Share" shall mean
                  initially,  (euro)50.70  for each Euro nominal value of shares
                  of Common Stock of the Company  (subject to adjustment for any
                  splits,  reserve  splits,  combinations or similar events) and
                  shall  be  reduced  to the  Effective  Price  as  used  in the
                  application of this Section 6 to the immediately prior sale or
                  issuance of Additional Shares of Common Stock.

                                    (iii) "Effective Price" of Additional Shares
                  of Common Stock shall mean the quotient determined by dividing
                  the aggregate  nominal  value of  Additional  Shares of Common
                  Stock issued or sold, or deemed to have been issued or sold by
                  the  Company   under  this   Section  6  into  the   aggregate
                  consideration received, or deemed to have been received by the
                  Company  for  such  issue  under  this   Section  6  for  such
                  Additional Shares of Common Stock.


                                      -8-
<PAGE>


      7.  Protective  Provisions.  Without  the prior  written  approval  of the
Investor  (in  addition  to any  stockholder  approval  as may  be  required  by
applicable statute,  the organizational  documents of the Company,  agreement or
otherwise) the Company or its shareholders or subsidiaries (if any) shall not:


                  (i)  liquidate,  dissolve,  re-capitalize  or  reorganize  the
Company or any of its subsidiaries (if any), merge or consolidate, or enter into
any agreement to merge or  consolidate,  the Company or any of its  subsidiaries
(if any) with or into any other entity,  or effect a share exchange  pursuant to
which any of the  outstanding  shares of Common Stock are  converted  into other
securities or property;

                  (ii) declare dividends or distribution of any kind, other than
dividends payable pro rata to all holders of Common Stock solely in the issuance
of shares of Common Stock;

                  (iii)  materially  change the nature of the  business in which
the Company is engaged as of the time of such determination;

                  (iv) approve any transaction or series of related transactions
in excess of (euro)  10,000 per annum with any  officer,  manager,  director  or
shareholder  of the Company or any of its  subsidiaries  or any  affiliate of an
officer,  manager,  director  of  shareholder  of  the  Company  or  any  of its
subsidiaries (including Immediate Family Members);

                  (v) increase  the annual cash  compensation  of the  Company's
chief executive officer above a gross amount of (euro) 150,000 per annum;

                  (vi) sell,  lease,  exchange,  transfer,  convey or  otherwise
dispose,  directly or indirectly, in a single transaction or a series of related
transactions,  of all or  substantially  all of the  property or business of the
Company or any of its  subsidiaries (if any) or effect any transaction or series
of related  transactions  in which more than fifty  percent  (50%) of the voting
power of the Company or any of its subsidiaries (if any) is disposed of;

                  (vii) except to the extent required by mandatory law, commence
any voluntary bankruptcy proceeding, liquidation,  reorganization,  dissolution,
conservation, delinquency or receivership proceeding, or a proceeding similar to
any of the foregoing or permit any involuntary  bankruptcy  proceeding to remain
unstayed  for more than 30 days from the date of the  petition  for  involuntary
bankruptcy;

                  (viii) amend the organizational documents of the Company so as
to adversely affects the rights, preferences,  restrictions or privileges of the
Investor;

                  (ix)  create  any  subsidiary  by  the  Company  or any of its
subsidiaries (if any), other than a wholly-owned subsidiary;

                  (x)  incur  any  indebtedness  by  the  Company  or any of its
subsidiaries  (if any),  directly or  indirectly,  in a single  transaction or a
series of related  transactions,  in excess of (euro) 215,000, or enter into any
agreement  pursuant to which the Company or any of its  subsidiaries  (if any) ,
directly  or  indirectly,  in a  single  transaction  or  a  series  of  related
transactions,  may be obligated to pay amounts,  or provide goods or services so
that the  total  aggregate  value  of such  obligations  and the  aforementioned
indebtedness exceeds (euro) 500,000;


                                      -9-
<PAGE>


                  (xi) redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking  fund for such  purpose) any share or shares of Common Stock
(such covenant to also prohibit,  without  limitation,  any redemption,  whether
voluntary  or not,  under Sec.  10 of the  Restated  Articles  of the  Company);
provided,  however,  that this restriction  shall not apply to the repurchase of
shares of Common Stock from employees or other persons  performing  services for
this Company or any of its  subsidiaries  (if any) pursuant to agreements  under
which this Company has the option to repurchase  such shares upon the occurrence
of certain events, such as the termination of employment; or

                  (xii)  authorize,  issue or create any additional  security or
class  of  stock  of the  Company  or,  any  other  type of  instrument  that is
convertible  into or  exchangeable  into a  security  or  class  of stock of the
Company.

      8. Additional Covenants.

            8.1 Transfer.  No shares of the capital stock of the Company held by
a Shareholder,  including the Founders, may be transferred (or encumbered) other
than with the Investor's  prior written  consent until such time as the later of
(i) any shares of the Company's equity securities are publicly traded,  and (ii)
the third  anniversary  of the date hereof.  The  Investor's  consent  cannot be
withheld if such proposed  transfer is to an Immediate  Family Member (or trusts
or partnerships  wholly owned or benefiting  such parties) of such  Shareholder,
provided, that such transfer shall be contingent upon the transferee providing a
written  instrument  to the Company  notifying  the Company of such transfer and
such  transferee  becoming a party to this Agreement by executing and delivering
an  additional  counterpart  signature  page to this  Agreement  to the Company.
Notwithstanding the foregoing,  up to five percent (5%) of the shares of capital
stock held by Andy Roesch as of the date hereof, may by transferred  without the
Investor's prior written consent to a third party, provided, such third party is
an  employee  of the  Company as of the  effective  date of such  transfer  and,
provided,  further,  that such transfer shall be contingent  upon the transferee
providing  a written  instrument  to the Company  notifying  the Company of such
transfer and such transferee becoming a party to this Agreement by executing and
delivering an additional  counterpart  signature  page to this  Agreement to the
Company.  Thereafter,  in each  such  case of  permissible  transfer  hereunder,
following the delivery of the required written  instrument and signature page to
the Company,  such transferee  shall be deemed a "Shareholder"  for all purposes
hereunder.

            8.2 Shareholder Action. The Shareholders shall duly and promptly and
in the form required by law, resolve any shareholder resolution,  enter into any
agreement,  execute any  transaction and perform any other action (whether legal
or factual ) that is or may become  necessary  in order to enable the Company to
fulfill  its  obligations  and  covenants  under this  Agreement,  the  Purchase
Agreement  or any other part of the  Transaction  Agreements  (as defined in the
Purchase  Agreement),  including,  without  limitation,  the issuance of capital
stock  upon any  conversion  of the Long Term Note (as  defined in the Long Term
Note). The obligation pursuant to the immediately  preceding sentence to perform
any action  required in  connection  with any  conversion  of the Long Term Note
includes,  without limitation,  the shareholders' resolution for the increase of
the Company's  share capital as required  under the terms of the Long Term Note,
the admission of the Conversion Holder as sole subscriber to the new share under
such capital  increase,  the waiver of any shareholder other than the Conversion
holder  to  participate  in  such  capital  increase,  the  cooperation  in  the
subscription  by the Conversion  Holder of the new share,  and the filing of the
Capital Increase to the Commercial Register.


                                      -10-
<PAGE>


Notwithstanding   Section  9.9  hereof,   each  party  hereto  consents  to  the
non-exclusive  jurisdiction  of the  courts  of  competent  jurisdiction  of the
Republic of Germany with respect to any action brought by the Conversion  Holder
(as  defined in the Long Term Note) to enforce  its rights to convert  such Long
Term Note.

            8.3   Administrative   Board.   The  parties   shall   establish  an
Administrative  Board  as  provided  by  Sec.  7 of  the  Restated  Articles  of
Association,  by executing a shareholders'  resolution substantially in the form
attached to this  Agreement as Exhibit  8.3.  The Investor  will always have the
right to nominate at least 50% of the members of this Administrative  Board. One
member appointed by the Investor shall be appointed  chairman.  The Shareholders
shall  at  any  time  implement   such   nominations  by  passing  the  required
shareholders'  resolutions and shall abstain from any resolutions and actions in
contravention thereof.

      9. Miscellaneous.

            9.1 Successors and Assigns. The Investor hereby agrees that it shall
not, and may not,  assign any of its rights and  obligations  hereunder,  unless
such assignee provides a written instrument to the Company notifying the Company
of such  assignment  and  agreeing  in  writing to be bound by the terms of this
Agreement.  The terms and conditions of this  Agreement  inure to the benefit of
and are binding upon the respective  successors  and permitted  assignees of the
parties.  Nothing in this Agreement,  express or implied,  is intended to confer
upon any party other than the parties hereto or their respective  successors and
permitted assignees any rights, remedies, obligations or liabilities under or by
reason of this Agreement,  except as expressly provided herein.  During the term
of this Agreement, the Company shall condition any issuance of New Securities by
the Company upon the purchaser of such New Securities  agreeing to be bound,  in
writing, by the terms of this Agreement as a "Shareholder" hereunder.

            9.2 Governing Law. This Agreement shall be governed by and construed
in  accordance  with the laws of the  State of New York  without  regard  to its
principles of conflicts of laws.

            9.3 Titles and  Subtitles.  The  titles and  subtitles  used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting this Agreement.

            9.4 Notices. All notices,  requests,  and other communications given
or made  pursuant  to this  Agreement  shall be in  writing  and shall be deemed
effectively given (i) upon personal  delivery to the party to be notified;  (ii)
when sent by  confirmed  electronic  mail or  facsimile  if sent  during  normal
business  hours  of the  recipient,  and if not so  confirmed,  then on the next
business  day;  (iii)  five (5) days after  having  been sent by  registered  or
certified mail, return receipt requested,  postage prepaid;  or (iv) one (1) day
after  deposit  with  a  nationally  recognized  overnight  courier,  specifying
next-day  delivery,  with written  verification of receipt.  All  communications
shall be sent to the respective  parties at their  addresses as set forth on the
signature page or Schedule A hereto, or to such email address, facsimile number,
or address as  subsequently  modified by written notice given in accordance with
this Section  9.4. If notice is given to the Company,  a copy shall also be sent
to [Name], [Address], [fax number] Attention: [ ].


                                      -11-
<PAGE>


            9.5  Amendments  and  Waivers.  Any  term of this  Agreement  may be
amended and the  observance of any term of this  Agreement may be waived (either
generally   or  in  a  particular   instance,   and  either   retroactively   or
prospectively)  only with the written  consent of the  Company and the  Investor
unless  notarization  is required  for such  amendment.  The Company  shall give
prompt notice of any amendment or termination  hereof or waiver hereunder to any
party hereto. Any amendment,  termination, or waiver effected in accordance with
this Section 9.5 shall be binding on all parties  hereto,  regardless of whether
any such party has consented  thereto.  No waivers of or exceptions to any term,
condition, or provision of this Agreement,  in any one or more instances,  shall
be deemed to be or construed as a further or continuing waiver of any such term,
condition, or provision.

            9.6  Severability.  In  case  any  one or  more  of  the  provisions
contained  in this  Agreement  is for any reason held to be invalid,  illegal or
unenforceable in any respect, such invalidity,  illegality,  or unenforceability
shall not  affect  any other  provision  of this  Agreement,  and such  invalid,
illegal,  or unenforceable  provision shall be reformed and construed so that it
will be valid, legal, and enforceable to the maximum extent permitted by law.

            9.7 Aggregation of Stock. All shares of Registrable  Securities held
or  acquired  by  Affiliates  shall be  aggregated  together  for the purpose of
determining the availability of any rights under this Agreement.

            9.8 Entire  Agreement.  This Agreement  (including any Schedules and
Exhibits  hereto)  constitutes the full and entire  understanding  and agreement
between the parties with  respect to the subject  matter  hereof,  and any other
written or oral agreement relating to the subject matter hereof existing between
the parties is expressly canceled.

            9.9 Dispute  Resolution.  Subject to Section 8.2 hereof, the parties
(a) hereby  irrevocably and  unconditionally  submit to the  jurisdiction of the
state courts of New York and to the  jurisdiction  of the United States District
Court for the Southern  District of New York for the purpose of any suit, action
or other proceeding  arising out of or based upon this Agreement,  (b) agree not
to commence any suit,  action or other  proceeding  arising out of or based upon
this  Agreement  except in such courts,  and (c) hereby waive,  and agree not to
assert, by way of motion, as a defense,  or otherwise,  in any such suit, action
or proceeding,  any claim that it is not subject  personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution,  that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.

            9.10 Delays or  Omissions.  No delay or  omission  to  exercise  any
right,  power, or remedy  accruing to any party under this  Agreement,  upon any
breach or default of any other party under this Agreement, shall impair any such
right,  power, or remedy of such nonbreaching or nondefaulting  party, nor shall
it be construed to be a waiver of or acquiescence to any such breach or default,
or to any similar breach or default thereafter  occurring,  nor shall any waiver
of any  single  breach or  default  be  deemed a waiver  of any other  breach or
default theretofore or thereafter  occurring.  All remedies,  whether under this
Agreement or by law or otherwise  afforded to any party, shall be cumulative and
not alternative.


                                      -12-
<PAGE>


            9.11 Waiver of Jury Trial. Each party hereto waives any right it may
have to a trial by jury in any  action  or  proceeding  directly  or  indirectly
arising out of or relating to this  Agreement or the  transactions  contemplated
hereby (whether based on contract, tort, equity or any other theory). Each party
certifies  that no  representative,  agent or  attorney  of the other  party has
represented,  expressly or otherwise,  that the other parties to this  Agreement
would not, in the event of litigation,  seek to enforce the foregoing waiver and
acknowledges  that all  parties  hereto  have been  induced  to enter  into this
Agreement by, among other things,  the waivers and  certifications  contained in
this Section 9.11.

                          [Signature Page(s) Follow(s)]


                                      -13-
<PAGE>


                  IN WITNESS  WHEREOF,  the parties have executed this Agreement
as of the date first written above.



                                         COMPANY:

                                         PAKETERIA GmbH

                                      By:
                                         ---------------------------------------
                                    Name:
                                         ---------------------------------------
                                   Title:
                                         ---------------------------------------
                                 Address:
                                         ---------------------------------------

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------

                                         INVESTOR:

                                         DATA SYSTEMS & SOFTWARE INC.

                                      By:
                                         ---------------------------------------
                                    Name:
                                         ---------------------------------------
                                   Title:
                                         ---------------------------------------
                                 Address:
                                         ---------------------------------------

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------


                                         SHAREHOLDER

                                      By:
                                         ---------------------------------------
                                    Name:
                                         ---------------------------------------
                                   Title:
                                         ---------------------------------------
                                 Address:
                                         ---------------------------------------

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------


                                      -14-
<PAGE>


                                         SHAREHOLDER

                                      By:
                                         ---------------------------------------
                                    Name:
                                         ---------------------------------------
                                   Title:
                                         ---------------------------------------
                                 Address:
                                         ---------------------------------------

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------


                                         SHAREHOLDER

                                      By:
                                         ---------------------------------------
                                    Name:
                                         ---------------------------------------
                                   Title:
                                         ---------------------------------------
                                 Address:
                                         ---------------------------------------

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------


                                         SHAREHOLDER

                                      By:
                                         ---------------------------------------
                                    Name:
                                         ---------------------------------------
                                   Title:
                                         ---------------------------------------
                                 Address:
                                         ---------------------------------------

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------


                                         SHAREHOLDER

                                      By:
                                         ---------------------------------------
                                    Name:
                                         ---------------------------------------
                                   Title:
                                         ---------------------------------------
                                 Address:
                                         ---------------------------------------

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------


                                      -15-
<PAGE>


                                   SCHEDULE A

                                    Investor


Data Systems & Software Inc.
200 Route 17
Mahwah, New Jersey 07430
Attention:  John A. Moore
            President and Chief Executive Officer

With a copy to:

Reitler Brown & Rosenblatt LLC
800 Third Avenue, 21st Floor
New York, New York 10022
Facsimile:  (212) 371-5500
Attention:  Scott H. Rosenblatt, Esq.

                                  Shareholders
Andy Roesch
Kornblumenring 3
12357 Berlin, Federal Republic of Germany
Phone Number
Fax Number
Email

Ralf Budde
Address
        ------------------------------------
Phone Number
             -------------------------------
Fax Number
           ---------------------------------
Email
      --------------------------------------

Joseph Benson
Address
        ------------------------------------
Phone Number
             -------------------------------
Fax Number
           ---------------------------------
Email
      --------------------------------------

John Moore
Address
        ------------------------------------
Phone Number
             -------------------------------
Fax Number
           ---------------------------------
Email
      --------------------------------------


<PAGE>


Richard Rimer
Address
        ------------------------------------
Phone Number
             -------------------------------
Fax Number
           ---------------------------------
Email
      --------------------------------------

                                      -2-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>6
<FILENAME>v050655_ex10-5.txt
<TEXT>


                                                                    EXHIBIT 10.5

                         NON-PLAN STOCK OPTION AGREEMENT
                         -------------------------------


         THIS STOCK OPTION  AGREEMENT  (this  "Agreement") is made as of the 7th
day of August, 2006 between DATA SYSTEMS & SOFTWARE INC., a Delaware corporation
(the "Company"), and Andy Roesch (the "Optionee").

                                    RECITALS
                                    --------

         WHEREAS,  in  connection  with that certain (i)  Employment  Agreement,
dated  as of the  date  hereof  between  Paketeria  GmbH  ("Paketeria")  and the
Optionee, and (ii) Common Stock Purchase Agreement,  dated as of the date hereof
(the  "Purchase  Agreement"),   between  Paketeria  and  the  Company,  and  the
transactions  contemplated  thereby,  the parties  hereto are entering into this
Agreement;

         WHEREAS,  the Purchase  Agreement  states  that,  as a condition to its
effectiveness, the Company and the Optionee enter into this Agreement; and

         WHEREAS the Board of Directors of the Company (the "Board"), authorized
the grant to Optionee,  an option to purchase  150,000  shares of the  Company's
common stock, par value $.01 per share (the "Common Stock").

         WHEREAS,  the parties  hereto  desire to enter into this  Agreement  in
order to set forth the terms of such option.

         Accordingly, the parties hereto agree as follows:

         1. Grant of Option; Exercise Price.

            (a)  Subject  to the terms and  conditions  of this  Agreement,  the
Company  hereby grants to Optionee the option (the  "Option") to purchase,  from
the Company,  up to 150,000 shares of Common Stock ("Option  Shares") at a price
per share of $______ (the "Exercise Price").  The Option Shares and the Exercise
Price are subject to adjustment in accordance  with the  provisions set forth in
Section 5 below.

            (b) The  Optionee  shall  deliver a fully  executed  Form W-8 to the
Company, dated as of the date hereof, in the form of Exhibit A hereto.

         2. Non-Incentive Stock Option. The Option is not intended to qualify as
an "incentive  stock option"  within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended.

         3.  Vesting of  Option.  This  Option  shall  vest and  thereby  become
exercisable  in three equal parts,  of which (a)  one-third of the Option Shares
(50,000  shares)  shall vest upon  Complete  Execution  (as defined  below) of a
licence  agreement for the sixtieth (60th) Paketeria store, (b) one-third of the
Option Shares  (50,000  shares) shall vest upon Complete  Execution of a licence
agreement for the  seventy-fifth  (75th)  Paketeria store, and (c) the remaining
one-third  of the  Option  Shares  (50,000  shares)  shall  vest  upon  Complete
Execution of a licence  agreement  for the  one-hundred  and  fifteenth  (115th)
Paketeria  store.  For purposes of this Agreement,  "Complete  Execution"  shall
mean, with respect to each license  agreement  executed by the Paketeria,  (i) a
fully executed  license  agreement  between  Paketeria and a licensee,  (ii) the
licensee shall pay the Paketeria,  and/or provide the Paketeria with evidence of
sufficient  financing  to fund the payment  of,  both the  license fee  required
pursuant to the license  agreement and the reasonable  "build-out" costs of such
licensee's store, and (iii) if necessary,  acceptance of such  [licensee/license
agreement] by the Kreditanstalt fur Wiederaufbau.


<PAGE>


         4. Termination of Option. This Option shall terminate (x) to the extent
vested, upon the earlier of (i) August 7, 2011 (the "Expiration Date"), and (ii)
the date  ninety  (90)  days  from the date on which  Optionee  ceases  to be an
employee of Paketeria for any reason,  and (y) to the extent unvested,  upon the
earlier of (i) the Expiration  Date, and (ii) the date on which Optionee  ceases
to be an employee of the Company for any reason.

         5. Adjustments.

            (a) In the event of a stock split,  stock  dividend,  combination of
shares,  or any other similar  change in the Common Stock as a whole,  the Board
shall make equitable, proportionate adjustments in the number and kind of shares
covered by the Option and in the Exercise Price.

            (b) In the event of any  reclassification  or  reorganization of the
outstanding shares of Common Stock other than a change covered by subsection (a)
hereof or that solely  affects the par value of such shares of Common Stock,  or
in the case of any merger or  consolidation  of the Company with or into another
corporation  (other than a  consolidation  or merger in which the Company is the
continuing  corporation  and that  does not  result in any  reclassification  or
reorganization  of the outstanding  shares of Common Stock),  the Optionee shall
have the right thereafter (until the expiration of the right of exercise of this
Option) to receive  upon the  exercise  hereof  after such  event,  for the same
aggregate   Exercise  Price  payable   hereunder   immediately   prior  to  such
reclassification,  reorganization,  merger or consolidation, the amount and kind
of consideration  receivable by a holder of the number of shares of Common Stock
obtainable  upon exercise of this Option  immediately  prior to such event.  The
provisions  of  this   subsection  (b)  shall   similarly  apply  to  successive
reclassifications,  reorganizations,  mergers or consolidations,  sales or other
transfers.

         6. Manner of Exercise.  This Option may be exercised by the delivery to
the Company of a written  notice signed by the Optionee in the form of Exhibit B
hereto,  together with either (i) full payment of the purchase price therefor in
cash  or by  certified  check  payable  to the  order  of the  Company,  or (ii)
irrevocable  instructions  to a broker  designated or approved by the Company to
sell shares of Common Stock equal to the Option  Shares and promptly  deliver to
the Company a portion of the proceeds  thereof  equal to the Exercise  Price and
any applicable  withholding  taxes. The Optionee may be required to remit to the
Company an amount sufficient to satisfy any federal,  state or local withholding
tax requirements prior to delivering to Optionee the Option Shares.  This Option
may not be exercised with respect to a fractional share.


<PAGE>


         7. Restriction on Transfer.

            (a) This Option may not be assigned  or  transferred  and during the
Optionee's lifetime may be exercised only by Optionee.

            (b) Notwithstanding  anything in this Agreement to the contrary, the
Optionee  hereby  agrees  that he  shall  not  sell,  transfer  by any  means or
otherwise  dispose of the Options  Shares  acquired by him without  registration
under the Securities Act of 1933, as amended (the "Securities  Act"), or that in
the event  that they are not so  registered,  unless (i) an  exemption  from the
Securities Act requirements is available  thereunder,  and (ii) the Optionee has
furnished  the Company with notice of such  proposed  transfer and the Company's
legal counsel, in its reasonable  opinion,  shall deem such proposed transfer to
be so exempt.

         8. Miscellaneous.

            (a)  Notices.  Any  notice or  communication  hereunder  shall be in
writing and shall be deemed to have been duly given when delivered in person, or
by United  States mail,  to the  following  address (or to such other address as
either party shall from time to time specify):

                          If to the Company:        Data Systems & Software Inc.
                                                    200 Route 17
                                                    Mahwah, New Jersey  07340
                                                    Attention:  Secretary

                          If to the Optionee:       Mr. Andy Roesch
                                                    Kornblumenring 3
                                                    12357 Berlin


            (b)  Stockholder  Rights.  The  Optionee  shall  not have any of the
rights of a stockholder with respect to the Option Shares until such shares have
been issued after the due exercise of the Option.

            (c)  Waiver.  The  waiver  by any  party  hereto  of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other or subsequent breach.

            (d)  Entire  Agreement.   This  Agreement   constitutes  the  entire
agreement  between the parties with respect to the subject matter  hereof.  This
Agreement may not be amended except by writing  executed by the Optionee and the
Company.

            (e)  Counterparts;  Facsimile.  This  Agreement  may be executed and
delivered by facsimile signature and in two or more counterparts,  each of which
shall be deemed an original,  but all of which together shall constitute one and
the same  instrument.  Execution  and  delivery of this  Agreement  by facsimile
transmission  (including  the delivery of  documents in Adobe PDF format)  shall
constitute  execution and delivery of this Agreement for all purposes,  with the
same force and effect as execution and delivery of an original  manually  signed
copy hereof.


<PAGE>


            (f) Binding  Effect;  Successors.  This Agreement shall inure to the
benefit  of and be  binding  upon the  parties  hereto  and,  to the  extent not
prohibited   herein,   their   respective   heirs,   successors,   assigns   and
representatives. Nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto and as provided above,  their
respective heirs, successors, assigns and representatives, any rights, remedies,
obligations or liabilities.

            (g) Governing Law. This Agreement shall be governed by and construed
in accordance  with the laws of the State of New York (without  regard to choice
of law provisions); provided, however, that all matters relating to or involving
corporate law shall be governed by the Delaware General Corporation Law.

            (h) Headings. The headings contained herein are for the sole purpose
of convenience of reference and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.

            (i)  Severability.  If any one or more  provisions of this Agreement
shall be found to be illegal or unenforceable  in any respect,  the validity and
enforceability  of the  remaining  provisions  hereof  shall  not in any  way be
affected or impaired thereby.

            (j)  Dispute  Resolution.  The parties  (a) hereby  irrevocably  and
unconditionally  submit to the  jurisdiction of the state courts of New York and
to the  jurisdiction  of the  United  States  District  Court  for the  Southern
District  of New York for the  purpose of any suit,  action or other  proceeding
arising out of or based upon this Agreement, (b) agree not to commence any suit,
action or other proceeding arising out of or based upon this Agreement except in
the  state  courts  of New York or the  United  States  District  Court  for the
Southern District of New York, and (c) hereby waive, and agree not to assert, by
way of  motion,  as a  defense,  or  otherwise,  in any  such  suit,  action  or
proceeding,  any claim that it is not subject  personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment or
execution,  that the suit,  action or proceeding  is brought in an  inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.

            (k) Waiver of Jury Trial.  Each party hereto waives any right it may
have to a trial by jury in any  action  or  proceeding  directly  or  indirectly
arising out of or relating to this  Agreement or the  transactions  contemplated
hereby (whether based on contract, tort, equity or any other theory). Each party
certifies  that no  representative,  agent or  attorney  of the other  party has
represented,  expressly  or  otherwise,  that the other party to this  Agreement
would not, in the event of litigation,  seek to enforce the foregoing waiver and
acknowledges  that all  parties  hereto  have been  induced  to enter  into this
Agreement by, among other things,  the waivers and  certifications  contained in
this Section 8(k).


<PAGE>


                          [Signature Page(s) Follow(s)]


<PAGE>


      IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date and year first above written.

                                                    DATA SYSTEMS & SOFTWARE INC.



                                                    By:
                                                       -------------------------
                                                       Name:
                                                       Title



                                                    OPTIONEE



                                                    By:
                                                       -------------------------
                                                       Andy Roesch

                     Roesch Option Agreement Signature Page


<PAGE>


                                    EXHIBIT A



                                    FORM W-8
                                    --------


<PAGE>


                                    EXHIBIT B


                              OPTION EXERCISE FORM
                              --------------------



DATA SYSTEMS & SOFTWARE INC.
200 ROUTE 17
MAHWAH, NJ  07430

Gentlemen:

                  I hereby  exercise the following  portion of the stock options
that  have  heretofore  been  granted  to me under  the  Non-Plan  Stock  Option
Agreement  by and between  myself and Data Systems & Software  Inc.  dated as of
August [ ], 2006:

                  Date of grant                      August 7, 2006
                                                     --------------
                  Exercise price per share             $
                                                       --------
                  Number of options originally granted   150,000
                                                       ---------
                  Number of options currently held
                  Number of options being exercised hereby
                  In connection with this exercise [check one]:
                  _____ I enclose my check in the amount of $
                  _____ I am  delivering  to a broker  designated or approved by
the Company irrevocable instructions to (i) sell shares of Common Stock acquired
upon exercise and (ii) promptly deliver to the Company a portion of the proceeds
thereof equal to the Exercise Price and any applicable withholding taxes.

                  I  hereby  agree  to  execute  whatever  other  documents  are
necessary  in order  to  comply  with the  Agreement  and any  applicable  legal
requirements  in connection with the issuance of the stock to me pursuant to the
Agreement.


Optionee (Signature)

- -------------------------
Please print name


Date                                                  Address

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
