EX-10.1



 





Exhibit 10.1




EXECUTION COPY




SHARE PURCHASE AGREEMENT




between




Voltaire Ltd.




and




BCF II Belgium Holding SPRL




and




Other Investors




Dated: 7 March 2004




	 	 	 
	DANZIGER, KLAGSBALD, ROSEN & CO. 

Gibor Sport Building 

28 Bezalel St. 

Ramat Gan 52521

Israel 

Tel: 972-3 6110700

Fax: 972-3 6110707
	 	HERZOG, FOX & NEEMAN

Asia House

4 Weizmann St.

Tel Aviv 64239

Israel

Tel: 972-3 6922020

Fax: 972-3 6966464












 



 


EXECUTION COPY




SHARE PURCHASE AGREEMENT



This Share Purchase Agreement is entered into as of the 7th day of March 2004, by and between:





	1.	 	Voltaire Ltd., a company organised under the laws of the State of Israel (Company No.
51-247196-2) (the “Company”); and
	 
	2.	 	BCF II Belgium Holding SPRL, a company organised under the laws of Belgium.
	 
	3.	 	Those persons and entities listed in Schedule 1 hereto (the “Other Investors”);




(Each of Belco and the Other Investors being referred to hereafter as an “Investor” and
collectively as the “Investors”)



WHEREAS The Investors wish to acquire shares in the Company, and the Company wishes to issue and
sell to the Investors shares in the Company on the terms as set forth herein.



NOW THEREFORE, the parties agree as follows:




1. DEFINITIONS




     1.1 The following terms shall have the following meanings:



	 	 	 	 	 
	 

	 	“Affiliate”
	 	with respect to any Person:







	 	(i)	 	any other Person of which securities
or other ownership interests representing
more than fifty percent (50%) of the
voting interests are, at the time such
determination is being made, owned,
Controlled or held, directly or
indirectly, by such Person; or
	 
	 	(ii)	 	any other Person which, at the time
such determination is being made, is
Controlling, Controlled by or under
common Control with, such Person.





	 	 	 	 	 
	 

	 	 	 	As used herein, “Control”, whether used
as a noun or verb, refers to the
possession, directly or indirectly, of
the power to direct, or cause the
direction of, the management or policies
of a Person, whether through the
ownership of voting securities or
otherwise.






	 	 	 	 	 
	 

	 	“Amended and Restated Articles
of Association”
	 	As defined in Section 2.2.1(b)(iii).
	 

	 	“Belco”
	 	shall mean BCF II Belgium Holding SPRL or
any Permitted Transferee (as such term is
defined in the












 



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	 	 	 	Articles) of Belco
following the transfer of Belco’s
holdings in the Company to such Permitted
Transferee.
	 

	 	“Board of Directors”
	 	The board of directors of the Company.
	 

	 	“Closing”
	 	As defined in Section 2.2.1.
	 

	 	“Closing Date”
	 	As defined in Section 2.2.1.
	 

	 	“Code”
	 	The United States Internal Revenue Code
of 1986, as amended.
	 

	 	“Disclosure Material”
	 	As defined in Section 3.5.
	 

	 	“Fully Diluted Basis”
	 	As defined in Section 2.1.
	 

	 	“Intellectual Property”
	 	All forms of intellectual property rights
recognised under any applicable laws,
including without limitation, the
following:







	 	(i)	 	Patents, whether in the form of
utility patents or design patents and all
continuations, continuations in part,
renewals and pending applications for the
foregoing (“Patents”);
	 
	 	(ii)	 	Trademarks, trade names, service
marks, designs, logos, trade dress, and
trade styles, whether or not registered,
and all pending applications for
registration of the same (“Trademarks”);
	 
	 	(iii)	 	Copyrights, whether or not
registered, and all pending applications
for registration of the same;
	 
	 	(iv)	 	Inventions, research records, trade
secrets, confidential information,
product designs, know-how, engineering
specifications and drawings, technical
information, formulae, customer lists,
supplier lists and market analyses;
	 
	 	(v)	 	Computer programs, including, without
limitation, computer programs embodied in
semiconductor chips or otherwise
embodied, and related flow-charts,
programmer notes, updates and data,
whether in object or source code form;
and
	 
	 	(vi)	 	Semiconductor chip designs, whether
or not











 



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	 	 	 	registered mask works or
topographies.





	 	 	 	 	 
	 

	 	“Key Employees”
	 	The employees of the Company included in
Schedule 3.15(a), attached hereto and
marked as “Key Employees”.
	 

	 	“Ordinary Shares”
	 	Ordinary Shares of the Company of nominal
value of NIS 4.00 each.
	 

	 	“Organisational Documents”
	 	In respect of any entity, the memorandum
of association, articles of association,
certificate of incorporation, by-laws,
certificate(s) of designation or other
constitutional documents of any type.
	 

	 	“Person”
	 	An individual, corporation, trust,
partnership, limited liability company,
joint venture, unincorporated
organization, government body or any
agency or political subdivision thereof,
or any other entity.
	 

	 	“Pitango”
	 	Shall mean Pitango Venture Capital Fund
III (Israeli Sub) LP, Pitango Venture
Capital Fund III (Israeli Sub) Non-Q LP,
Pitango Venture Capital Fund III (Israeli
Investors) LP, Pitango Venture Capital
Fund III Trusts 2000 Ltd., Pitango Fund
II Opportunity Annex Fund L.P., Pitango
Fund II Opportunity Annex Fund (ICA),
L.P. and Pitango Principals Fund III
(Israel) LP (each, a “Pitango Fund”) and
any Permitted Transferee of any Pitango
Fund following the transfer of such
Pitango Fund’s holdings in the Company to
such Permitted Transferee.
	 

	 	“Principal Investor”
	 	Each of Belco, Pitango and Vertex.
	 

	 	“Purchase Price”
	 	As defined in Section 2.1.
	 

	 	“Series E Preferred Shares”
	 	Preferred E Shares of the Company, of
nominal value NIS 4.00 each.
	 

	 	“Securities Act”
	 	The United States Securities Act of 1933,
as amended.
	 

	 	“Security Interest”
	 	Any interest or equity of any person
(including any right to acquire, option,
or right of pre-emption) or any mortgage,
charge, pledge, lien, or assignment, or
any other encumbrance or security
interest or arrangement of whatsoever
nature over or in the relevant property.
	 

	 	“Senior Executives”
	 	The employees of the Company listed in
Schedule 3, attached hereto.












 



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	 	“Subsidiary”
	 	Voltaire Inc.
	 

	 	“Transaction Documents”
	 	This Agreement and the documents listed
in Schedule 1.1.







	 	1.2	 	Words and defined terms denoting the singular number include the plural and vice
versa and the use of any gender shall be applicable to all genders.
	 
	 	1.3	 	The paragraph headings are for the sake of convenience only and shall not affect
the interpretation of this Agreement.
	 
	 	1.4	 	The recitals, schedules, appendices, annexes and exhibits hereto form an integral
part of this Agreement.






	2.	 	PURCHASE AND SALE OF THE SHARES






	 	2.1	 	Agreement to Purchase and Sell
	 
	 	 	 	Subject to and in accordance with the terms and conditions of this Agreement, the
Company shall issue to the Investors, and the Investors shall purchase from the Company
a total of 15,000,000 Series E Preferred Shares, constituting 37.16% of the issued and
outstanding shares of the Company on a fully diluted basis (including but not limited to
all warrants, options, convertible securities and convertible debt) as of the date of
Closing, as represented in the Capitalisation Table set out in Schedule 3.4(a), (“Fully
Diluted Basis”) at a price per share of $1.00 and for an aggregate purchase price of
$15,000,000 (the “Purchase Price”).
	 
	 	 	 	At the Closing (as defined below), each Investor shall pay that part of the Purchase
Price set out next to such Investor’s name in Schedule 2.1 attached hereto and shall be
entitled to receive such number of Series E Preferred Shares as are set out next to such
Investor’s name in Schedule 2.1.






	 	2.2	 	Closing






	 	2.2.1	 	The closing of the purchase and sale of the Series E Preferred Shares
as detailed in Section 2.1 above, (the “Closing”) shall take place at the offices
of Danziger, Klagsbald, Rosen & Co., 28 Bezalel St, Ramat Gan, Israel on the date
hereof (the time and date of the Closing being herein referred to as the “Closing
Date”).
	 
	 	 	 	At the Closing, the following actions and occurrences will take place, all of
which shall be deemed to have occurred simultaneously and no action shall be
deemed to have been completed and no document or certificate shall be deemed to
have been delivered, until all actions are completed and all documents and
certificates delivered:






	 	(a)	 	The Company will allot and deliver to each Investor a
certificate representing that number of Series E Preferred Shares, appearing
next to its name in Schedule 2.1 against payment by each Investor by wire
transfer of the portion of the Purchase Price appearing next to that
Investor’s name in Schedule 2.1 in immediately available funds to the account
of the Company










 



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	 	 	 	at Bank Hapoalim, New York Branch, Account No. 01062991-01. Such payment
shall be in U.S. dollars.
	 
	 	(b)	 	The Company shall deliver to the Investors:






	 	(i)	 	the opinion, addressed to the Investors, of
Danziger, Klagsbald, Rosen & Co. counsel to the Company, dated as of
the Closing Date, substantially in the form attached hereto as Schedule
2.2.1(b)(i);
	 
	 	(ii)	 	a copy of the resolution of the Board of
Directors and the Company’s shareholders meeting, if necessary, in the
forms attached here to as Schedule 2.2.1(b)(ii) approving and
authorising the issuance of the Series E Preferred Shares, and
approving this Agreement (and all documents relating hereto) and
approving the reservation of 1,500,000 Ordinary Shares for conversion
of the Series E Preferred Shares, in a form reasonably acceptable to
Belco;
	 
	 	(iii)	 	copies of the amended and restated Articles of
Association of the Company (the “Amended and Restated Articles of
Association”), as duly adopted and in effect as of the Closing, in the
form attached hereto as Schedule 2.2.1(b)(iii) and accompanied by
certified resolutions (to the extent required by law) of shareholders
of the Company adopting the Amended and Restated Articles of
Association;
	 
	 	(iv)	 	consents by all holders of outstanding warrants
to purchase Series D1 Preferred Shares of the Company to the
cancellation of such warrants, effective upon Closing; and
	 
	 	(v)	 	a letter from the Company’s independent
auditors in the form attached hereto as Schedule 2.2(b)(v).






	 	(c)	 	The Company, the Investors and shareholders of the Company
in sufficient majorities as required to amend the Company’s Revised
Shareholders Rights Agreement, dated July 24, 2002, shall sign the Amended
and Restated Shareholders’ Rights Agreement in the form attached hereto as
Schedule 2.2.1(c) (the “Shareholders’ Rights Agreement”).
	 
	 	(d)	 	The Company shall record the issuance of the Series E
Preferred Shares to the Investors in the name of the Investors, as set out in
Schedule 2.1 on the shareholders’ register of the Company and other records
and, promptly after the Closing, the Company shall make all filings and
registrations as may be necessary to perfect such issuance and sale and shall
deliver copies thereof to the Investors.
	 
	 	(e)	 	Copies of confirmations signed by each Key Employee to the
Company to the effect that:






	 	(i)	 	he or she is not subject to any non-compete or
confidentiality agreements or any other contractual restriction that
would restrict or impair their ability to manage or implement the
business of the Company as currently conducted or proposed to be
conducted; and










 



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	 	(ii)	 	he or she will not abuse any confidentiality or
similar obligation owed to a current or previous employer or any other
person.






	 	(f)	 	The Company shall deliver to Pitango a management’s rights
letter in the form attached hereto as Schedule 2.2.1(f).
	 
	 	(g)	 	The parties hereto shall execute and deliver this
Agreement.






	3.	 	REPRESENTATIONS AND WARRANTIES
	 
	 	 	It is hereby clarified that for the purposes of this Section 3, any reference to “knowledge”
includes such information as is actually known by the Company, the Subsidiary or any Senior
Executive or any information which a Senior Executive would be expected to be aware of if the
Company, the Subsidiary or Senior Executive had made prudent enquiries into the relevant
actions and circumstances of the Company and the Subsidiary.
	 
	 	 	The Company represents and warrants to the Investors as follows:






	 	3.1	 	Constitution and Compliance 






	 	(a)	 	The Company is duly incorporated and validly existing under the laws of
the State of Israel, with power and authority to carry on its business as now being
conducted and as proposed to be conducted. The Company has at all times carried on
its business and affairs in all respects in accordance with its Organisational
Documents and all applicable laws and regulations, and there is no violation or
default with respect to any statute, regulation, order, decree, or judgement of any
court or any governmental entity which could have a material adverse effect upon
the assets or business of the Company. The Company is duly qualified to do
business and in good standing in each jurisdiction in which the Company currently
conducts business.
	 
	 	(b)	 	The Company has delivered to the Investors true and accurate copies of
the Organisational Documents of the Company and the Subsidiary as of the date of
this Agreement.
	 
	 	(c)	 	The Company and the Subsidiary maintain all corporate, shareholder or
other records and registries required by law. True and complete copies of all such
documents have been delivered to the Investors.
	 
	 	(d)	 	The Company does not presently own or control, directly or indirectly,
any interest in any corporation, association or other business entity other than
the Subsidiary which is a wholly-owned subsidiary of the Company. The Company is
not, directly or indirectly a participant in any joint venture, partnership or
similar arrangement. The Subsidiary is duly incorporated, validly existing and in
good standing under the State of Maryland and has all requisite corporate power and
authority and it has obtained all necessary licences, authorisations and approvals
to carry on its business as now conducted in each jurisdiction in which failure so
to qualify would have a material adverse effect on its business or properties.
There are no other share capital, pre-emptive rights, convertible securities,
outstanding warrants, options or other rights to subscribe for, purchase and or
acquire from the Subsidiary. The Subsidiary is not in default under any material










 



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	 	 	 	licence, authorisation or approval mentioned in this Section 3, where applicable.
The Subsidiary is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure so to qualify would have a material adverse
on its business or properties.






	 	3.2	 	Authority to Transact






	 	(a)	 	The Company has all requisite corporate power and authority to execute
and deliver this Agreement and the Transaction Documents and to sell and issue the
Series E Preferred Shares hereunder and to carry out and perform its obligations
under this Agreement and the Transaction Documents and to consummate the
transactions contemplated hereby and thereby.
	 
	 	(b)	 	All corporate action on the part of the Company, its directors, and its
shareholders necessary for the authorisation and execution of this Agreement and
the Transaction Documents by the Company, the authorisation, sale, issuance, and
delivery of the Series E Preferred Shares and the performance of all of the
Company’s obligations under the Agreement and the Transaction Documents has been
taken. This Agreement constitutes and, when signed and where applicable, filed by
its duly authorised representatives, the Transaction Documents will constitute,
valid and legally binding obligations of the Company, enforceable in accordance
with their terms.






	 	3.3	 	Execution of Agreement






	 	(a)	 	The execution and delivery of this Agreement by the Company does not,
and the execution and delivery of the Transaction Documents and the consummation of
the transactions contemplated hereby and thereby will not, violate any provisions
of the Company’s Organisational Documents or any contract, agreement, indenture,
mortgage, instrument, lease, license, arrangement, or undertaking of any nature,
written or oral, of the Company or any Subsidiary.
	 
	 	(b)	 	Other than as set forth on Schedule 3.14, the execution and delivery of
this Agreement by the Company does not, and the execution and delivery of the
Transaction Documents and the consummation of the transactions contemplated hereby
and thereby will not, require the consent or agreement of any governmental body,
entity or any other third party.
	 
	 	(c)	 	The execution, delivery and performance of and compliance with this
Agreement and the Transaction Documents by the Company and the issuance of the
Series E Preferred Shares to the Investors will not result in any violation of, or
conflict with or constitute a default under any term of, or result in the creation
or enforcement of any Security Interest upon any of the properties or assets of the
Company.
	 
	 	(d)	 	The execution, delivery and performance of and compliance with this
Agreement and the Transaction Documents by the Company will not cause the Company
to lose any interest in or the benefit of any asset, right, license or privilege,
it presently owns or enjoys or result in the termination of any relationship with
anyone who normally does business with the Company on the same basis as previously
conducted, and will not result in any present or future indebtedness of the Company
becoming due prior to its stated maturity. Compliance with the










 



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	 	 	 	terms of this Agreement or the Transaction Documents will not give rise to or
cause any option or right of pre-emption to become exercisable, except as set
forth in the Organisational Documents.






	 	3.4	 	Capitalisation






	 	(a)	 	The authorised and issued share capital of the Company as of
immediately prior to and after the Closing is as stated in Schedule 3.4(a).
	 
	 	(b)	 	Other than as listed in Schedule 3.4(a), there are no outstanding or
authorised subscriptions, options, warrants, rights, commitments, or any other
agreements of any character directly or indirectly obligating the Company or the
Subsidiary to issue (i) any additional shares or other securities or (ii) any
securities or debt convertible into, or exchangeable for, or evidencing the right
to subscribe for, any shares other securities.
	 
	 	(c)	 	Neither the Company nor the Subsidiary has adopted or authorised any
plan for the benefit of its officers, employees, consultants or directors which
requires or permits the issuance, sale, purchase, or grant of any shares of the
Company’s or the Subsidiary’s share capital or other securities or any securities
convertible into, or exercisable or exchangeable for, or evidencing the right to
subscribe for any such shares or securities, other than as set forth in Schedule
3.4(a).
	 
	 	(d)	 	The Series E Preferred Shares to be issued to the Investors in
accordance herewith, will, when issued and paid for, be duly authorised, validly
issued, fully paid and non-assessable, and will have the rights, preferences,
privileges, and restrictions as set forth in the Amended and Restated Articles of
Association, Shareholders’ Rights Agreement and this Agreement and will be free and
clear of all Security Interests, proxies, voting trusts and other voting
agreements, calls or commitments of any kind, other than as explicitly contemplated
by the Amended and Restated Articles of Association and this Agreement, and will be
duly registered in the name of the Investors in the Company’s shareholders’
register. The Series E Preferred Shares, when issued, will have been issued in
compliance with all laws, rules and regulations, including applicable securities
laws.
	 
	 	(e)	 	All other securities of the Company and the Subsidiary have been issued
in compliance with all laws, rules and regulations, including applicable securities
laws. Other than as contemplated by this Agreement and the Transaction Documents,
the Company is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its shares or any warrants,
options or other rights to acquire its shares.






	 	3.5	 	Disclosure Material and Information






	 	(a)	 	The opinions and assumptions contained in the disclosure material
attached hereto as Schedule 3.5 (the “Disclosure Material”) are reasonable and have
been prepared in good faith, and the financial projections set out in the
Disclosure Material have been prepared with due diligence, care and consideration,
and there are no facts or matters of which the Company is aware which would render
any such opinions, assumptions or projections misleading provided, however, that no
assurance can be or is given that the assumptions are correct or any of the
forecast projections, expectations or transactions contemplated therein will be
attained.










 



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	 	(b)	 	All facts and information with regard to the Company and the Subsidiary
since their incorporation which would reasonably have been considered as material
for disclosure to an intending investor in the shares of the Company have been
disclosed to the Investors.






	 	3.6	 	Financial Statements






	 	(a)	 	The Company has delivered to the Investors the final draft of the
financial statements of the Company for the year ended and as of 31st
December, 2003, in the form as has been audited by the Company’s independent
auditors (the “Financial Statements”), all prepared in accordance with generally
accepted accounting principles accepted in the United States (“GAAP”), consistently
applied, and in English and stated in US dollars.
	 
	 	(b)	 	The Financial Statements are in accordance with the books and records
of Company; are accurate in all respects; present in a true, complete and fair
view, the financial position, assets and liabilities of the Company as of the dates
indicated and the results of its operations for such periods; and have been
prepared in accordance with generally accepted accounting principles in the United
States consistently applied.
	 
	 	(c)	 	Except as set forth in Schedule 3.6(c), there are no off-balance sheet
liabilities, claims, or obligations of any nature, whether accrued, absolute,
contingent, anticipated, or otherwise, whether due or to become due, that are not
shown or provided for in the Financial Statements. The liabilities of the Company
were included in the ordinary course of the Company’s business.
	 
	 	(d)	 	Except as set forth in Schedule 3.6(d), all of the accounts receivable
shown on the balance sheets included in the Financial Statements have been
collected or are good and collectible in the aggregate recorded amounts thereof
(less the allowance for doubtful accounts also appearing in the Financial
Statements and net of returns and payment discounts allowable by the Company’s
policies) and can reasonably be anticipated to be paid in full without outside
collection efforts within ninety (90) days of the due date, and are not subject to
counterclaims or setoffs in excess of recorded reserves.
	 
	 	(e)	 	The Company knows of no basis for the assertion against the Company of
any liabilities not adequately reflected or reserved against in the Financial
Statements.






	 	3.7	 	Business to Date






	 	(a)	 	Since the date of the Financial Statements, except as provided in
Schedule 3.7(a) attached hereto and except if presented in any of the provisions of
Section 3 of this Agreement:






	 	(i)	 	neither the Company nor the Subsidiary has amended any of
its Organisational Documents;
	 
	 	(ii)	 	neither the Company nor the Subsidiary has entered into any
transaction in excess of $25,000 per transaction or greater than $100,000 in
the aggregate for a series of related transactions, as to both;










 



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	 	(iii)	 	there has been no material adverse change in the business,
prospects (in so far as they may reasonably be foreseen), operations, assets,
liabilities, or condition (financial or otherwise) of the Company or the
Subsidiary;
	 
	 	(iv)	 	neither the Company nor the Subsidiary has made any payment
of, or declaration, setting a record date, setting aside or authorizing the
payment of, any dividend or other distribution in respect of any shares of
capital stock of the Company or the Subsidiary or made any purchase,
repurchase, redemption, retirement or other acquisition by the Company or the
Subsidiary, of any of the outstanding shares of capital stock or other
securities of, or other ownership interest in, the Company or the Subsidiary;
	 
	 	(v)	 	there has not been any transfer, issue, sale or other
disposition by the Company or the Subsidiary of any shares of capital stock
or other securities of the Company or the Subsidiary or any grant of options,
warrants, calls or other rights to purchase or otherwise acquire shares of
such capital stock or such other securities;
	 
	 	(vi)	 	neither the Company nor the Subsidiary has increased or
entered into an agreement to increase the compensation payable or to become
payable, or awarded or paid any bonuses to employees, consultants,
independent contractors, officers, directors, shareholders or representatives
of the Company or the Subsidiary or agreed to increase the coverage or
benefits available under any severance pay, deferred compensation, bonus or
other incentive compensation, pension or other employee benefit plan, payment
or arrangement made to, for or with such employees, consultants, independent
contractors, officers, directors, shareholders or representatives, other than
in the ordinary course of business consistent with past practice and with the
Company’s or the Subsidiary’s operating expense budget;
	 
	 	(vii)	 	there has not been satisfaction or discharge of any lien,
claim or encumbrance or payment of any obligation by the Company or the
Subsidiary, except in the ordinary course of business and that is not
material to the business, operations, properties, assets, liabilities,
financial condition or results of operations of the Company or the Subsidiary
(as such business is presently conducted and as it is presently proposed to
be conducted);
	 
	 	(viii)	 	there has not been any termination or change to a material contract or
arrangement by which the Company or the Subsidiary or any of its assets is
bound or subject;
	 
	 	(ix)	 	there has not been any resignation or termination of
employment of any Senior Employee, consultant or independent contractor of
the Company or the Subsidiary;
	 
	 	(x)	 	there has not been any damage, destruction or loss, whether
or not covered by insurance, with respect to the property or assets of the
Company or the










 



11


	 	 	 	Subsidiary having a replacement cost of more than $10,000 for any single
loss or $50,000 for all such losses in the aggregate;
	 
	 	(xi)	 	neither the Company nor the Subsidiary have mortgaged,
pledged or subjected to any lien any of its assets, or acquired any assets or
sold, assigned, transferred, conveyed, leased or otherwise disposed of any
assets of the Company or the Subsidiary, except for assets acquired or sold,
assigned, transferred, conveyed, leased or otherwise disposed of in the
ordinary course of business consistent with past practice;
	 
	 	(xii)	 	neither the Company nor the Subsidiary have cancelled or
compromised any debt or claim or amended, cancelled, terminated,
relinquished, waived or released any contract or right except in the ordinary
course of business consistent with past practice and which, individually or
in the aggregate, would not be material to the Company or the Subsidiary;
	 
	 	(xiii)	 	neither the Company nor the Subsidiary has entered into any material
transaction except for this Agreement and the Transaction Documents;
	 
	 	(xiv)	 	neither the Company nor the Subsidiary have encountered
any labour disputes, strikes, slowdowns, work stoppages or labour union
organizing activities;
	 
	 	(xv)	 	neither the Company nor the Subsidiary have made any change
in the accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted;
	 
	 	(xvi)	 	neither the Company nor the Subsidiary have disclosed to
any person any material trade secrets except for disclosures made to persons
subject to valid and enforceable confidentiality agreements;
	 
	 	(xvii)	 	neither the Company nor the Subsidiary have suffered or experienced any
change in the relationship or course of dealings between the Company or the
Subsidiary and any of their suppliers or customers which supply goods or
services to the Company or the Subsidiary or purchase goods or services from
the Company or the Subsidiary, which has resulted in, or could reasonably be
expected to result in, a material adverse change;
	 
	 	(xviii)	 	neither the Company nor the Subsidiary have made any loans, advances or
capital contributions or payment to, or received any payment from, or made or
received any investment in, or entered into any transaction or series of
related transactions (including without limitation, the purchase, sale,
exchange or lease of assets, property or services, or the making of a loan or
guarantee) with any Affiliate or paid any fees or expenses to any Affiliate
of the Company;
	 
	 	(xix)	 	neither the Company nor the Subsidiary have entered into
any agreement or commitment (contingent or otherwise) to do any of the
foregoing;
	 
	 	(xx)	 	there has been no sale, assignment, or transfer of any
tangible asset of the Company or the Subsidiary except in the ordinary course
of business and










 



12


	 	 	 	no sale, assignment, or transfer of any patent, trademark, trade secret,
or other intangible asset of the Company or the Subsidiary; and
	 
	 	(xxi)	 	neither the Company nor the Subsidiary have taken any
actions to reduce the scale of operations, work-force or scope of business as
a result of shortages of funds.






	 	(b)	 	Neither the Company nor the Subsidiary have any debts or liabilities of
any nature whatsoever, fixed or variable or contingent, except as shown on Schedule
3.7(b) (except for up to $50,000 in the aggregate as to both the Company and any
Subsidiary).
	 
	 	(c)	 	Except as set forth in Schedule 3.7(c), there are no outstanding debts
owed to the Company or the Subsidiary.
	 
	 	(d)	 	Except as set forth in Schedule 3.7(d), there are no bad or doubtful
debts on the Company’s or the Subsidiary’s books at the date hereof.
	 
	 	(e)	 	Full and accurate details of all bank accounts, overdrafts, loans,
guarantees or other financial facilities outstanding or available to the Company or
the Subsidiary are contained in Schedule 3.7(e).






	 	3.8	 	Properties






	 	(a)	 	Full and accurate details of the Company’s and the Subsidiary’s
tangible properties and assets are contained in Schedule 3.8(a) to this Agreement.
The Company and the Subsidiary each has good title to, or valid leasehold interest
in, all properties and assets used in its business or owned by it, free and clear
of all Security Interests, other then as contained in Schedule 3.8(a).
	 
	 	(b)	 	Other than the shares of the Subsidiary being owned by the Company,
neither the Company nor the Subsidiary is the holder or the beneficial owner of any
share, debenture, mortgage, or security (or interest therein) in any other company
or corporation, or a member of any partnership or unincorporated association or
limited liability company.
	 
	 	(c)	 	No condemnation, environmental, zoning or other land use regulation
proceedings have been instituted or, to the best of the Company’s knowledge, are
planned to be instituted, which would materially adversely affect the use or
operation of the Company’s or the Subsidiary’s properties and assets for their
respective intended uses and purposes, or the value of such properties and assets,
and the Company has not received notice of any special assessment proceedings which
would affect such properties and assets.
	 
	 	(d)	 	All items of personal property and assets owned or leased by the
Company and the Subsidiary are in good operating condition, normal wear and tear
excepted, are reasonably fit and useable for the purposes for which they are being
used, are adequate and sufficient for the Company’s business, and conform in all
material respects with all applicable laws. The carrying value of the Company’s
assets on the Financial Statements is not overstated in accordance with generally
accepted accounting principles and practices in the U.S.A, in any material respect.










 



13








	 	3.9	 	Assumptions, Guaranties
	 
	 	 	 	The Company and the Subsidiary have not assumed, guaranteed, endorsed or otherwise
become directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or otherwise,
to purchase, to provide funds for payment, to supply funds to or otherwise invest in the
debtor, or otherwise to assure the creditor against loss), except for guaranties by
endorsement of negotiable instruments for deposit or collection in the ordinary course
of business.






	 	3.10	 	Taxation






	 	(a)	 	All reports, returns or other information required to be filed by or on
behalf of the Company or the Subsidiary regarding taxes of any sort (including,
without limitation, taxes concerning income, capital gains, sales, value added,
franchise, withholding, payroll, employment, social security, severance, stamp,
property) (“Taxes”), have been filed on a timely basis with the appropriate
governmental authorities in all requisite jurisdictions and all such returns,
reports or other information were true, correct and complete in all respects;
	 
	 	(b)	 	All Taxes due and payable have been fully and timely paid;
	 
	 	(c)	 	There are no circumstances which will, whether by lapse of time or the
issue of any notice of assessment or otherwise, give rise to any dispute with any
relevant taxation authority in relation to the Company’s or the Subsidiary’s
liability or accountability for taxation under currently enacted statutes and
regulations;
	 
	 	(d)	 	The provision for taxes of the Company as shown in the Financial
Statements is adequate for taxes due or accrued as of the respective dates thereof.
	 
	 	(e)	 	The Company and the Subsidiary have not had any tax deficiency proposed
or assessed against them and have not executed any waiver of any statute of
limitations on the assessment or collection of any tax or governmental charge.
Other than as set forth on Schedule 3.10(e), the Company and the Subsidiary have
never been audited by governmental authorities. Since the date of the Financial
Statements, the Company and the Subsidiary have not incurred any taxes, assessments
or governmental charges, other than in the ordinary course of business and the
Company and the Subsidiary have made adequate provisions for all taxes, assessments
and governmental charges with respect to their business, properties and operations
for such period.






	 	3.11	 	Capital Expenditure and Contracts






	 	(a)	 	Schedule 3.11(a) contains a true and complete list of all contracts,
agreements, instruments, leases, licenses, arrangements, or undertakings of any
nature, written or oral, of the Company and the Subsidiary which are material to
Company or the Subsidiary, including (if so deemed material) but not limited to the
following:






	 	(i)	 	any hire, hire purchase, credit sale or conditional sale
agreement or any contract providing for payment on deferred terms in respect
of assets purchased by the Company or the Subsidiary;










 



14


	 	(ii)	 	any Security Interest on or over any asset of the Company
or the Subsidiary (including the issued or unissued share capital of the
Company or the Subsidiary), and any agreement or commitment to give or create
any such Security Interest;
	 
	 	(iii)	 	any guarantee, indemnity, security or other agreement
pursuant to which the Company or the Subsidiary agrees to become directly or
contingently liable for any obligation of any other person;
	 
	 	(iv)	 	any guarantee, indemnity, security or other agreement
pursuant to which any third party agrees to become directly or contingently
liable for any obligation of the Company or the Subsidiary;
	 
	 	(v)	 	any agreement, instrument or other arrangement creating any
indebtedness of the Company or the Subsidiary or Security Interest regarding
the assets of the Company or Subsidiary;
	 
	 	(vi)	 	any power of attorney given by the Company or the
Subsidiary with respect to any material asset or business of the Company or
the Subsidiary;
	 
	 	(vii)	 	any agreement, instrument or deed pursuant to which a
third party is entitled or authorised to bind or commit the Company or the
Subsidiary to any obligation;
	 
	 	(viii)	 	any application or award of any grant or allowance which is now liable or
may in the future become liable to be repaid or which imposes any other
financial obligations on the Company or the Subsidiary;
	 
	 	(ix)	 	any contract with any director, officer, employee (other
than contracts relating to the employment of such employee, disclosed in
Schedule 3.15(a)), shareholder of the Company or any subsidiary or any
Affiliate of any of the foregoing;
	 
	 	(x)	 	any agreement restricting the competitive freedom of the
Company or the Subsidiary to provide and take goods and services by such
means and from and to such persons as it may from time to time think fit
(including any exclusive licenses made by such entities or contracts with
other entities limiting rights);
	 
	 	(xi)	 	any distributor, dealer, manufacturer’s representative or
sales agency agreement which is not terminable on less than ninety (90) days’
notice without cost or other liability to the Company or the Subsidiary;
	 
	 	(xii)	 	any agreement with any supplier containing any provision
permitting any party other than the Company or the Subsidiary to renegotiate
the price or other terms, or containing any pay-back or other similar
provision, upon the occurrence of a failure by the Company or the Subsidiary
to meet its obligations under the agreement when due or the occurrence of any
other event;










 



15


	 	(xiii)	 	any agreement for the future purchase of fixed assets or for the future
purchase of materials, supplies, services or equipment in excess of its
normal operating requirements or at an excessive price;
	 
	 	(xiv)	 	any agreement for the employment of any officer, employee
or other person (whether of a legally binding nature or in the nature of
informal understandings) on a full-time, part-time or consulting basis which
is not terminable on notice without cost or other liability to the Company or
the Subsidiary;
	 
	 	(xv)	 	any bonus, pension, profit-sharing, retirement,
hospitalisation, insurance, stock purchase, stock option or other plan,
agreement or understanding pursuant to which benefits are provided to any
employee of the Company or the Subsidiary;
	 
	 	(xvi)	 	any voting trust or agreement, shareholders’ agreement,
pledge agreement, buy-sell agreement, first refusal or pre-emptive rights
agreement relating to any of the securities of the Company or the Subsidiary;
	 
	 	(xvii)	 	any acquisition, sale or lease agreement outside of the Company’s or the
Subsidiary’s ordinary course of business;
	 
	 	(xviii)	 	any partnership or joint venture agreement;
	 
	 	(xix)	 	any agreement (A) which prohibits or requires consent for
(1) a change in control or merger of the Company or the Subsidiary, (2) the
sale of all or substantially all of the Company’s or the Subsidiary’s assets,
(3) the transfer or issuance of any securities of the Company or the
Subsidiary, or (4) the assignment, subletting or other transfer of the rights
under such agreement, or (B) which terminates, is subject to termination, is
materially and adversely affected or is subject to being materially and
adversely affected as a result of the occurrence of any event described in
subsection (A) hereof;
	 
	 	(xx)	 	any agreement, or group of related agreements with the same
party or any group of affiliated parties, under which the Company or
Subsidiary has advanced or agreed to advance money or has agreed to lease any
property as lessee or lessor;
	 
	 	(xxi)	 	any agreement or obligation (contingent or otherwise) to
issue, sell, transfer, assign or otherwise distribute or dispose of,
repurchase, redeem or otherwise acquire, or retire any shares of the
securities of the Company or the Subsidiary ;
	 
	 	(xxii)	 	any assignment, license or other agreement with respect to any form of
intangible property;
	 
	 	(xxiii)	 	any agreement under which it has granted any person any registration
rights;










 



16


	 	(xxiv)	 	any agreement, or group of related agreements with the same party,
involving more than $100,000 or continuing over a period of more than six (6)
months from the date or dates thereof (including renewals or extensions
optional with another party), which agreement or group of agreements is not
terminable by the Company or the Subsidiary without penalty upon notice of
thirty (30) days or less, or any agreement not made in the ordinary course of
business;
	 
	 	(xxv)	 	any agreement with any municipal or governmental body,
department, commission, board, bureau, agency or instrumentality, domestic or
foreign; or
	 
	 	(xxvi)	 	any binding commitment or agreement to enter into any of the foregoing.






	 	 	 	(hereinafter referred to collectively as “Material Contracts”).
	 
	 	(b)	 	The Company has made available to the Investors true, correct, and
complete copies (or where oral, written descriptions) of all Material Contracts.
	 
	 	(c)	 	Except as set forth in Schedule 3.11(c), all Material Contracts are in
full force and effect. The Company and each Subsidiary (as appropriate) has
performed in all material respects all of its obligations under each Material
Contract, and, to the best of the Company’s knowledge, information and belief, all
third parties with whom the Company or the Subsidiary has transacted business have
performed in all material respects all of their obligations thereunder which were
due to have been performed. No party to a Material Contract has made a claim to
the effect that the Company or Subsidiary has failed to perform an obligation
thereunder and nor has any such party notified the Company or the Subsidiary of an
intention to terminate or not renew any such contracts.






	 	3.12	 	Material Customers and Suppliers
	 
	 	 	 	Except as set forth in Schedule 3.12, since 1st January 2004, no customer or
supplier which is material to the Company or the Subsidiary has terminated, materially
reduced or threatened to terminate or materially reduce its purchases from or provision
of products or services to the Company or the Subsidiary, as the case may be.






	 	3.13	 	Litigation; Compliance






	 	(a)	 	There are no civil, criminal, arbitration or administrative proceedings
involving the Company or the Subsidiary, including claims on which, to the best
knowledge of the Company, the Company or the Subsidiary may be vicariously liable.
No such proceedings and no claims of any nature are pending or threatened by, or,
to the best knowledge of the Company, against the Company, the Subsidiary, or the
directors of the Company or the Subsidiary (in their capacity as such) or any such
person or in respect whereof the Company or the Subsidiary is liable to indemnify
any party concerned and, to the best knowledge of the Company, there are no facts
likely to give rise to any such proceedings.
	 
	 	(b)	 	Neither the Company nor the Subsidiary is in default with respect to
any order, writ, judgment, injunction or decree known to or served upon the Company
or the Subsidiary of any court or governmental body, department, commission, board,










 



17


	 	 	 	bureau, agency or instrumentality, domestic or foreign. Except as set forth in
Schedule 3.13(b), there is no action or suit by the Company or the Subsidiary
pending, threatened or contemplated against others.
	 
	 	(c)	 	The Company and the Subsidiary have complied, in all material respects,
with all laws, rules, regulations and orders applicable to the Company or the
Subsidiary and its business, operations, properties, assets, products and services.
The Company and the Subsidiary each has all necessary permits, licenses,
registrations, franchises, approvals, exemptions and other authorisations required
to conduct its business as conducted and as proposed to be conducted and, each of
the Company and the Subsidiary has been operating its business pursuant to and in
compliance with the terms of all such permits, licenses, registrations, franchises,
approvals, exemptions and other authorisations. Such permits, licenses,
registrations, franchises, approvals, exemptions and other authorisations have been
validly issued, and the Company and the Subsidiary have complied in all material
respects with all conditions of permits, licenses, registrations, franchises,
approvals, exemptions and other authorisations applicable to them. No default or
violation, or event that with the lapse of time or giving of notice or both would
become a default or violation, has occurred in the due observance of any such
permits, licenses, registrations, franchises, approvals, exemptions and other
authorisations. All such permits, licenses, registrations, franchises, approvals,
exemptions and other authorisations are in full force and effect without further
consent or approval of any person. The Company and Subsidiary have not received
any notice from any source (i) to the effect that the Company or the Subsidiary
lack any such permits, licenses, registrations, franchises, approvals, exemptions
or other authorisations required in connection with the Company’s and the
Subsidiary’s current or proposed operations or otherwise asserting a violation of
law applicable to the conduct of its business, (ii) threatening to revoke any
permit, license, registration, franchise, approval, exemption, or other
authorisation or (iii) restricting or in any way limiting its operations as
currently conducted or proposed to be conducted, in each case which has not been
previously remedied or resolved.
	 
	 	(d)	 	There is no law, regulation or order, and the Company and Subsidiary
are not aware of any proposed law, rule, regulation or order, which would prohibit
or restrict the Company or the Subsidiary from, or otherwise materially adversly
affect the Company or Subsidiary in, conducting business in any jurisdiction in
which it is now conducting business or in which it proposes to conduct business.
Neither the Company nor Subsidiary have received any notices of violation or
alleged violation of any law, rule, regulation or order by any governmental body,
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
	 
	 	(e)	 	As set forth in Schedule 3.13(e), the Company has applied for and/or
received financings or grants through the Office of the Chief Scientist, Ministry
of Industry and Trade of the State of Israel and from the Fund for the
Encouragement of Overseas Marketing Activities. The Company is in compliance, in
all material respects, with the terms and conditions of such financings and grants
and has fully fulfilled in all in all material respects all of the undertakings
relating thereto.










 



18








	 	3.14	 	Approvals 
	 
	 	 	 	Subject to the accuracy of the representations and warranties of the Investors set forth
in this Agreement, and other than as set forth in Schedule 3.14, no registration or
filing with, or consent or approval of or other action by, any federal, state or other
governmental agency or instrumentality or any third party is or will be necessary for
the Company’s valid execution, delivery and performance of this Agreement and the
Transaction Documents, the issuance, sale and delivery of the Series E Preferred Shares
or, upon conversion thereof, the Company’s issuance and delivery of Ordinary Shares,
other than those (i) which have previously been obtained or made, or (ii) which are
required to be made under law, which will be obtained or made, and will be effective
within the time periods required by law. The Company and the Subsidiary have complied
with all applicable securities laws in connection with the offer, issuance and sale of
the Series E Preferred Shares and, upon conversion thereof, the issuance and delivery
of Ordinary Shares.






	 	3.15	 	Employees






	 	(a)	 	A list of all the directors, officers, employees and consultants
(excluding consultants receiving less than $10,000 per year, lawyers and
accountants) of the Company and the Subsidiary (the “Employees”) is attached hereto
as Schedule 3.15(a)-1.
	 
	 	(b)	 	Except as set forth in Schedule 3.15 (b), no Key Employee of the
Company or Subsidiary has been dismissed in the last six months or has given notice
of termination of his employment. To the Company’s knowledge, no Key Employee and
no group of the Company’s or the Subsidiary’s employees, consultants or independent
contractors has any plans to terminate their employment or relationship as an
employee, consultant or independent contractor with the Company, nor does the
Company have any present intention to terminate the employment of any Key Employee,
group of employees, consultant or independent contractor.
	 
	 	(c)	 	The Company has made available to the Investors true and complete
copies of all employment agreements with the Key Employees, and a standard form of
an employment agreement for its other employees. No employee has signed an
employment agreement with terms materially different to the standard agreement.
	 
	 	 	 	Except for extension orders of common application to all employees in Israel, the
Company is not a party or subject to any collective bargaining agreement with any
labour union or any local or subdivision thereof. There is no current union
organising activity among any of the employees of the Company or Subsidiary or any
union representative petition pending or threatened.
	 
	 	(d)	 	Except as set forth in the Material Contracts, there are no agreements
or arrangements for the payment of any pensions, allowances, lump sums or other
like benefits on retirement or on death or termination or during periods of
sickness or disablement for the benefit of any Employee or consultant of the
Company or the Subsidiary or for the benefit of the dependants of any such person
in operation at the date hereof except for the plans detailed in Schedule 3.15(e)
and as provided










 



19


	 	 	 	in the agreements delivered to Belco. The Company, and the Subsidiary have
fulfilled all their obligations under the law to the Employees.
	 
	 	(e)	 	Attached as Schedule 3.15(e) is a true and complete copy of all share
or stock option plans approved by the Company and the Subsidiary, together with a
list of all options granted pursuant thereto.
	 
	 	(f)	 	The Company and the Subsidiary have withheld or collected from each
payment made to each of their employees, the amount of all taxes (including but not
limited to, Israeli income taxes) required to be withheld or collected therefrom
and has paid the same to the proper tax receiving officers or authorised
depositories.
	 
	 	(g)	 	The severance pay and accrued vacation days due to the employees is
recorded in the Company’s records, but no actual funds have been put aside for the
purpose thereof, other than with respect to the transfer of funds to manager’s
insurance policies relating to 80% of the salaries of the Company’s Israeli
employees. The Company is not aware of any circumstance whereby any employee might
demand any claim for compensation on termination of employment beyond the statutory
severance pay to which such employee is entitled or as they are entitled to under
their employment agreements with the Company, nor is the Company aware of any claim
to be made by any employee for payment of compensation arising from the purchase of
Series E Preferred Shares by the Investors as contemplated hereby.
	 
	 	(h)	 	Except as provided in Schedule 3.15(h), each employee has undertaken to
provide their services on a full time basis to the Company and all such employment
agreements, may be terminated upon prior notice of not more than 90 days. The
employments of each officer and employee of the Company and the Subsidiary is
terminable at the will of the Company or the Subsidiary, as applicable, subject to
the payment of severance and other payments, pursuant to law or an employment
agreement.
	 
	 	(i)	 	No Senior Executive is and the Company is not aware of any other
employee of the Company or the Subsidiary who is a party to or is otherwise bound
by any agreement or arrangement (including, without limitation, confidentiality
agreements, non-competition agreements, proprietary information and inventions
agreements, licenses, covenants or commitments of any nature), or subject to any
judgment, decree, or order of any court or governmental body, that would conflict
with the employment of such employee with the Company or the Subsidiary (as the
case may be).
	 
	 	(j)	 	Neither the Company nor the Subsidiary is delinquent in payments to any
of its employees, consultants or independent contractors for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed
through the date hereof or amounts required to be reimbursed to them through the
date hereof. The Company and the Subsidiary are in material compliance with all
laws, rules and regulations respecting employment, employment practices, labour,
terms and conditions of employment and wages and hours. There is no labour strike,
dispute, slowdown or stoppage pending or, to the best knowledge of the Company,
threatened against or involving the Company or the Subsidiary.










 



20








	 	3.16	 	Insurance






	 	(a)	 	There is in full force and effect one or more policies of insurance,
insuring the Company and the Subsidiary, as specified in Schedule 3.16(a). Full and
accurate copies of the insurance policies of the Company and the Subsidiary have
been delivered to the Investors.
	 
	 	(b)	 	Neither the Company nor the Subsidiary have done or suffered anything
to be done which has rendered or might render any polices of insurance taken out by
them void or voidable or which might result in an increase in premiums and the
Company and the Subsidiary have complied with all conditions attached to such
policies.
	 
	 	(c)	 	There is no claim outstanding under any of such policies nor are there,
to the Company’s knowledge, any circumstances likely to give rise to a claim.
	 
	 	(d)	 	The Company has procured and maintains in effect a “key man” life
insurance policy for the benefit of the Company, in the amount of $2,000,000,
regarding Ronnie Kenneth.






	 	3.17	 	Intellectual Property 






	 	(a)	 	The Intellectual Property owned by the Company and the Subsidiary is
described in Schedule 3.17(a), including a full list of all Patents and Trademarks
and where appropriate indicating for each item, the applicable jurisdiction,
registration number (or application number) and date issued (or date filed).
Except as set forth in Schedule 3.17(a), all such Intellectual Property is owned
outright by the Company, free and clear of any rights of any third party, including
any Security Interests.
	 
	 	(b)	 	Except as disclosed in Schedule 3.17(b), neither the Company nor the
Subsidiary has licensed any Intellectual Property from third parties (not including
off the shelf products acquired or licensed from third parties and not to be
incorporated in intellectual property distributed by the Company or such
Subsidiary).
	 
	 	(c)	 	Except as disclosed in Schedule 3.17(c), neither the Company nor the
Subsidiary has granted any licence of any Intellectual Property to third parties.
	 
	 	(d)	 	The Company owns or has the right to use all of the Intellectual
Property required for its business as currently conducted or as proposed to be
conducted in the Disclosure Material.
	 
	 	(e)	 	Except as disclosed in Schedule 3.17(e), neither the Company nor the
Subsidiary are obligated or under any liability whatsoever to make any payments by
way of royalties, fees or otherwise to any owner or licensee of, or other claimant
to any Intellectual Property used by the Company or the Subsidiary (other than
off-the shelf software), with respect to the use thereof or in connection with the
business of the Company and the Subsidiary or otherwise.
	 
	 	 	 	To the best knowledge and belief of the Company, the Company will be able to
obtain or acquire rights to use all of the Intellectual Property required for the










 



21


	 	 	 	future conduct of the business as contemplated to be conducted in the Disclosure
Material.
	 
	 	 	 	There is no Intellectual Property required for the Company’s business as currently
conducted or as proposed to be conducted in the Disclosure Material, the use of
which by the Company or the Subsidiary requires or would require the payment of a
royalty to a third party.
	 
	 	(f)	 	To the Company’s best knowledge, information and belief, (i) no
Intellectual Property, used or proposed to be used in the business of the Company
or the Subsidiary as currently conducted or as proposed to be conducted in the
Disclosure Material, has infringed or infringes upon any Intellectual Property
rights of others, (ii) the use of such Intellectual Property in the business of the
Company or the Subsidiary as currently conducted or as proposed to be conducted in
the Disclosure Material, will not constitute an infringement, misappropriation or
misuse of any Intellectual Property rights of any third party, and (iii) no third
party has the right to assert any claim regarding the use of, or challenging or
questioning the Company’s or the Subsidiary’s right or title in, any of such
Intellectual Property.
	 
	 	 	 	The Company does not use, nor will be necessary to use any inventions of any of
the employees (or persons that the Company or any Subsidiary currently intends to
engage) made prior to their employment or engagement by the Company or the
Subsidiary.
	 
	 	(g)	 	The Company and Subsidiary have taken all necessary measures, including
measures against unauthorised disclosure, to protect the secrecy, confidentiality
and value of their Intellectual Property.
	 
	 	(h)	 	All Intellectual Property that has been developed or is currently being
developed on behalf of the Company or Subsidiary by any employee or other third
party shall be the sole property of the Company or the Subsidiary.
	 
	 	 	 	Each employee, independent contractor and consultant is bound by a Non Disclosure
and Proprietary Information and Inventions Agreement, in the form made available
to the Investors, regarding, among other things, confidentiality, transfer of
rights to the Company and, with respect to employees, non-competition, all as set
forth in the documents made available to the Investors.






	 	3.18	 	Environmental and Safety Laws
	 
	 	 	 	The Company and the Subsidiary are not in violation of any applicable laws relating to
the environment or occupational health and safety which is likely to result in a
material adverse change and no material expenditures are or will be required in order to
comply with any such existing laws.






	 	3.19	 	Transactions With Interested Parties
	 
	 	 	 	Except as set forth in Schedule 3.19 no director, officer, employee or shareholder of
the Company, the Subsidiary, or Affiliate thereof, is a party to any transaction with
the Company or the Subsidiary, including any contract, agreement or other arrangement
providing for the employment of, furnishing of services by, rental of real or personal










 



22


	 	 	 	property from or otherwise requiring payments to any such person, other than
employment-at-will or consulting-at-will arrangements in the ordinary course of
business. To the Company’s knowledge, none of such persons has any direct or indirect
ownership interest in any person with which the Company or the Subsidiary is affiliated
or with which the Company or the Subsidiary has a business relationship, or any person
that competes with the Company or the Subsidiary.
	 
	 	 	 	Notwithstanding the foregoing, the Company has signed an indemnity agreement with each
of the directors of the Company, and obtained customary directors’ and officers’
insurance policy in an amount not less than $10.0 million for all the directors
including any director nominated by the Investors, in forms acceptable to the Investors.






	 	3.20	 	Offering of the Series E Preferred Shares 
	 
	 	 	 	Neither the Company, the Subsidiary nor any person authorised or employed by the Company
or the Subsidiary as agent, broker, dealer or otherwise in connection with the offering
or sale of the Series E Preferred Shares has offered the Series E Preferred Shares for
sale to, or solicited any offer to buy the Series E Preferred Shares, or otherwise
approached or negotiated with respect thereto with, any person or persons other than the
Investors. Neither the Company, the Subsidiary nor any person acting on its behalf has
taken or will take any other action (including, without limitation, any offer, issuance
or sale of any security of the Company under circumstances which might require the
integration of such security with the Series E Preferred Shares under the Securities Act
or the rules and regulations of the Commission promulgated thereunder), in either case
so as to subject the offering, issuance or sale of the Series E Preferred Shares to the
registration provisions of the Securities Act. Neither the Company, the Subsidiary nor
any person acting on its behalf has offered the Series E Preferred Shares to any person
by means of general or public solicitation or general or public advertising, such as by
newspaper or magazine advertisements, by broadcast media, or at any seminar or meeting
whose attendees were solicited by such means.
	 
	 	3.21	 	Brokers and Finders
	 
	 	 	 	Neither the Company, nor any of its Employees, shareholders or the Subsidiary, has
employed or made any agreement with any broker, finder or similar agent or any person or
firm, which will result in the obligation of the Company or any of the Investors to pay
any finder’s fee, brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.
	 
	 	3.22	 	Full Disclosure
	 
	 	 	 	Neither this Agreement nor any certificates made or delivered by the Company in
connection herewith 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, in view
of the circumstances in which they were made.






	4.	 	REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
	 
	 	 	Each Investor, severally and not jointly, represents and warrants:










 



23








	 	4.1	 	Authorisation
	 
	 	 	 	All actions on the part of the Investor necessary for the authorisation, execution,
delivery, and performance by it of this Agreement have been duly taken and this
Agreement constitutes the legal, valid, and binding obligation of the Investor,
enforceable as to the Investor in accordance with its terms. The execution, delivery
and performance of this Agreement do not violate the Investor’s Organisational Documents
or any previous agreement of the Investor.






	 	4.2	 	Brokers
	 
	 	 	 	The Investor has not made any agreement with any broker, finder or similar agent or any
person or firm, which will result in the obligation of the Company to pay any finder’s
fee, brokerage fees or commission or similar payment in connection with the transactions
contemplated hereby.
	 
	 	4.3	 	Investment
	 
	 	 	 	The Investor is acquiring the Series E Preferred Shares for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. The Investor understands that the Series E
Preferred Shares to be purchased hereby have not been, and will not be, registered under
the Securities Act by reason of a specific exemption from the registration provisions of
the Securities Act, the availability of which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of the Investors’ representations
as expressed herein.
	 
	 	4.4	 	Restricted Securities
	 
	 	 	 	The Investor understands that the Series E Preferred Shares (and any Ordinary Shares
issued on conversion thereof) may not be sold, transferred, or otherwise disposed of
without registration under the Securities Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the Series E Preferred Shares
(or the Ordinary Shares issued on conversion thereof) or an available exemption from
registration under the Securities Act, the Series E Preferred Shares (and any Ordinary
Shares issued on conversion thereof) may have to be held indefinitely. In particular,
the Investor is aware that the Series E Preferred Shares (and any Ordinary Shares issued
on conversion thereof) may not be sold pursuant to Rule 144 promulgated under the
Securities Act unless the conditions of that Rule are met.
	 
	 	4.5	 	Accredited Investor 
	 
	 	 	 	Such Investor is an Accredited Investor as defined in Rule 501 of Regulation D under the
Securities Act.






	5.	 	INDEMNIFICATION AND REMEDIES






	 	5.1	 	The Company agrees, to protect, defend, indemnify, and hold the Investors harmless
against and in respect of any and all loss, liability, deficiency, damage, cost, or
expense or actions in respect thereof (including reasonable legal fees and expenses)
(“Damages”) as and when incurred, occasioned by (i) any breach of this Agreement, (ii)
the confirmation delivered pursuant to Section 2.2.1(e) (i) hereof being untrue or










 



24


	 	 	 	(iii) any falsity of any of the representations and warranties of the Company contained
in this Agreement. Each such representation and warranty is deemed to be made on the
date of this Agreement and shall survive the Closing for a period up to the date one
month after the publication of the Company’s audited financial statements for the year
ending 31st December 2005. It is hereby clarified that notwithstanding the
forgoing, the representations made in Sections 3.1, 3.2, 3.3, 3.4, 3.10 and 3.17 above,
shall survive for a period of seven (7) years from the Closing.
	 
	 	5.2	 	Indemnity Procedure
	 
	 	 	 	Promptly after (i) receipt by any Investor of notice of the commencement of any action,
proceeding, or investigation; or (ii) becoming aware of any breach of this Agreement or
falsity of representation, in each case, in respect of which indemnity may be sought as
provided above, such Investor shall notify the party from whom indemnification is
claimed (the “Indemnitor”). The Indemnitor shall promptly assume the defence of the
Investor with counsel reasonably satisfactory to the Investor, and the fees and expenses
of such counsel shall be at the sole cost and expense of the Indemnitor. The Investor
will cooperate with the Indemnitor in the defence of any action, proceeding, or
investigation for which the Indemnitor assumes the defence. The Indemnitor shall not be
liable for the settlement by the Investor of any action, proceeding, or investigation
effected without its consent, which consent shall not be unreasonably withheld. The
Indemnitor shall not enter into any settlement in any action, suit, or proceeding to
which any Investor is a party, unless such settlement includes a general release of the
Investor with no payment by the Investor of consideration and without an admission of
liability.
	 
	 	5.3	 	Subject to the other provisions of this Section 5, the Investors shall be entitled,
in addition, to any other non-pecuniary remedy provided by law or equity, and injunctive
relief may be obtained to enjoin the breach, or threatened breach, of any provision of
this Agreement, and each party shall be entitled to the specific performance by the other
of its obligations hereunder and thereunder.
	 
	 	5.4	 	The Investors’ rights of indemnification under this Section 6 shall not be affected
by any examination made for or on behalf of the Investors or the knowledge of any of the
Investors’ officers, directors, employees or agents.
	 
	 	5.5	 	No claims shall be asserted by any Investor, unless the amount claimed is in excess
of $25,000 (twenty five thousand U.S. Dollars), and under no circumstances shall any
Investor be entitled to compensation or damages in an amount greater than the aggregate
amount paid by such Investor for the shares issued to it as set forth in Schedule 2.1,
plus an amount of 8% (eight percent) per year from the date of payment by such Investor
until the date of actual reimbursement by the Company.






	6.	 	MISCELLANEOUS






	 	6.1	 	Communications
	 
	 	 	 	All notices or other communications hereunder shall be in writing and shall be given in
person, by registered mail (registered international air mail if mailed
internationally), by an overnight courier service which obtains a receipt to evidence
delivery, or by facsimile transmission (provided that written confirmation of receipt is
provided) with a copy by mail, addressed as set forth below:










 



25







	 	 	 	 	 
	 

	 	If to the Company:
	 	Voltaire Ltd.

9 Hamenofim Street, Building A

Herzelia

ISRAEL

Fax: 972-9-971-7660


Attn: CEO
	 

	 	with a copy to:
	 	Danziger, Klagsbald, Rosen & Co.

28 Bezalel Street

Gibor Sport Building

Ramat Gan 52521

ISRAEL

Fax: 972-3-611-0707


Attn: Ori Rosen, Adv.
	 

	 	If to Investors
	 	BCF II Belgium Holding SPRL

Avenue Louise 331-333

1050 Brussels

BELGIUM

Fax: 32-2-642-86-50
	 

	 	 	 	Attn: Robert Kimmels and Caroline Hoogsteyns
	 

	 	 	 	with copies to:

Baker Capital Corp.

540 Madison Avenue

New York,

New York 10022

USA

Fax: 1-212-486-6686
	 

	 	 	 	Attn: Ashley Leeds and Joseph Saviano
	 

	 	 	 	and:

Herzog, Fox & Neeman

4 Weizmann Street,

Asia House

Tel-Aviv 64239

ISRAEL

Fax: 972-3-696-6464
	 

	 	 	 	Attn: Alan Sacks
	 

	 	 	 	and:

Akin, Gump, Strauss Hauer & Feld, L.L.P.

590 Madison Avenue

New York, New York 10022

Fax: 212 872 1002












 



26


	 	 	 	 	 
	 

	 	 	 	Attn: Stephen E. Older
	 

	 	And:
	 	Pitango

11 HaMenofim St., Eastern Tower

Herzliya 46725, Israel


Fax: +972-9-971-8102

Attn: [General Counsel]







	 	 	 	or such other address as any party may designate to the other in accordance with the
aforesaid procedure. All communications delivered in person or by courier service shall
be deemed to have been given upon delivery, those given by facsimile transmission shall
be deemed given on the business day following transmission with confirmed answer back,
and all notices and other communications sent by registered mail (or air mail if the
posting is international) shall be deemed given ten (10) days after posting.
	 
	 	6.2	 	Successors and Assigns
	 
	 	 	 	The Company shall not sell, assign, transfer, or otherwise convey any of its rights or
delegate any of its duties under this Agreement. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
	 
	 	6.3	 	Expenses 
	 
	 	 	 	At the Closing, the Company will reimburse Belco and the other Investors for all
out-of-pocket expenses, including all attorneys’ fees and disbursements, incurred in
connection with the purchase of the Series E Preferred Shares hereunder, including legal
fees, up to a total of (i) $75,000, with respect to Belco, and (ii) $10,000 with respect
to the other Investors who hold shares in the Company prior to the issuance of the
Series E Preferred Shares hereunder, in each case plus VAT, if applicable, and against
receipt of tax invoice. Belco shall be entitled, at its choice, to withhold all or part
of the amount of such out-of-pocket expenses from the Purchase Price, provided that it
shall thereafter supply invoices to the Company evidencing such expenses.
	 
	 	 	 	The Company shall be responsible for costs in connection with (a) all Transaction
Documents signed by it or actions taken by it relating to the transactions contemplated
by this Agreement (or any other documents and actions if approved in advance by the
Company for purpose of this Section 6.3), and (b) all stamp duty payable in respect of
this Agreement or the issuance of shares as contemplated hereby.
	 
	 	6.4	 	Delays or Omissions; Waiver
	 
	 	 	 	No delay or omission to exercise any right, power, or remedy accruing to any party
hereto upon any breach or default by the other under this Agreement shall impair any
such right or remedy nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein or in any similar breach or default thereafter
occurring.










 



27


	 	6.5	 	Entire Agreement; Amendment
	 
	 	 	 	This Agreement (together with the recitals, schedules, appendices, annexes and exhibits
hereto attached hereto) contains the entire understanding of the parties with respect to
its subject matter and all prior negotiations, discussions, commitments, and
understandings heretofore had between them with respect thereto are merged herein. This
Agreement may be amended or modified only by a written document signed by the Company
and Investors holding (or, prior to issuance of the Series E Preferred Shares — entitled
to hold) at least a majority of the Series E Preferred Shares, including each of Belco,
Vertex and Pitango.
	 
	 	6.6	 	Preemptive Rights.
	 
	 	 	 	Each of the Investors, by executing and delivering this Agreement, hereby waives any and
all rights pursuant to any agreement, arrangement or other instrument to subscribe for
any securities of the Company issued pursuant to the Board of Directors resolutions set
forth on Schedule 2.2.1(b)(ii), other than the number of Series E Preferred Shares set
forth opposite such Investor’s name on Schedule 2.1 hereof.
	 
	 	6.7	 	Counterparts, Facsimile Signatures
	 
	 	 	 	This Agreement may be executed in any number of counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument. A signed Agreement received by a party hereto via facsimile will be deemed
an original, and binding upon the party who signed it.
	 
	 	6.8	 	Several Obligations
	 
	 	 	 	The obligations of the Investors under this Agreement and the Transaction Documents are
several and not joint. The failure of any Principal Investor to carry out its
obligations under this Agreement or the Transaction Documents or of this Agreement and
the Transaction Documents to be duly authorised, executed and delivered by any Principal
Investor shall relieve any of the other Principal Investors of their obligations under
this Agreement or the Transaction Documents (or affect the rights under this Agreement
or the Transaction Documents of such other Principal Investor). No Investor shall be
responsible for the obligations of, or any action taken or omitted by, any other
Investor under this Agreement or under the Transaction Documents.
	 
	 	6.9	 	Governing Law 
	 
	 	 	 	The Agreement shall be governed by and construed in accordance with the laws of the
State of Israel, without giving effect to the rules respecting conflict of law. The
competent courts of Tel Aviv-Jaffa shall have exclusive jurisdiction to hear all
disputes arising in connection with this Agreement.
	 
	 	6.10	 	Further Actions
	 
	 	 	 	At any time and from time to time, each party agrees, without further consideration, to
take such actions and to execute and deliver such documents as may be reasonably
necessary to effectuate the purposes of this Agreement.










 



28


	 	6.11	 	Force Majeure
	 
	 	 	 	No party shall be liable to any other party for non-performance or delay in performance
of any of its obligations under this Agreement due to causes beyond its reasonable
control, including, but not limited to, fire, strike, hostilities (whether or not
declared war), riot, insurrection, civil commotion or unavoidable accident.





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[Signature Page to Voltaire’s Round E Share Purchase Agreement]




Voltaire Ltd.




By: /s/ Ronnie Kenneth                                             

Name: Ronnie Kenneth

Title: CEO




 









 





[Signature Page to Voltaire’s Round E Share Purchase Agreement]




BCF II Belgium Holding SPRL




By: /s/ Ashley Leeds                                             

Name: Ashley Leeds

Title: Manager




By:                                                             

Name: Robert Kimmels

Title: Manager




 









 





[Signature Page to Voltaire’s Round E Share Purchase Agreement]




BCF II Belgium Holding SPRL




By:                                                             

Name: Ashley Leeds

Title: Manager




By: /s/ Robert Kimmels                                             

Name: Robert Kimmels

Title: Manager




 









 





[Signature Page to Voltaire’s Round E Share Purchase Agreement]




VERTEX ISRAEL II (C.I.) FUND L.P.




By: /s/ Yoram Oron                                             

Name:

Title:




VERTEX ISRAEL II (A) FUND L.P.




By: /s/ Yoram Oron                                             

Name:

Title:




VERTEX ISRAEL II (B) FUND L.P.




By: /s/ Yoram Oron                                             

Name:

Title:




VERTEX ISRAEL II DISCOUNT FUND L.P.




By: /s/ Yoram Oron                                             

Name:

Title:




VERTEX ISRAEL II (C.I.) EXECUTIVE FUND L.P.




By: /s/ Yoram Oron                                             

Name:

Title:




 









 





[Signature Page to Voltaire’s Round E Share Purchase Agreement]




Pitango Venture Capital Fund III (Israeli Sub) L.P.




By: /s/ Chemi Peres                                             

Name:

Title:




Pitango Venture Capital Fund III (Israeli Sub) Non Q.L.P.




By: /s/ Chemi Peres                                             

Name:

Title:




Pitango Venture Capital Fund III (Israeli Investors) L.P.




By: /s/ Chemi Peres                                             

Name:

Title:




Pitango Principals Fund III (Israel) L.P.




By: /s/ Chemi Peres                                             

Name:

Title:




Pitango Venture Capital Fund Trusts 2000 Ltd.




By: /s/ Chemi Peres                                             

Name:

Title:




Pitango Fund II Opportunity Annex Fund, L.P.




By: /s/ Chemi Peres                                             

Name:

Title:




Pitango Fund II Opportunity Annex Fund (ICA), L.P.




By: /s/ Chemi Peres                                             

Name:

Title:




 









 





[Signature Page to Voltaire’s Round E Share Purchase Agreement]




Tamir Fishman Ventures II (Israeli) LP




By: /s/ Michael Elias                                             

Name:

Title:




Tamir Fishman Ventures II CEO Fund LP




By: /s/ Michael Elias                                             

Name:

Title:




Tamir Fishman Ventures II LP




By: /s/ Michael Elias                                             

Name:

Title:




Tamir Fishman Ventures II CEO Fund (US) LP




By: /s/ Michael Elias                                             

Name:

Title:




Tamir Fishman Ventures II (Cayman Islands) LP




By: /s/ Michael Elias                                             

Name:

Title:




Tamir Fishman Ventures Capital II Ltd.




By: /s/ Michael Elias                                              

Name:

Title:




 









 





[Signature Page to Voltaire’s Round E Share Purchase Agreement]




Platinum Venture Capital Ltd. (as Trustee)




By: /s/ Illegible by PoA                                              

Name:

Title:




Danbar Tech 2001 LP




By: /s/ Illegible by PoA                                              

Name:

Title:




 









 





[Signature Page to Voltaire’s Round E Share Purchase Agreement]




Challenge Fund-Etgar II LP




By: /s/ J. Ciechanover                                              

Name:

Title: