Exhibit 10.1


 


SECURITIES PURCHASE AGREEMENT


 


This SECURITIES PURCHASE AGREEMENT
(the “Agreement”), is dated as of
March 18, 2006, by and among Vyyo Inc., a Delaware corporation (the “Company”), and the investors listed on the
Schedule of Investors attached hereto as Exhibit A (individually,
an “Investor” and collectively,
the “Investors”).


 


WHEREAS:


 


A.            The Company and each
Investor is executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “SEC”) under the Securities Act.


 


B.            Each Investor,
severally and not jointly, wishes to purchase, and the Company wishes to sell,
upon the terms and conditions stated in this Agreement: (i) that aggregate
number of shares of the Common Stock, par value $0.0001 per share, of the
Company (the “Common Stock”), set
forth opposite such Investor’s name in column two (2) on the Schedule of
Investors in Exhibit A (the “Common
Shares”); (ii) that aggregate principal amount of Convertible Notes,
in substantially the form attached hereto as Exhibit B (the “Convertible Notes”), set forth opposite
such Investor’s name in column three (3) on the Schedule of Investors (as
converted, collectively, the “Conversion
Shares”); (iii) that aggregate principal amount of 9.5% Senior
Secured Notes in substantially the form attached hereto as Exhibit C
(the “Senior Secured Notes”) set
forth opposite such Investor’s name in column four (4) on the Schedule of
Investors and (iv) that aggregate number of Warrants (the “Warrants”) in substantially the form
attached hereto as Exhibit D set
forth opposite such Investor’s name in column five (5) on the Schedule of
Investors which will be exercisable to purchase additional shares of Common
Stock (as exercised, collectively, the “Warrant
Shares”).


 


C.            The Common Shares,
Convertible Notes, Conversion Shares, Senior Secured Notes, Warrants and
Warrant Shares issued pursuant to this Agreement are collectively are referred
to herein as the “Securities.”


 


D.            Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in the
form attached hereto as Exhibit E (the “Registration Rights Agreement”), pursuant to which the Company
has agreed to provide certain registration rights with respect to the Common
Shares, Conversion Shares and Warrant Shares under the Securities Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.


 


NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:


 

















 


ARTICLE I

DEFINITIONS


 


1.1           Definitions. In
addition to the terms defined elsewhere in this Agreement, the following terms
have the meanings indicated:


 


“Affiliate” means any
Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Securities Act.


 


“Business Day” means any
day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain closed.


 


“Closing” means the
closing of the purchase and sale of the Securities pursuant to Section 2.1.


 


“Closing Date” means the
date and time of the Closing and shall be 10:00 a.m., New York City time, on
March 22, 2006 (or such other date and time as is mutually agreed to by the
Company and each Investor).


 


“Collateral” has the
meaning assigned to such term in the Guaranty and Security Agreement.


 


“Collateral Agent” has the
meaning assigned to such term in the Guaranty and Security Agreement.


 


“Company Counsel” means Skadden,
Arps, Slate, Meagher & Flom LLP, United States special counsel to
the Company.


 


“Common Shares” has the
meaning set forth in the Preamble.


 


“Common Stock” has the
meaning set forth in the Preamble.


 


“Convertible Notes” has
the meaning set forth in the Preamble.


 


“Conversion Shares” has
the meaning set forth in the Preamble.


 


“Eligible Market” means
any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ
National Market or the NASDAQ SmallCap Market.


 


“Guaranty and Security Agreement”
by and among the Company, the Investors and the parties thereto in
substantially in the form set forth as Exhibit F hereto.


 


“Grantor” has the meaning
assigned to such term in the Guaranty and Security Agreement.


 


“Insignificant Subsidiaries”
means Vyyo Asia, Inc., Vyyo Brasil Ltd., and Vyyo Hong Kong Inc.


 


“Intellectual Property Rights”
has the meaning set forth in Section 3.1(j).


 


2

















 


“Investor Counsel” means
Brown Raysman Millstein Felder & Steiner LLP, counsel to the Investors.


 


“Knowledge,” including the phrase “to the Company’s knowledge,” and words of similar import shall mean that which Davidi Gilo,
Arik Levi, Amir Hochbaum, and Tashia Rivard know or should have known using the
exercise of reasonable due diligence.


 


 “Lien” means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.


 


“Material Adverse Effect”
has the meaning set forth in Section 3.1(a).


 


“Material Permits” has the
meaning set forth in Section 3.1(z).


 


“Person” means any
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, or joint stock company.


 


“Proceeding” means an
action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened in writing.


 


“Registration Rights Agreement”
has the meaning set forth in the Preamble.


 


“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144,
Rule 415 and Rule 424, respectively, promulgated by the SEC pursuant
to the Securities Act, as such Rules may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC having substantially
the same effect as such Rule.


 


“SEC” has the meaning set
forth in the Preamble.


 


“SEC Reports” has the
meaning set forth in Section 3.1(h).


 


“Securities” has the
meaning set forth in the Preamble.


 


“Senior Secured Notes” has
the meaning set forth in the Preamble.


 


“Shares” means shares of
the Company’s Common Stock.


 


“Significant Subsidiary”
has the meaning assigned thereto in Rule 1-02(w) of Regulation S-X and each
Subsidiary that is party to the Guaranty and Security Agreement.


 


“Subsidiary” means any
Person in which the Company, directly or indirectly, owns capital stock or
holds an equity or similar interest.


 


“Trading Day” means
(a) any day on which the Common Stock is listed or quoted and traded on
its primary Trading Market, (b) if the Common Stock is not then listed or
quoted and traded on any Eligible Market, then a day on which trading occurs on
the NASDAQ National Market 


 


3

















 


(or any
successor thereto), or (c) if trading ceases to occur on the NASDAQ
National Market (or any successor thereto), any Business Day.


 


“Trading Market” means the
Nasdaq National Market or any other Eligible Market, or any national securities
exchange, market or trading or quotation facility on which the Common Stock is
then listed or quoted.


 


“Transaction” means the
transaction contemplated by the Transaction Documents.


 


“Transaction Documents”
means this Agreement, the schedules and exhibits attached hereto, the
Convertible Notes, the Senior Secured Notes, the Warrants and the Guaranty and
Security Agreement.


 


“Warrant” has the meaning
set forth in the Preamble.


 


“Warrant Shares” has the
meaning set forth in the Preamble.


 


ARTICLE II

PURCHASE AND SALE


 


2.1           Closing.


 


(a)           Subject to the terms
and conditions set forth in Sections 5.1(a) and 5.2 herein, at
the Closing the Company shall issue and sell to each Investor, and each
Investor shall, severally and not jointly, purchase from the Company, such
number of Common Shares, Convertible Notes, Senior Secured Notes and Warrants set forth opposite such Investor’s name on
Exhibit A hereto under the headings “Common Shares”, “Convertible
Notes”, “Senior Secured Notes” and “Warrants”. The date and time of the Closing
and shall be 10:00 a.m., New York City time, on the Closing Date. The Closing
shall take place at the offices of Company Counsel.


 


(b)           At the Closing, each
Investor shall deliver or cause to be delivered to the Company the purchase
price set forth opposite such Investor’s name on Exhibit A hereto
under the heading “Purchase Price” in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing to such
Investor by the Company for such purpose.


 


ARTICLE III

REPRESENTATIONS AND WARRANTIES


 


3.1           Representations
and Warranties of the Company. The Company hereby represents and warrants
to each Investor that, except as set forth in the SEC Reports (as hereinafter
defined) or in the Schedule of Exceptions attached as Exhibit I 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 hereof. The Schedule of Exceptions shall be arranged in
sections corresponding to the numbered and lettered sections and subsections
contained in this Section 3, and the disclosures in any section or subsection
of the Schedule of Exceptions shall qualify other sections and subsections in
this Section 2 only to the extent it is reasonably apparent 


 


4

















 


from a reading of the disclosure that such
disclosure is applicable to such other sections and subsections:


 


(a)           Organization and
Qualification. Each of the Company and the Significant Subsidiaries is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization (as applicable), with the
requisite legal authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor any Significant
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Significant Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not
reasonably be expected to individually or in the aggregate, (i) materially
and adversely affect the legality, validity or enforceability of any
Transaction Document, (ii) have or result in a material adverse effect on
the results of operations, assets, business or financial condition of the
Company and the Significant Subsidiaries, taken as a whole on a consolidated
basis or (iii) materially and adversely impair the Company’s ability to
perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (i), (ii) or (iii), a “Material
Adverse Effect”).


 


(b)           Subsidiaries.
The Company has no direct or indirect Subsidiaries. The Company owns, directly
or indirectly, all of the capital stock or comparable equity interests of each
Subsidiary free and clear of any Lien and all the issued and outstanding shares
of capital stock or comparable equity interest of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights. None of the Insignificant Subsidiaries (i) carries on any substantive
business operations or activities or (ii) has assets or liabilities in excess
of $50,000.


 


(c)           Authorization;
Enforcement. The Company has the requisite corporate authority to enter
into and to consummate the transactions contemplated by each of the Transaction
Documents to which it is a party and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction
Documents to which it is a party by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary action on the part of the Company and no further consent or
action is required by the Company, its Board of Directors or its stockholders. Each
of the Transaction Documents to which it is a party has been (or upon delivery
will be) duly executed by the Company and is, or when delivered in accordance
with the terms hereof, will constitute, the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the enforcement of
creditors rights generally, and (ii) the effect of rules of law governing
the availability of specific performance and other equitable remedies.


 


(d)           No Conflicts.
The execution, delivery and performance of the Transaction Documents to which
it is a party by the Company and any Significant Subsidiary and the
consummation by the Company and any Significant Subsidiary of the transactions
contemplated hereby and thereby do not, and will not, (i) conflict with or
violate any provision of the Company’s 


 


5

















 


or any Significant Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Significant Subsidiary debt
or otherwise) or other understanding to which the Company or any Significant
Subsidiary is a party or by which any property or asset of the Company or any
Significant Subsidiary is bound, or affected, except to the extent that such
conflict, default, termination, amendment, acceleration or cancellation right
would not reasonably be expected to have a Material Adverse Effect or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Significant Subsidiary is subject (including federal
and state securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are subject),
or by which any property or asset of the Company or a Significant Subsidiary is
bound or affected, except to the extent that such violation would not
reasonably be expected to have a Material Adverse Effect.


 


(e)           Authorization of
Securities. The Securities are duly authorized and, when issued and paid
for in accordance with the Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens and shall not
be subject to preemptive or similar rights of stockholders. Upon issuance or
conversion in accordance with the Convertible Notes or exercise in accordance
with the Warrants, as the case may be, the Conversion Shares and the Warrant
Shares, respectively, will be validly issued, fully paid and nonassessable and
free from all preemptive or similar rights, taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Shares. As of the Closing, the Company shall
have reserved from its duly authorized capital stock equal to the sum of
(A) the Common Shares (B) the number of Common Shares issuable upon
conversion of the Convertible Notes (without taking into account any
limitations on the conversion, or redemption of the Convertible Notes set forth
in the Convertible Notes) at the Closing (y) the number of Common Shares
issuable upon exercise of the Warrants (without taking into account any
limitations on the exercise of the Warrants set forth in the Warrants).


 


(f)            Capitalization.
The aggregate number of shares and type of all authorized, issued and
outstanding classes of capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in Schedule 3.1(f)
hereto. All outstanding shares of capital stock are duly authorized, validly
issued, fully paid and nonassessable and have been issued in compliance with
Section 5 of the Securities Act. The Company has not issued any other
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or entered into any
agreement giving any Person any right to subscribe for or acquire, any shares
of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. Except for customary adjustments as a result of stock
dividends, stock splits, combinations of shares, reorganizations,
recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued
by the Company (or in any agreement providing rights to security holders) and
the issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Investors) and will not result in a 


 


6

















 


right of any holder of securities to adjust
the exercise, conversion, exchange or reset price under such securities. To the
knowledge of the Company, no Person or group of related Persons beneficially
owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has the
right to acquire, by agreement with or by obligation binding upon the Company,
beneficial ownership of in excess of 5% of the outstanding Common Stock,
ignoring for such purposes any limitation on the number of shares of Common
Stock that may be owned at any single time.


 


(g)           Consents. None
of the Company nor any of its Significant Subsidiaries is required to obtain
any consent, authorization or order of, or make any filing or registration
with, any court, governmental agency or any regulatory or self-regulatory
agency or any other Person in order for it to execute, deliver or perform any
of its obligations under or contemplated by the Transaction Documents, in each
case in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations (which the Company is
required to obtain pursuant to the preceding sentence) have been obtained or
effected, or will have been obtained or effected, on or prior to the Closing
Date, except to the extent that failure to obtain such consent would not be
expected to result in a Material Adverse Effect, and the Company and its
Significant Subsidiaries are unaware of any facts or circumstances that might
prevent the Company from obtaining or effecting any of the registration,
application or filings pursuant to the preceding sentence. The Company is not
in violation of the listing requirements of the Trading Market.


 


(h)           SEC Reports;
Financial Statements. The Company has filed all reports required to be
filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the twelve months preceding the date hereof (the foregoing
materials (together with any materials filed by the Company under the Exchange
Act, whether or not required) being collectively referred to herein as the “SEC Reports” and, together with this
Agreement and the Schedules to this Agreement, the “Disclosure Materials”) on a timely basis. As of the date
hereof, the Company is not aware of any event occurring on or prior to the
Closing Date (other than the transactions contemplated by the Transaction
Documents) that requires the filing of a Form 8-K after the Closing. As of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended except as may
be indicated in the notes thereto and except, in the case of interim
statements, for the absence of footnotes and as permitted by Form 10-Q,
subject, in the case of unaudited statements, to normal, year-end audit
adjustments.


 


7

















 


(i)            No Adverse
Changes. Since the date of the latest unaudited financial statements for
the quarter ended September 30, 2005, (i) there has been no event,
occurrence or development that, individually or in the aggregate, has had or
that would reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any material liabilities other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the SEC, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders, in their capacities as such, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock (except for repurchases by the Company of shares of capital stock held by
employees, officers, directors, or consultants pursuant to an option of the
Company to repurchase such shares upon the termination of employment or
services) and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock-based
plans.


 


(j)            Intellectual
Property. To the Company’s knowledge, the Company and the Subsidiaries own,
possess, license or have other rights to use all foreign and domestic patents,
patent applications, reexams, reissues, divisional continuations, or any patent
or application claiming priority therefrom, including any patent that may be
issued as a result of an interference action, trade and service marks, trade
and service mark registrations, trade names, copyrights, licenses, inventions,
trade secrets, technology, Internet domain names, know-how and other
intellectual property (collectively, the “Intellectual
Property Rights”) necessary for the conduct of their respective
businesses described in the SEC Reports, except where such violations or
infringements would not reasonably be expected to result in a Material Adverse
Effect, (a) there are no rights of third parties to any such Intellectual
Property Rights; (b) to the Company’s knowledge, there is no infringement by
third parties of any such Intellectual Property Rights; (c) there is no pending
or, to the Company’s knowledge, threatened action, suit, proceeding or claim by
others challenging the Company’s and its Significant Subsidiaries’ rights in or
to any such Intellectual Property Rights, and the Company is unaware of any
facts which would form a reasonable basis for any such claim; (d) there is
no pending or, to the Company’s knowledge, threatened action, suit, proceeding
or claim by others challenging the validity or scope of any such Intellectual
Property Rights and (e) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others that the Company and its
subsidiaries infringe or otherwise violate any patent, trademark, copyright,
trade secret or other proprietary rights of others, and the Company is unaware
of any other fact which would form a reasonable basis for any such claim. All
of the licenses and sublicenses and consent, royalty or other agreements
concerning Intellectual Property Rights which are necessary for the conduct of
the Company’s business as currently conducted to which the Company or the
Significant Subsidiary is a party or by which any of their respective assets
are bound (other than generally commercially available, non-custom, off the
shelf software application programs having a retail acquisition price of less
than $25,000 per license) (collectively, “License
Agreements”) are valid and binding obligations of the Company or the
Significant Subsidiaries, as the case may be and, to the Company’s knowledge,
the other parties thereto, enforceable in accordance with their respective
terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors’ rights
generally, and there exists no event or condition which 


 


8

















 


will result in a material violation or breach
of or constitute (with or without due notice or lapse of time or both) a
default by the Company under such License Agreements.


 


(k)           Tax Matters. The
Company and each Significant Subsidiary (i) has timely prepared and filed
all foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has
paid all material taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, with respect to which
adequate reserves have been set aside on the books of the Company and
(iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. To the Company’s knowledge, there are
no unpaid taxes in any material amount claimed to be past due by the taxing
authority of any jurisdiction, and the Company knows of no basis for such claim.
The Company has not waived or extended any statute of limitations at the
request of any taxing authority. There are no outstanding tax sharing
agreements or other such arrangements between the Company and any other
corporation or entity and the Company is not presently undergoing any audit by
a taxing authority.


 


(l)            Absence of
Litigation. Except as disclosed in the Company’s SEC Reports, there is no
action, suit, claim, or proceeding, or, to the Company’s knowledge, inquiry or
investigation, before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Significant Subsidiaries that
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.


 


(m)          Environmental
Matters. To the Company’s knowledge, the Company and each Significant
Subsidiary (i) is not in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), (ii) does not own or
operate any real property contaminated with any substance in violation of any
Environmental Laws, (iii) is not liable for any off-site disposal or
contamination pursuant to any Environmental Laws and (iv) is not subject to any
claim relating to any Environmental Laws; which violation, contamination,
liability or claim has had or would reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate; and there is no pending or,
to the Company’s knowledge, threatened investigation that might lead to such a
claim.


 


(n)           Compliance. None
of the Company nor any Significant Subsidiary, except in each case as would
not, individually or in the aggregate, reasonably be expected to have or result
in a Material Adverse Effect, (i) is in default under or in violation of
(and no event has occurred that has not been waived that, with notice or lapse
of time or both, would result in a default by the Company or any Significant
Subsidiary under), nor has the Company or any Significant Subsidiary received
written notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is
in violation of any order of any court, arbitrator or governmental body or
(iii) is or has been in violation of any statute, rule or regulation of
any governmental authority.


 


9

















 


(o)           Title to Assets.
The Company and the Significant Subsidiaries have good and marketable title in
fee simple to all real property owned by them that is material to the business
of the Company and the Significant Subsidiaries and good and marketable title
in all personal property owned by them that is material to the business of the
Company and the Significant Subsidiaries, in each case free and clear of all
Liens, except for Liens that do not, individually or in the aggregate, have or
would reasonably be expected to result in a Material Adverse Effect. Any real
property and facilities held under lease by the Company and the Significant
Subsidiaries are held by them under valid, subsisting and enforceable leases of
which the Company and the Significant Subsidiaries are in material compliance.


 


(p)           No General
Solicitation; Placement Agent’s Fees. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Securities. The
Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or brokers’ commissions (other than for persons
engaged by any Investor or its investment advisor) relating to or arising out
of the issuance of the Securities pursuant to this Agreement. The Company shall
pay, and hold each Investor harmless against, any liability, loss or expense
(including, without limitation, reasonable attorney’s fees and out-of-pocket
expenses) arising in connection with any such claim for fees arising out of the
issuance of the Securities pursuant to this Agreement.


 


(q)           Private Placement.
None of the Company, its Subsidiaries, any of their Affiliates, or any Person
acting on their behalf has, directly or indirectly, at any time within the past
six months, made any offer or sale of any security or solicitation of any offer
to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under
the Securities Act in connection with the offer and sale by the Company of the
Securities as contemplated hereby or (ii) cause the offering of the
Securities pursuant to the Transaction Documents to be integrated with prior
offerings by the Company for purposes of any applicable law, regulation or
stockholder approval provisions, including, without limitation, under the rules
and regulations of any Trading Market. The Company is not required to be
registered as, a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.


 


(r)            Form S-3
Eligibility. The Company is eligible to register the Common Shares, Conversion
Shares and Warrant Shares for resale by the Investors using Form S-3
promulgated under the Securities Act.


 


(s)           Listing and
Maintenance Requirements. The Company has not, in the twelve months
preceding the date hereof, received notice (written or oral) from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is in compliance with all such
listing and maintenance requirements.


 


(t)            Registration
Rights. The Company has not granted or agreed to grant to any Person any
rights (including “piggy-back” registration rights) to have any securities of
the Company registered with the SEC or any other governmental authority that
have not been satisfied or waived.


 


10

















 


(u)           Application of
Takeover Protections. There is no control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s charter documents
or the laws of its state of incorporation that is or would become applicable to
any of the Investors as a result of the Investors and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including, without limitation, as a result of the Company’s issuance of the
Securities and the Investors’ ownership of the Securities.


 


(v)           Disclosure. Neither
this Agreement, nor any of the Transaction Documents, certificates or other
documents made or delivered at the Closing, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements herein or therein not misleading.


 


(w)          Acknowledgment
Regarding Investors’ Purchase of Securities. Based upon the assumption that
the transactions contemplated by this Agreement are consummated in all material
respects in conformity with the Transaction Documents, the Company acknowledges
and agrees that each of the Investors is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that no Investor is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Investor or any of
their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to the Investors’ purchase of the Securities. The Company further
represents to each Investor that the Company’s decision to enter into this
Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.


 


(x)            Insurance. The
Company and the Significant Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses and location in which the Company
and the Significant Subsidiaries are engaged. Neither the Company nor any
Significant Subsidiary has any knowledge that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.


 


(y)           ERISA. As of
the Closing Date, neither the Company nor any of its Significant Subsidiaries
has any obligation or any liability in respect of any employee pension benefit
plan subject to the provisions of Title IV of ERISA or Section 412 of the
Internal Revenue Code of 1986 or Section 302 of ERISA, and in respect of which
the Company or any Significant Subsidiary (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an “employer” as defined in
Section 3(5) of ERISA or any multiemployer plan as defined in Section
4001(a)(3) of ERISA.


 


(z)            Regulatory
Permits. The Company and the Significant Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC 


 


11

















 


Reports, except where the failure to possess
such permits does not, individually or in the aggregate, have or result in a
Material Adverse Effect (“Material Permits”),
and neither the Company nor any Significant Subsidiary has received any written
notice of proceedings relating to the revocation or modification of any
Material Permit.


 


(aa)         Transactions With
Affiliates and Employees. Except as set forth in the SEC Reports made on or
prior to the date hereof, none of the officers or directors of the Company and,
to the Company’s knowledge, none of the employees of the Company is presently a
party to any transaction with the Company or any Significant Subsidiary or to a
presently contemplated transaction (other than for ordinary course services as
employees, officers and directors) that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.


 


(bb)         Questionable
Payments. Neither the Company nor any Significant Subsidiary, nor, to the
Company’s knowledge, directors, officers, employees, agents or other Persons
acting on behalf of the Company or any Significant Subsidiary has, in the
course of its actions for, or on behalf of, the Company:  (i) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
relating to foreign or domestic political activity; (ii) made any direct
or indirect unlawful payments to any foreign or domestic governmental officials
or employees from corporate funds; (iii) violated in any respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended or
(iv) made any other unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee which, in the aggregate of clauses (i) through (iv) would
have a Material Adverse Effect.


 


(cc)         Internal
Accounting Controls. The Company and the Significant Subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.


 


(dd)         Sarbanes-Oxley Act.
The Company is in compliance with applicable requirements of the Sarbanes-Oxley
Act of 2002 and applicable rules and regulations promulgated by the SEC
thereunder, except where such noncompliance would not have, individually or in
the aggregate, a Material Adverse Effect.


 


(ee)         Investment Company.
Neither the Company nor any of its Significant Subsidiaries is (i) an “investment
company” as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (ii) a “holding company” as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.


 


(ff)           Margin Stock.
Neither the Company nor any of the Significant Subsidiaries is engaged
principally, or as one of their important activities, in the business of
extending credit for the purpose of buying or carrying Margin Stock (as such
term is defined in Regulation U). Immediately 


 


12

















 


before and after giving effect to the sale of
the Senior Secured Note, Margin Stock will constitute less than 25% of the
Company’s assets as determined in accordance with Regulation U. No part of the
proceeds of the Senior Secured Note will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, to purchase,
acquire or carry any Margin Stock or for any purpose that entails a violation
of, or that is inconsistent with, the provisions of the regulations of the
Board of Governors of the Federal Reserve System of the United States of
America, including Regulation T, U or X.


 


3.2           Representations
and Warranties of the Investors. Each Investor hereby, as to itself only
and for no other Investor, represents and warrants to the Company as follows:


 


(a)           Organization;
Authority. Such Investor is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with
the requisite corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The purchase
by such Investor of the Securities hereunder has been duly authorized by all
necessary action on the part of such Investor. This Agreement has been duly
executed and delivered by such Investor and constitutes the valid and binding
obligation of such Investor, enforceable against it in accordance with its
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting
the enforcement of creditors rights generally and (ii) the effect of rules
of law governing the availability of specific performance and other equitable
remedies.


 


(b)           No Public Sale or
Distribution; Investment Intent. Such Investor is acquiring the Securities
in the ordinary course of business for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, and such Investor does not have a present arrangement to effect any
distribution of the Securities to or through any person or entity.


 


(c)           Investor Status.
At the time such Investor was offered the Securities, it was, and at the date
hereof it is, an “accredited investor” as defined in Rule 501(a) under the
Securities Act.


 


ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES


 


4.1           Transfer
Restrictions.


 


(a)           The Investors
covenant that the Securities will only be disposed of pursuant to an effective
registration statement under, and in compliance with the requirements of, the
Securities Act or pursuant to an available exemption from the registration
requirements of the Securities Act, and in compliance with any applicable state
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or to the Company, the Company
may require the transferor to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration under the Securities Act. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register on the books
of the Company and with its transfer agent, without any such legal opinion,
except to the extent that the transfer agent 


 


13

















 


requests such legal opinion, any transfer of
Securities by an Investor to an Affiliate of such Investor, provided that the
transferee makes customary representations to Company and certifies to the
Company that it is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and provided that such Affiliate does not request any removal of
any existing legends on any certificate evidencing the Securities.


 


(b)           Such Investor
understands that the instruments representing the Senior Secured Notes,
Convertible Notes and the Warrants and
the stock certificates representing the Common Shares, Conversion Shares and
the Warrant Shares, until such time as the resale of the Common Shares,
Conversion Shares and the Warrant Shares have been registered and sold under
the Securities Act, shall bear any legend as required by the “blue sky” laws of
any state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):


 


NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE]
[EXERCISABLE] [HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR (B) IF REASONABLY REQUESTED BY THE COMPANY,
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT.


 


The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities have been registered and sold pursuant to an effective registration statement
under the Securities Act or (ii) in connection with a sale, assignment or other
transfer, the Company reasonably requests that such holder provide the Company
with opinion of counsel reasonably acceptable to the Company that the sale,
assignment or transfer of the Securities may be made without registration under
the applicable requirements of the Securities Act.


 


4.2           Furnishing of
Information. So long as any Investor owns Securities, the Company covenants
to use commercially reasonable efforts to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the reasonable request of any Investor, the Company shall
deliver to such Investor a written certification of a duly authorized officer
as to whether it has complied with the preceding sentence. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request to satisfy the provisions of this Section 4.2.


 


4.3           Integration. The
Company shall not, and shall use its commercially reasonable efforts to ensure
that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with 


 


14

















 


the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the sale
of the Securities to the Investors or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market.


 


4.4           Reservation of
Securities. The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents in
such amount as may be required to fulfill its obligations in full under the
Transaction Documents. In the event that at any time the then authorized shares
of Common Stock are insufficient for the Company to satisfy its obligations in
full under the Transaction Documents, the Company shall promptly take such
actions as may be required to increase the number of authorized shares.


 


4.5           Securities Laws Disclosure; Publicity. The Company
shall, on or before 8:30 a.m., New York time, on the first Trading Day
following execution of this Agreement, issue a press release acceptable to the
Investors disclosing all material terms of the transactions contemplated hereby.
The Company shall file a Current Report on Form 8-K with the SEC (the “8-K Filing”) within one (1) Business Day of execution of
this Agreement describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K this Agreement in the form required by the Exchange Act. Thereafter, the
Company shall timely file any filings and notices required by the SEC or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Investors promptly after filing. Except with
respect to the 8-K Filing and the press release referenced above (a copy of
which will be provided to the Investors for their review as early as
practicable prior to its filing), the Company shall, at least two Trading Days
prior to the filing or dissemination of any disclosure required by this
paragraph, provide a copy thereof to the Investors for their review. The
Company and the Investors shall consult with each other in issuing any press
releases or otherwise making public statements or filings and other
communications with the SEC or any regulatory agency or Trading Market with
respect to the transactions contemplated hereby, and neither party shall issue
any such press release or otherwise make any such public statement, filing or
other communication without the prior consent of the other, except if such
disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement,
filing or other communication. Notwithstanding the foregoing, the Company shall
not publicly disclose the name of any Investor, or include the name of any
Investor in any press release without the prior written consent of such Investor.
Except as required under the Transaction Documents, the Company shall not, and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents not to, provide any Investor with any
material nonpublic information regarding the Company or any of its Subsidiaries
from and after the issuance of the above referenced press release without the
express written consent of such Investor.


 


4.6           Use of Proceeds. The Company intends to use the net
proceeds from the sale of the Securities for working capital and general
corporate purposes and not for the (i) repayment of any of the Senior Secured
Notes or (ii) redemption or repurchase of any of its equity securities. Pending
these uses, the Company intends to invest the net proceeds from this offering
in short-term, interest-bearing, investment-grade securities, or as otherwise
pursuant to the Company’s customary investment policies.


 


15

















 


4.7.          Short Sales. The Investor represents, warrants and
agrees that, since the date on which any of the Company or first contacted the
Investor about the potential sale of the Securities, it has not engaged in any
transactions in the securities of the Company (including, without limitation,
any Short Sales involving the Company’s securities). Such Investor covenants
that it will not engage in any transactions in the securities of the Company
(including Short Sales) prior to the time that the transactions contemplated by
this Agreement are publicly disclosed. Such Investor further covenants that it
will not engage in any Short Sales in the Company’s securities for a period of
180 days from the Closing Date. For purposes hereof, “Short Sales” include,
without limitation, all “short sales” as defined in Rule 3b-3 of the Exchange
Act and Rule 200 promulgated under Regulation SHO under the Exchange Act,
whether or not against the box, and all types of direct and indirect stock
pledges, forward sales contracts, options, puts, calls, short sales, swaps, “put
equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and
similar arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers.


 


ARTICLE V

CONDITIONS


 


5.1           Conditions Precedent to each Investor’s Obligation to
Purchase. The obligation of each Investor to purchase the Securities at the
Closing is subject to the satisfaction or waiver by such Investor, at or before
the Closing, of each of the following conditions:


 


(a)           The Company shall
have duly executed and delivered to each Investor:


 


(i)    one or more stock
certificates, free and clear of all restrictive and other legends (except as
expressly provided in Section 4.1(b) hereof), evidencing such number of
Common Shares equal to the number of Shares set forth opposite such Investor’s
name in column (2) on the Schedule of Investors;


 


(ii)   one or more Convertible
Notes with an aggregate principal amount as is set forth opposite such Investor’s
name in column (3) on the Schedule of Investors;


 


(iii)  one or more Senior Secured
Notes with an aggregate principal amount as is set forth opposite such Investor’s
name in column (4) on the Schedule of Investors;


 


(iv)  that number of Warrants as
is set forth opposite such Investor’s name in column (5) on the Schedule of
Investors;


 


(v)   the Guaranty and Security
Agreement signed on behalf of the Company, and each Subsidiary party thereto,
together with the following:


 


(1)           any certificated
securities representing shares of capital stock or other similar interests
owned by or on behalf of any Grantor (as defined in the Guaranty and Security
Agreement) constituting Collateral (as defined in the Guaranty and Security
Agreement) as of the Closing Date after giving effect to the Transactions;


 


16

















 


(2)           any promissory notes
and other instruments evidencing all loans, advances and other debt owed or
owing to any Grantor constituting Collateral as of the Closing Date after
giving effect to the Transactions;


 


(3)           stock powers and
instruments of transfer, endorsed in blank, with respect to such certificated
securities, promissory notes and other instruments;


 


(4)           descriptions of all
intellectual property, including all patents, trademarks and copyrights, owned
by the Company and its Subsidiaries in detail reasonably satisfactory to the
Investors;


 


(5)           all instruments and
other documents, including UCC financing statements, required by law or
reasonably requested by the Collateral Agent to be filed, registered or
recorded to create or perfect the Liens intended to be created under the
Guaranty and Security Agreement; and


 


(6)           results of a search
of the UCC (or equivalent) filings made and tax and judgment lien searches with
respect to the Grantors in the jurisdictions contemplated by the Guaranty and
Security Agreement and copies of the financing statements (or similar
documents) disclosed by such search and evidence reasonably satisfactory to the
Collateral Agent that the Liens indicated by such financing statements (or
similar documents) are acceptable to the Collateral Agent or have been
released.


 


(b)           Such Investor shall
have received the opinion of Company Counsel, dated as of the Closing Date, in
substantially the form of Exhibit G attached hereto. Such Investor shall
have received the opinion of Fischer Behar Chen Well Orion & Co., the
Company’s Israeli counsel dated as of the Closing Date, in substantially the
form of Exhibit H attached hereto.


 


(c)           The Company shall
have delivered a certificate, executed on behalf of the Company by its
Secretary, dated as of the Closing Date, certifying the resolutions adopted by
the Board of Directors of the Company approving the transactions contemplated
by the Transaction Documents and the issuance of the Securities, certifying the
current versions of the Certificate and Bylaws of the Company and certifying as
to the signatures and authority of persons signing this Agreement and related
documents on behalf of the Company.


 


(d)           The representations
and warranties of the Company shall be true and correct in all material
respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all
respects) as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. Such Investor shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Investor.


 


17

















 


(e)           The Common Shares
(i) shall be designated for quotation or listed on the Nasdaq National Market
and (ii) shall not have been suspended, as of the Closing Date, by the SEC or
the Nasdaq National Market from trading on the Nasdaq National Market nor shall
suspension by the SEC or the Nasdaq National Market have been threatened, as of
the Closing Date, either (A) in writing by the SEC or the Nasdaq National
Market or (B) by falling below the minimum listing maintenance requirements of
the Nasdaq National Market.


 


(f)            The Company shall
have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the sale of the Securities, except for those
consents and approvals set forth in Sections 3.1(d), 3.1(g) and 3.1(i) to the
Schedule of Exceptions.


 


(g)           The Investors shall
have received all fees and other amounts due and payable on or prior to the
Closing Date pursuant to Section 6.2 hereof.


 


(h)           The Company shall
have delivered to such Investor such other documents relating to the
transactions contemplated by this Agreement as such Investor or its counsel may
reasonably request.


 


5.2           Conditions Precedent to the Obligations of the Company.
The Company’s obligation to sell and issue the Securities at the Closing is, at
the option of the Company, subject to the fulfillment or waiver of the
following conditions:


 


(a)           Receipt of
Payment. The Investors shall have delivered payment of the purchase price
to the Company for the Securities.


 


(b)           Representations
and Warranties. The representations and warranties made by the Investors in
Section 3.2 hereof qualified as to materiality shall be true and correct
at all times prior to and on the Closing Date as if made on and as of the
Closing Date, except to the extent any such representation or warranty
expressly speaks as of an earlier date, in which case such representation or
warranty shall be true and correct as of such earlier date; and the
representations and warranties made by the Investors in Section 3.2
hereof not qualified as to materiality shall be true and correct in all
material respects at all times prior to and on the Closing Date as if made on
and as of the Closing Date, except to the extent any such representation or
warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects
as of such earlier date.


 


(c)           Covenants. All
covenants, agreements and conditions contained in this Agreement to be
performed, satisfied or complied with by the Investors on or prior to the
Closing Date shall have been performed, satisfied or complied with in all
material respects.


 


ARTICLE VI

MISCELLANEOUS


 


6.1           Termination. This Agreement may be terminated by
the Company or any Investor, by written notice to the other parties, if the
Closing has not been consummated by the third Business Day following the date
of this Agreement; provided that no such termination will affect the right of
any party to sue for any breach by the other party (or parties).


 


18

















 


6.2           Fees and Expenses. At the Closing, the Company
shall pay to the Investors an aggregate of $100,000 for the Investor Counsel
legal fees and expenses incurred or to be incurred in connection with its due
diligence and the preparation and negotiation of the Transaction Documents and
the registration of the Securities under the Registration Rights Agreement. In
lieu of the foregoing payment, the Investor may retain such amount at the
Closing or require the Company to pay such amount directly to Investor Counsel.
Except as expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the initial
sale and issuance of their applicable Securities to the Investors, including
the exercise of the Warrant and conversion of the Convertible Notes.


 


6.3           Entire Agreement. The Transaction Documents,
together with the Exhibits and Schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules. At or after the Closing, and without
further consideration, the Company and the Investors will execute and deliver
such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction
Documents.


 


6.4           Notices. Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of
(a) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section prior to 6:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that is
not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the Trading Day following the date of deposit with a nationally
recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The addresses and facsimile
numbers for such notices and communications are those set forth on the
signature pages hereof, or such other address or facsimile number as may be
designated in writing hereafter, in the same manner, by any such Person.


 


6.5           Amendments; 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), with the written consent of the Company and the Investors
holding a majority of, as such waiver or amendment shall so effect, (i) the
then outstanding Common Shares, (ii) the principal amount of the Convertible
Notes, or (iii) the principal amount of the Senior Secured Notes. Subject to
the preceding sentence, any amendment or waiver effected in accordance with
this Section shall be binding upon all parties to this Agreement, including,
without limitation, any Investors who may not have executed such amendment or
waiver.


 


6.6           Construction. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof. The language 


 


19

















 


used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.


 


6.7           Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investors. Any
Investor may assign its rights under this Agreement to any Person to whom such
Investor assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the “Investors.”


 


6.8           Governing Law; Venue; Waiver of Jury Trial. THE
CORPORATE LAWS OF THE STATE OF NEW YORK SHALL GOVERN ALL ISSUES CONCERNING THE
RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT
BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.


 


6.9           Survival. The representations and warranties,
agreements and covenants contained herein shall survive the Closing.


 


6.10         Execution. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the 


 


20

















 


party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile signature page were an original thereof.


 


6.11         Severability. If any provision of this Agreement is
held to be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision that is a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.


 


6.12         Rescission and Withdrawal Right. Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Investor exercises a
right, election, demand or option owed to such Investor by the Company under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then, prior to the performance
by the Company of the Company’s related obligation, such Investor may rescind
or withdraw, in its sole discretion from time to time upon written notice to
the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.


 


6.13         Replacement of Securities. If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and the
execution by the holder thereof of a customary lost certificate affidavit of
that fact and an agreement to indemnify and hold harmless the Company for any
losses in connection therewith. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities.


 


6.14         Other Engagements and Activities. The investment in
the Company made by Goldman, Sachs & Co. (“Goldman Sachs” and, together with any other affiliate of
Goldman Sachs, the “GS Entities”
or the “GS Entity”) pursuant to
this Agreement, and any subsequent investments in the Company by any GS Entity
after the date hereof, is made notwithstanding any engagement, prior to or
subsequent to the date hereof, by the Company, of any GS Entity as financial
advisor, agent or underwriter to the Company. Notwithstanding anything in the
Transaction Documents to the contrary, no GS Entity shall be restricted in any
way from engaging in any brokerage, investment advisory, financial advisory,
financing, asset management, trading, market making, arbitrage and other
similar activities conducted in the ordinary course of Goldman Sachs’ business.
Further, neither the Company nor any Subsidiary shall have any right, by virtue
of any of the Transaction Documents to, in or to such other ventures or
activities of any GS Entity, or to the income or proceeds derived therefrom,
and the pursuit of such ventures, even if competitive with the business of the
Company, shall not be deemed wrongful or improper. Any GS Entity shall have the
right to take for its own account or to recommend to others, any investment
opportunity including investment opportunities that may be competitive with or
involve the same line of business as that conducted or proposed to be conducted
from time to time by the Company.


 


21

















 


6.15         No Promotion. Except as otherwise required by law and
as provided in Section 4.5 herein, the Company agrees that it will not,
without the prior written consent of Goldman Sachs in each instance, (i) use in
advertising, publicity, or otherwise the name of any GS Entity, or any partner
or employee of any GS Entity, nor any trade name, trademark, trade device,
service mark, symbol or any abbreviation, contraction or simulation thereof
owned by any GS Entity or (ii) represent, directly or indirectly, that any
product or any service provided by the Company has been approved or endorsed by
any GS Entity. This provision shall survive termination of the Transaction
Documents.


 


[SIGNATURE PAGES TO FOLLOW]


 


22

















 


IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.


 


	
   

  	
  VYYO INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /a/ Davidi Gilo

  
	
   

  	
  Name: Davidi Gilo

  
	
   

  	
  Title: Chief Executive Officer and Chairman
  of 

  the Board

  



 

















 


Investor Signature Page


 


By its execution and delivery of this signature page, the undersigned
Investor hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of March 17, 2006 (the “Purchase
Agreement”) by and among Vyyo Inc. and the Investors (as defined therein), as
to the number of shares of Common Stock, Convertible Notes, Senior Secured
Notes and Warrants set forth below, and authorizes this signature page to be
attached to the Purchase Agreement or counterparts thereof.


 


	
   

  	
  GOLDMAN, SACHS
  & CO.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kenneth Eberts

  
	
   

  	
   

  	
  Name: Kenneth Eberts

  
	
   

  	
   

  	
  Title: 
  Managing Director

  



 

















 


Exhibits:


 


A             Schedule of
Investors


 


B             Form of Convertible
Note


 


C             Form of Senior
Secured Note


 


D             Form of Warrant


 


E              Form of
Registration Rights Agreement


 


F              Form of Guaranty
and Security Agreement


 


G             Form of Opinion of
Company Corporate Counsel (US)


 


H             Form of Company
Counsel (Israel)


 


I               Schedule of
Exceptions


 

















 


Exhibit A


 


Schedule of Investors


 


	
  Investor

  	
   

  	
  Common Shares

  	
   

  	
  Convertible Notes

  	
   

  	
  Senior Secured

  Notes

  	
   

  	
  Warrants

  	
   

  	
  Purchase Price

  	
   

  
	
  Goldman,
  Sachs & Co.

  	
   

  	
  1,353,365

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  $

  	
  7,500,000

  	
   

  	
  298,617

  	
   

  	
  $

  	
  25,000,000