EX-10.1



 





Exhibit 10.1




Share Purchase Agreement



This Share Purchase Agreement (this “Agreement”) is entered into as of August 24, 2004, by and
among Allot Communications Ltd., an Israeli company (registered no. 51-239477-6) having its main
place of business at 5 Hanagar Street, Neve Ne’eman B Industrial
Zone, Hod Hasharon 45800 (the“Company”), certain entities comprising the Partech International fund, the names and addresses of
which are as set forth on Exhibit I attached hereto (collectively “Partech”) and certain of
the Company’s shareholders, the names and addresses of which are set forth on Exhibit I attached
hereto (the “Investing Shareholders”; Partech and the Investing Shareholders, collectively the
“Investors”).





			
	WHEREAS,	 	the Company requires an infusion of funds in order to continue to
conduct its business activities; and






			
	WHEREAS,	 	the Investors wish to invest in the Company in consideration of
the issuance by the Company of the Company’s Series D Preferred
Shares, NIS 0.01 par value each, subject to the terms and
conditions set forth in this Agreement.




NOW, THEREFORE, the parties hereto hereby agree as follows:





	1.	 	Interpretation; Definitions






	 	1.1.	 	The Recitals and Exhibits hereto consist an integral part
hereof.
	 
	 	1.2.	 	The headings of the sections and subsections of this Agreement
are for convenience of reference only and are not to be considered in
construing this Agreement.
	 
	 	1.3.	 	In this Agreement, unless the context otherwise requires:






	 	1.3.1.	 	“Corporate Documents” means the Company’s Memorandum of Association
and Articles of Association.
	 
	 	1.3.2.	 	“Companies” means the Company and the Subsidiaries, on a consolidated
basis.
	 
	 	1.3.3.	 	“Interested Party” means any “interested party”, as such term is
defined in the Israeli Securities Law of 1968, or any member of the
family or affiliate of such Interested Party, Person controlled by it,
Person under common control or Person 7controlling it.
	 
	 	1.3.4.	 	“IPO” means an underwritten initial public offering of Ordinary Shares
of the Company.
	 
	 	1.3.5.	 	“Liens” means all mortgages, liens, pledges, charges, security
interests, third party rights or other claims or encumbrances of any
kind whatsoever.
	 
	 	1.3.6.	 	“Ordinary Shares” means the Ordinary Shares NIS 0.01 par value of the
Company.
	 
	 	1.3.7.	 	“Person” means an individual, any entity, corporation, partnership,
joint venture, trust or non-incorporated organization.











 



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	 	1.3.8.	 	“Preferred A Shares” means the Series A Preferred Shares of the
Company NIS 0.01 par value.
	 
	 	1.3.9.	 	“Preferred B Shares” means the Series B Preferred Shares of the
Company NIS 0.01 par value.
	 
	 	1.3.10.	 	“Preferred C Shares” means the Series C Preferred Shares of the
Company NIS 0.01 par value.
	 
	 	1.3.11.	 	“Preferred D Shares” means the Series D Preferred Shares of the
Company NIS 0.01 par value.
	 
	 	1.3.12.	 	“Preferred Shares” means the Preferred A Shares, the Preferred B
Shares, the Preferred C Shares and the Preferred D Shares.
	 
	 	1.3.13.	 	“RRE” means the official representative rate of exchange of the US
Dollar last published by the Bank of Israel prior to the time of payment
or calculation under this Agreement.
	 
	 	1.3.14.	 	“US Subsidiary” means Allot Communications, Inc., a corporation duly
organized and validly existing under the laws of the State of
California.
	 
	 	1.3.15.	 	“European Subsidiary” means Allot Communication Europe SARL, a
company duly organized and validly existing under the laws of France.
	 
	 	1.3.16.	 	“Subsidiaries” means the US Subsidiary and the European Subsidiary.






	 	1.4.	 	In this Agreement all obligations and undertakings of the
Investors shall apply and bind each of the Investors severally, and not
jointly, and each Investor shall be liable only for its own representations,
warranties, undertakings and obligations and shall not be liable for any breach
by any other Investor or for any action taken or omitted to be taken by any
other Investor in connection with the execution hereof and the transactions and
actions contemplated herein.






	2.	 	The Transaction






	 	2.1.	 	Sale, Purchase and Conversion of
Shares






	 	2.1.1.	 	The Company shall issue and allot to the Investors an aggregate of
7,851,381 Preferred D Shares (the “Shares”), to be allocated among them
as set forth in Exhibit 2.1.1, in consideration of the payment
to the Company by each of the Investors of US$1.02256 for each Preferred
D Share (the “Original Price Per Share”), totaling, for all Investors
together, US$8,028,507 (the “Purchase Price”).
	 
	 	2.1.2.	 	At the Closing (as defined below), the Company shall issue the Shares
to the Investors, against payment by the Investors of the Purchase
Price.
	 
	 	2.1.3.	 	The Company represents and warrants to the Investors that










 



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	 	 	 	immediately following the Closing (as defined below), the
Shares shall represent 11.465% of the share capital of the
Company, on a Fully Diluted Basis. For the purpose of this
Section 2.1.3, “Fully Diluted Basis” shall mean all issued and
outstanding share capital of the Company, including Preferred A
Shares, Preferred B Shares and Preferred C Shares, all
securities issuable upon the conversion of any existing
convertible securities or loans, the exercise of all
outstanding warrants, options, options reserved under the ESOP
(as defined below) (whether allocated or unallocated, vested or
unvested), and issuance of securities pursuant to any
anti-dilution rights of existing shareholders (if any).






	3.	 	Closing






	 	3.1.	 	Closing. The transactions contemplated hereby shall
take place at a closing (the “Closing”) to be held at the offices of Danziger,
Klagsbald, Rosen & Co., Law Offices, at 7 Menachem Begin Street, Ramat-Gan, at
10:00 a.m. on                                         , 2004 (the “Closing Date”), or such other date,
time and place as the parties shall mutually agree.
	 
	 	3.2.	 	Deliveries and Transactions at Closing. At the Closing,
the following transactions shall occur simultaneously (no transaction shall be
deemed to have been completed or any document delivered until all such
transactions have been completed and all required documents delivered):






	 	3.2.1.	 	The Company shall deliver to the Investors the following documents:






	 	3.2.1.1.	 	Duly executed resolutions of the Company’s General
Meeting, in the form attached hereto as Exhibit
3.2.1.1, approving, among other matters: (i) the
modification of the share capital of the Company and the
creation of the Preferred D Shares and the performance of
the Company’s obligations hereunder and pursuant to all of
the transactions contemplated hereby; (ii) the replacement
of the Articles of Association of the Company with the
Amended Articles of Association attached hereto as
Exhibit 3.2.1.1a (the “Amended Articles”); (iii)
the amendment to the Company’s Memorandum of Association
to reflect the Company’s registered share capital as set
forth in the Amended Articles with duly completed notices
of such changes to the Israeli Registrar of Companies in
the form attached hereto as Exhibit 3.2.1.1b, to
be in form and substance acceptable for immediate filing
with the Israeli Registrar of Companies; and (iv) the
transactions contemplated hereby.










 



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	 	3.2.1.2.	 	Copies of a duly executed resolution of the Board of
Directors of the Company in the form set forth in
Exhibit 3.2.1.2 approving among other matters (i)
the Company’s execution of this Agreement and all
transactions contemplated hereby; (ii) the issuance and
allotment of the Shares to the Investors against payment
by the Investors of the Original Price Per Share for each
Share, together with a duly completed notice of the
issuance of the Shares in form and substance acceptable
for immediate filing with the Israeli Registrar of
Companies; (iii) the reservation of a sufficient number of
Ordinary Shares to be issued upon the conversion of the
Shares; (iv) the authorization of the issuance of such
Ordinary Shares upon such conversion; and (v) the
Increased Reservation (as defined in Section 7.4 below)
under the Company’s Employee Stock Option Plan (the
“ESOP”), such that the total number Ordinary Shares free
for allocation under the ESOP at the Closing shall
represent 2.5% of the Company’s issued and outstanding
share capital immediately subsequent to Closing on a fully
diluted basis; and (vi) the Signature Rights of the
Company as set forth in Exhibit 3.2.1.2A.
	 
	 	3.2.1.3.	 	Validly executed Share Certificates pertaining to the
Shares in the name of the respective Investors;
	 
	 	3.2.1.4.	 	A written confirmation, in the form of Exhibit
3.2.1.4 hereto, executed by the CEO of the Company,
confirming and certifying that the Company has complied
with all its obligations hereunder and all the conditions
to Closing to be met by the Company and any of its
subsidiaries have been satisfied;
	 
	 	3.2.1.5.	 	An opinion in the form attached hereto as Exhibit
3.2.1.5, dated as of the Closing Date, of Danziger,
Klagsbald, Rosen & Co., counsel to the Company.
	 
	 	3.2.1.6.	 	a non-competition agreement in the form attached
hereto as Exhibit 3.2.1.6 entered into by the
Company and Yigal Jacoby.
	 
	 	3.2.1.7.	 	Copies of all applicable consents and waivers,
including but not limited to (i) duly executed waivers in
the form attached hereto as Exhibit 3.2.1.7
executed by all of the shareholders of the Company,
pursuant to which each of the shareholders, not exercising
preemptive rights










 



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	 	 	 	in connection with this Agreement, shall have
waived any preemptive rights, rights of first
refusal, anti-dilution rights, rights to adjust
conversion ratio or similar rights it may have
with respect to the transactions contemplated in
connection with this Agreement; or (ii) evidence
that the pre-emptive rights of the shareholders
of the Company have expired.
	 
	 	3.2.1.8.	 	Approvals of the Office of the Chief Scientist of the
Ministry of Industry and Trade of the State of Israel, the
Investment Center, and any other approvals necessary in
connection with the matters referred to in Sections 4.24
and/or 4.25 for the consummation of the transactions
contemplated by this Agreement, if any.
	 
	 	3.2.1.9.	 	A copy of the Company’s shareholders’ register updated
as of immediately following the Closing.
	 
	 	3.2.1.10.	 	A copy of the Investors Rights Agreement (as defined
below) executed by the Investors, certain shareholders of
the Company and the Company, in the form attached hereto
as Exhibit 6.
	 
	 	3.2.1.11.	 	A duly executed copy of the Management Rights Letter
to Partech addressed to each of AXA Growth Capital II
L.P.; Double Black Diamond II LLC; Partech International
Growth Capital I LLC; Partech International Growth Capital
II LLC; Partech International Growth Capital III LLC; and
Multinvest LLC, in the forms attached hereto as
Exhibit 3.2.1.11.
	 
	 	3.2.1.12.	 	A copy of a side letter executed by each of Yigal
Jacoby and Michael Shurman, in the form attached hereto as
Exhibit 3.2.1.12.
	 
	 	3.2.1.13.	 	Certificate of Good Standing of the US Subsidiary
from the California Secretary of State dated as soon as
close to the Closing Date and in no event earlier than
five days prior to the Closing Date.






	 	3.2.2.	 	Upon and against the issuance of the Shares in the name of the
Investors, and the registration of all the Shares in the name of the
respective Investors in the shareholders’ register of the Company, each
of the Investors shall pay to the Company its proportional share of the
Purchase Price, in US dollars or the amount equivalent in NIS according
to the RRE, at the discretion of such Investor, by way of a bank
transfer to the Company’s account, pursuant to wiring instructions given
in writing by the Company prior to Closing, or by a certified










 




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	 	 	 	check, or by such other form of payment as is mutually agreed
by the Company and such Investor.






	 	3.3.	 	Conditions to Closing by the Investors. The obligations
of the Investors at the Closing are subject to the fulfillment at or before the
Closing of the following conditions precedent, any one or more of which may be
waived in whole or in part by the Investors, which waiver shall be at the sole
discretion of the Investors:






	 	3.3.1.	 	Representations and Warranties. The representations and
warranties made by the Company in this Agreement shall have been true
and correct when made, and shall be true and correct as of the Closing
as if made on the date of the Closing.
	 
	 	3.3.2.	 	Covenants. All covenants, agreements, and conditions contained
in this Agreement to be performed or complied with by the Company and
Persons other than the Investors prior to the Closing, and at the
Closing, shall have been performed or complied with prior to or at the
Closing.
	 
	 	3.3.3.	 	Consents. etc. The Company shall have secured all permits,
consents and authorizations that shall be necessary or required for the
Company to consummate this Agreement and all transactions contemplated
thereby, and to issue the Shares to the Investors at the Closing, and
the Amended Articles shall be ready for immediate filing with the
Registrar of Companies promptly following the Closing.
	 
	 	3.3.4.	 	Delivery of Documents. All the documents to be delivered by
the Company at the Closing shall be in the form attached hereto, and the
Investors shall have received all such counterpart originals or
certified or other copies of such documents.
	 
	 	3.3.5.	 	Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement,
shall have taken place and duly performed and completed.
	 
	 	3.3.6.	 	Absence of Adverse Changes. From the date hereof until the
Closing, there shall have been no material adverse change; in the
financial, business or other condition of the Company.
	 
	 	3.3.7.	 	No Action. No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any state, municipal, or foreign jurisdiction or before any
arbitrator, reference of which is not contained herein, wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge that
would: (i) prevent consummation of any of the transactions contemplated
by this Agreement or by any of the ancillary agreements thereto; (ii)
cause any of the transactions contemplated by this Agreement or by any
of the ancillary agreements thereto, to be rescinded following
consummation; (iii) affect materially and adversely the rights of the
Companies to own the Intellectual Property Rights or













 



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	 	 	 	other assets or to operate their business.






	 	3.4.	 	Conditions to Closing by the Company. The obligations
of the Company are subject to the fulfillment at or before the Closing of the
conditions that: (a) all covenants, agreements and conditions contained in this
Agreement to be performed, or complied with, by the Investors prior to the
Closing shall have been performed or complied with by the Investors prior to or
at the Closing, and (b) the representations and warranties made by the
Investors in this Agreement shall have been true and correct when made, and
shall be true and correct as of the date of the Closing, which conditions may
be waived in whole or in part by the Company, and which waiver shall be at the
sole discretion of the Company.






	4.	 	Representations and Warranties of the Company.
	 
	 	 	The Company hereby represents and warrants to each of the Investors that, as of the date
hereof and as of Closing, the following representations and warranties are true and accurate
in all respects with regard to the Companies, and acknowledge that the Investors are
entering into this Agreement in reliance thereon (in connection with the representations
made herein by the Company, any knowledge possessed by either of the Subsidiaries, shall be
deemed to be possessed also by the Company):






	 	4.1.	 	The Company has the full power and authority to execute and
deliver this Agreement and the other agreements contemplated hereby or which
are ancillary hereto, and to consummate the transactions contemplated hereby
and thereby. All corporate action on the part of the Company necessary for the
authorization, execution, delivery, and performance of all of the Company’s
obligations under this Agreement and the other agreements contemplated hereby
or which are ancillary hereto, and for the authorization, issuance, and
allotment of the Shares being sold under this Agreement, and the Ordinary
Shares issuable upon conversion of the Shares has been (or will be) taken prior
to the Closing. The Company and each Subsidiary has all franchises, permits,
licenses, and any similar authority necessary or required under any law,
regulation, rule or ordinance, for the conduct of its business as now being
conducted, of which the failure to obtain would have a material adverse effect
on the Company or such Subsidiary, and, none of the Company or any of the
Subsidiaries is in material default under any of the same.
	 
	 	 	 	The Company believes that it or each such Subsidiary can obtain,
without undue burden or expense, any similar authority for the
conduct of its business as presently planned to be conducted.
	 
	 	4.2.	 	The Company is a company duly incorporated and validly existing
under the laws of the State of Israel, the US Subsidiary is a corporation duly
organized and validly existing under the laws of the State of California, and
the European Subsidiary is a company duly organized and validly existing under
the laws of France. Each of the Companies has the power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and as presently planned to be conducted. Neither the nature of the
Companies’ business as now conducted nor their ownership or
leasing of property, require that the Companies be qualified to do











 



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	 	 	 	business or be in good standing in any jurisdiction other than
jurisdictions in which they are qualified to do business or in good
standing, except in such jurisdictions where the failure to be so
qualified or be in good standing does not have a material adverse
effect on the Company or its business. Attached hereto in Exhibit
4.2 are true and accurate copies of the Company’s Incorporation
Certificate, Memorandum of Association and current Articles of
Association as in effect prior to the execution hereof, and the US
Subsidiary’s and European Subsidiary’s incorporation documents. None
of the Companies has taken any action or failed to take any action,
which action or failure would preclude or prevent any of the
Companies from conducting its business in the manner heretofore
conducted and/or as presently planned to be conducted.






	 	4.3.	 	The authorized capital stock of the Company immediately prior
to the Closing shall consist of (A) 58,659,200 Ordinary Shares, par value NIS
0.01 per share, of which (i) 9,560,420 shares are issued and outstanding, (ii)
8,473,039 shares are reserved for issuance upon the exercise of employee,
director and consultant options and the Tmurah warrant granted under the ESOP
or under the warrant granted to Tmurah, all of which are reserved for exercise
of options (and the Tmurah warrant) that have been granted and are outstanding;
(B) 2,687,600 Ordinary A Shares, all of which are issued and outstanding; (C)
38,653,200 Preferred Shares, par value NIS 0.01 per share, of which (i)
7,765,580 have been designated Series A Preferred Shares, all of which are
issued and outstanding, (ii) an aggregate of 29,989,420 have been designated
Series B Preferred Shares, of which 27,062,220 shares are issued and
outstanding, and 2,306,739 are reserved for issuance upon exercise of options
granted by the Company; and (iii) 898,200 have been designated Series C
Preferred Shares all of which are issued and outstanding. The authorized
capital stock of the Company at the Closing shall consist of (A) 69,807,819
Ordinary Shares, par value NIS 0.01 per share, of which (i) 9,560,420 shares
shall be issued and outstanding, (ii) 10,185,132 shares are reserved for
issuance upon the exercise of employee, director and consultant options and the
Tmurah warrant granted under the ESOP or under the warrant granted to Tmurah,
of which 8,473,039 Ordinary Shares are reserved for exercise of options (and
the Tmurah warrant) that have been granted and are outstanding; (B) 2,687,600
Ordinary A Shares, all of which are issued and outstanding; (C) 46,504,581
Preferred Shares, par value NIS 0.01 per share, of which (i) 7,765,580 have
been designated Series A Preferred Shares, all of which shall be issued and
outstanding, (ii) an aggregate of 29,989,420 have been designated Series B
Preferred Shares, of which 27,062,220 shares shall be issued and outstanding,
and 2,306,739 shall be reserved for issuance upon exercise of options granted
by the Company; (iii) 898,200 have been designated Series C Preferred Shares
all of which shall be issued and outstanding; and (iv) an aggregate of
7,851,381 have been designated Series D Preferred Shares, all of which shall be
issued and outstanding at the Closing.
All of the outstanding share capital of the Company has been duly











 



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	 	 	 	authorized, and is validly issued, fully paid and nonassessable.
Neither the Company nor any one acting on its behalf has offered
securities of the Company for issuance or sale to, or solicited any
offer to acquire any of the same from, anyone so as to make issuance
and sale of the Shares not exempt from the registration requirements
of Section 5 of the 1933 U.S. Securities Act or the Israeli
Securities Law, 1968. None of the outstanding shares of the Company
have been offered or sold in such a manner as to make the issuance
and sale of such shares not exempt from such registration
requirements, and all such shares have been offered and sold in
compliance with all applicable securities laws. Except as set forth
in Exhibit 4.3, there are no other share capital, convertible
securities, outstanding warrants, options or other rights or
agreements to subscribe for, or to purchase, any shares or other
securities of the Company, nor are there outstanding any warrants,
options, convertible instruments, or any other rights, agreements,
undertakings, or promises or commitments, written or oral, to sell or
acquire shares from the Company. The Shares, at the time the Company
has to issue and allot same in accordance with this Agreement, are
duly authorized, validly issued, and free of preemptive or similar
rights, and upon payment therefor fully paid and non-assessable. The
Shares when issued and allotted will have the rights, preferences and
privileges set forth in the Corporate Documents of the Company, as
amended hereunder, and such Shares upon issuance thereof and payment
therefor will be free and clear of any Liens, and duly registered in
the name of each Investor in the Company’s Shareholders register. The
Ordinary Shares issuable upon conversion of the Shares have been duly
authorized and reserved for issuance by all necessary corporate
action and, when issued and allotted will be duly and validly issued,
fully paid, non-assessable, and free of any preemptive rights or anti
dilution rights, will have the rights, preferences, privileges and
restrictions set forth in the Corporation Documents, and will be
issued free and clear of any Liens and duly registered in the name of
each of the Investors in the Company’s register of shareholders.






	 	4.4.	 	Except as set forth in Exhibit 4.4, the Company is not
under any obligation to register for trading on any securities exchange any of
its currently outstanding securities or any of its securities which may
hereafter be issued.






	 	4.5.	 	The entire issued share capital of, and all of the rights
pertaining to, the US Subsidiary and of the European Subsidiary are held of
record and beneficially by the Company free and clear of Liens, options to
purchase, proxies, voting trust or other voting agreements, and has been duly
authorized, validly issued, fully paid and non-assessable and free of any
preemptive rights. No Person has any rights to receive and/or purchase any
securities and/or any other rights in and/or in connection with the
Subsidiaries and/or any of them. Except for the US Subsidiary and the European
Subsidiary, the Company has no subsidiaries and does not, directly or
indirectly, own any interest in any corporation, partnership, joint venture or
other business
association. There are no other share capital, preemptive rights,











 



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	 	 	 	convertible securities, outstanding warrants, options or other rights
to subscribe for, purchase or acquire from any Subsidiary or from the
Company, any share capital of such Subsidiary and there are not any
contracts or binding commitments providing for the issuance of, or
the granting of rights to acquire, any share capital of any
Subsidiary.






	 	4.6.	 	The directors of each of the Companies are listed in
Exhibit 4.6 and have been duly and lawfully appointed to such position.
Except as set forth in Exhibit 4.6, none of the Companies is a party to
any agreement, obligation or commitment with respect to (i) the election of any
individual or individuals to the Board of Directors of the Company, the Board
of Directors of the US Subsidiary or the Board of Directors of the European
Subsidiary; (ii) any voting agreement or other arrangement among the Company’s
shareholders, among the US Subsidiary’s shareholders or among the European
Subsidiary’s shareholders, or (iii) any compensation to be paid to any of the
Companies’ directors or officers. All agreements, commitments and
understandings, whether written or oral, with respect to any compensation to be
provided to any of the Company’s directors or officers as set forth in
Exhibit 4.6.
	 
	 	4.7.	 	Since December 31, 2003, there has been no declaration or
payment by the Company of dividends, or any distribution by the Company of any
assets of any kind to any of its shareholders in redemption of or as the
purchase price for any of the Company’s securities.
	 
	 	4.8.	 	The Company has furnished the Investors audited, consolidated,
United States Dollar-denominated financial statements of the Company for the
period ended December 31, 2003, (a true and complete copy of which is attached
hereto in Exhibit 4.8), and the management prepared, unaudited and
unreviewed, consolidated, U.S. Dollar-denominated balance sheet, profit and
loss and cash flow statements for the period ended March 31, 2004 (a true and
complete copy of which is attached hereto as Exhibit 4.8A)
(collectively, the “Financial Statements”). The Financial Statements, are true
and accurate in all material respects, are in accordance with the books and
records of the Company and fairly reflect the financial condition, transactions
in and dispositions of the assets of, the results of operations of, and the
cash flows of the Companies for the periods stated therein. The Financial
Statements were prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”) applied on a consistent basis.
	 
	 	4.9.	 	Except as set forth in Exhibit 4.9 or as set forth in the
Financial Statements, since December 31, 2003, the Companies have conducted
each of their businesses in the ordinary course consistent with past practice,
and there has not been: (i) any event that has had or may be expected to have a
material adverse effect on the business, assets, prospects, condition or the
results of operations and financial condition of the Companies (collectively,
the “Condition of the Companies”) or that would hereafter give rise to any
material debt or liability of the Companies or any claim, demand or suit
against the
Companies or against their shareholders as shareholders of the











 



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	 	 	 	Companies; (ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital
stock of the Companies; (iii) any damage, destruction or other
casualty or loss (whether or not covered by insurance) affecting or
which may affect the Condition of the Companies; (iv) any change in
any method of accounting or accounting practice by the Companies; (v)
any transaction, including any change of terms of an existing
transaction, between the Companies and any Interested Party; (vi) any
waiver by the Companies of any material right, or of a material debt,
owed to it; (vii) any material change or amendment to material
agreement or arrangement by which the Companies or any of their
assets are bound; (viii) any sale, transfer or lease of or mortgage
or pledge or imposition of lien on any of the Companies’ assets; (ix)
any agreement or arrangement made by the Companies to do any of the
foregoing; (x) any loans made by the Company or any Subsidiary to its
employees, officers, or directors; (xi) any change in any
compensation arrangement or agreement with any key employee of the
Companies; (xii) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or any
Subsidiary, except in the ordinary course of business and that is
not, individually or in the aggregate, materially adverse to the
Condition of the Companies; or (xiii) any other event, series of
events in the aggregate, or condition of any character that would
adversely affect in a material way the Condition of the Companies.






	 	4.10.	 	Except as fully reflected, disclosed or reserved for in the
Financial Statements none of the Companies has any material indebtedness or
liability, whether absolute, accrued, fixed, contingent or otherwise, other
than as incurred in the ordinary course of business of the Companies.
	 
	 	4.11.	 	Except as set forth in the Financial Statements and as
specifically stated in Exhibit 4.11 attached hereto, none of the
Companies is a guarantor of any debt or obligation of another, nor have the
Companies given any indemnification, loan, security or otherwise agreed to
become directly or contingently liable for any obligation of any Person, and no
Person has given any guarantee of or security for any obligation of the
Companies.
	 
	 	4.12.	 	The Companies have timely filed all tax returns and reports
required by applicable laws. All tax returns and reports of the Companies are
true and correct in all material respects and the Companies have paid all taxes
and other assessments due. No deficiency assessment or proposed adjustment of
income or payroll taxes of the Company or the Subsidiaries is pending and the
Company has no knowledge of any proposed liability for any tax to be imposed.
The Companies have not filed with any tax authority any specific elections
under applicable tax laws or regulations (other than elections that related
solely to methods of accounting, depreciation or amortization) that would have
an affect on the Condition of the Companies.
	 
	 	4.13.	 	The real and personal property of the Companies is as set
forth in the
Financial Statements. Except as set forth in Exhibit 4.13, the











 



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	 	 	 	Companies hold all of their property free and clear of all Liens.
Each of the Companies, as applicable, has good and marketable title
to all of its assets, and such assets are sufficient for the conduct
of the Company’s or the Subsidiaries’ business as currently
conducted, and as presently planned to be conducted. None of the
Companies is in material default or in breach of their leases or
licenses, and the Companies, holds a valid leasehold or licensed
interest in the property they lease or license. None of the
shareholders of the Company, the US Subsidiary or the European
Subsidiary owns, holds or possesses, in his individual or any other
capacities, any property, whether tangible or intangible, which is
material, individually or in the aggregate, to the financial
condition, operations or business of the Companies.






	 	4.14.	 	The minute books of each of the Companies which have been
provided or made available to the Investors contain accurate and complete
copies of the minutes of every meeting of the Companies’ shareholders and the
boards of directors (and any committee thereof). No resolutions have been
passed, enacted, consented to or adopted by the directors (or any committee
thereof) or shareholders of the Companies, except for those contained in such
minute books.






	 	4.15.	 	Intellectual Property






	 	4.15.1.	 	Exhibit 4.15.1A sets forth all (i) patents, trademarks,
service marks, copyrights and mask works owned by the Company and each
of the Subsidiaries, or licensed to the Company, the US Subsidiary or
the European Subsidiary and (ii) all pending patent or trade mark
applications or applications for registration which the Company has made
with respect to any of its intellectual property; (iii) each trade name
or unregistered trademark used by the Company; and (iv) license,
agreement or other permission which the Company has granted to, or
received from any third party with respect to any of its intellectual
property (all of the above in this Section 4.15.1, together with all
technology, know how and trade secrets owned by any of the Companies, or
licensed by any of the Companies shall be referred to collectively, as
the “Intellectual Property Rights”). No other material intellectual
property, other than the Intellectual Property Rights and other than
“off-the-shelf” products used in the operation of the Companies’
business is necessary for the Company, the US Subsidiary or the European
Subsidiary, to enable them to conduct their business as currently
conducted. The only open source software that is used by the Companies
is listed in Exhibit 4.15.1B hereto and the terms of the
licenses thereof ware made available to Partech’s counsel (“License
Terms”). Notwithstanding anything to the contrary in this Agreement,
the Companies are not in compliance with all of the License Terms (those
License Terms with which the Companies are not in compliance, the
“Noncompliant License Terms”), and the
Companies’ noncompliance with the Noncompliant License 










 



- 13 -


	 	 	 	Terms
does not and, to the Companies’ best knowledge, will not, have
a material adverse effect on the Condition of the Companies
including the Companies’ Intellectual Property Rights. To the
Companies’ best knowledge, the compliance by the Companies with
all of the License Terms shall not have a material adverse
effect on the Condition of the Companies, including the
Companies’ Intellectual Property Rights. The Board of Directors
shall establish a committee of the Board (which will include
the director designated by Partech) (the “Committee”) in order
to determine how the Companies should act with regard to the
License Terms. The Committee shall convene no later than 1
month following the Closing or such later period as approved by
the Committee (with the approval of the director designated by
Partech), and will submit its conclusions within 3 months
following the Closing or such later period as approved by the
Committee (with the approval of the director designated by
Partech).






	 	4.15.2.	 	Except as explicitly and specifically set forth in Exhibit
4.15.2, (i) no Intellectual Property Right is subject to any
stipulation or agreement, whether of the Company, the US Subsidiary or
the European Subsidiary, and to the Companies’ best knowledge, nothing
which is part of the Intellectual Property Rights is subject to any law
or outstanding order, or agreement, materially restricting the use or
licensing thereof by the Companies; (ii) the Company, the US Subsidiary
or the European Subsidiary, possess all right, title, and interest in
and to the Intellectual Property Rights and the Company owns such rights
with respect to the Intellectual Property, all free and clear of any
lien, pledge, encumbrance, security interest, or other restriction;
(iii) to the Company’s knowledge, no Person, other than the Company, the
US Subsidiary or the European Subsidiary, has any conflicting ownership
right, title, interest, claim in, or lien on, any of the Intellectual
Property Rights; (iv) any and all of the Intellectual Property Rights of
any kind that has been developed by the shareholders of the Company
and/or by former shareholders of the Company and/or by any related
parties thereto and/or by any employees or former employees of the
Company and/or by any related parties thereto, has been assigned to the
Company, the US Subsidiary or the European Subsidiary; (v) none of the
Companies, is aware of any third party that is infringing or violating
any of the Intellectual Property Rights (vi) to the best knowledge of
the Company, the Intellectual Property Rights are not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge that
applies to the Companies in the jurisdictions in which it is registered
and conducts business; (vii) to the best knowledge of the Company, no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, is threatened, which challenges the
legality,
validity, enforceability, use, or ownership of the Intellectual










 



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	 	 	 	Property in the jurisdictions in which it is registered and
conducts business; (viii) none of the Companies has granted,
and there are not outstanding, any options, licenses or
agreements of any kind relating to any Intellectual Property
Rights, nor is the Company, the US Subsidiary or the European
Subsidiary bound by, or a party to, any option, license or
agreement of any kind (whether exclusive or non-exclusive) with
respect to any of the Intellectual Property Rights, in each
case other than licenses granted and products sold in the
ordinary course of business of the Companies pursuant to the
Companies’ standard agreements, copies of which have been
provided or made available to Partech’s counsel, or has the
Company entered into any covenant not to compete in any market,
field or application, or geographical area or with any third
party; (ix) except as set forth in Exhibit 4.15.2, none of the
Companies is obligated to pay any royalties, fees or otherwise
to third parties with respect to the marketing, sale,
distribution, manufacture, license or use of any Intellectual
Property Rights or any other property or rights.






	 	4.15.3.	 	None of the Companies has, to the best of its knowledge, violated or
infringed or is currently violating or infringing, and none of the
Companies has received any communication alleging that any of the
Companies (or any of their employees or consultants or former employees
and consultants) has violated or infringed or, by conducting its
business as currently conducted, violate or infringe, any patents,
trademarks, service marks, trade names, trade secrets, copyrights or
other proprietary rights of any other Person.
	 
	 	4.15.4.	 	None of the Companies is aware that any current employee, contractor
or consultant of the Companies is obligated under any agreement
(including licenses, covenants or commitments of any nature) or subject
to any judgment, decree or order of any court or of an administrative
agency, or any other restriction, that would interfere with the use of
his or her best efforts to carry out his or her duties for the
Companies, or to promote the best interests of the Companies, or that
would conflict with the Companies’ business as presently conducted.
	 
	 	4.15.5.	 	To the best of the Companies knowledge, the carrying on of the
Companies’ business by the Companies’ employees will not, and by
contractors and consultants of the Companies is not reasonably expected
to, and the conduct of the Companies’ business as presently conducted
will not, conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract or
agreement under which any of such employees, contractors or consultants
of the Companies is now obligated.
	 
	 	4.15.6.	 	At no time during the conception of or reduction of any of the
Intellectual Property Rights to practice was any developer,
inventor or other contributor to such Intellectual Property










 



- 15 -


	 	 	 	Rights operating under any grants from any governmental entity
or agency, performing research sponsored by any governmental
entity or agency or private source, or subject to any
employment agreement, or invention assignment or nondisclosure
agreement, or other obligation with any third party that could
adversely affect the Companies’ rights in such Intellectual
Property Rights.






	 	4.15.7.	 	Each of the Companies has taken security measures to protect the
confidentiality and value of all the Intellectual Property Rights, which
measures are reasonable and customary in the industry in which the
Companies operate.
	 
	 	4.15.8.	 	Except as set forth on Exhibit 4.15.8, it is not, and, to the
Company’s best knowledge, will not become, necessary to utilize any
inventions of any of the Companies’ employees made prior to their
employment by the Companies other than those that have been assigned to
the Companies pursuant to the Proprietary Information and
Non-Competition Agreement signed by all such employees, a copy of which
agreements have been made available to Partech’s counsel, and which are
substantially in the form attached hereto as Exhibit 4.15.8A.
	 
	 	4.15.9.	 	Each employee, officer and consultant and each former employee,
officer and consultant of the Companies and/or any Person, who
contributed to the Intellectual Property Rights of the Company which has
been developed, or is currently being developed, executed a
Non-disclosure and Assignment of Invention Agreements sufficient to vest
in the Company good and exclusive title to such Intellectual Property
Rights as well as to the work product or result of endeavors of any of
the above, free of any rights or royalty or other obligations. The form
of such agreements has been made available to Partech’s counsel, and
such agreements are substantially in the form attached hereto as Exhibit
4.15.9, and to the Company’s best knowledge, none of the Companies’
employees, officers or consultants, or former employees, officers or
consultants, are in violation thereof.






	 	4.16.	 	A true and complete list of all material agreements and
contracts of at least US$ 50,000 and all distribution, reseller and OEM
agreements to which any of the Companies are a party, or by which their
property is bound and the Companies bonus, incentive or profit sharing plans,
are attached in Exhibit 4.16 hereto. Subject to all applicable laws,
all such agreements and contracts, are valid, in full force and effect and
binding upon the Companies. None of the Companies nor, to the best of its
knowledge, any other party thereto, is in breach thereof. True and correct
copies of all such contracts, or complete and accurate summaries and/or forms
thereof have been has been made available to Partech’s counsel.
	 
	 	4.17.	 	Except as set forth in Exhibit 4.17 attached hereto:






	 	4.17.1.	 	none of the directors, officers or shareholders of the Company: 










 



- 16 -


	 	 	 	(i)has been involved in any business arrangement or relationship with the
Company, which is material to the Company or its business; (ii) has any
cause of action or other claim whatsoever against or owes any amount to,
or is owed any amount by, the Company; (iii) has lent or advanced any
money to, or borrowed any money from, or guaranteed or otherwise become
liable for, any indebtedness or other obligations of the Company; (iv)
is a party to any contract, lease, agreement, arrangement or commitment
with the Company that is material to the Company in its business; or (v)
received from or furnished to the Company any goods or services (with or
without consideration), material to the Company in the conduct of its
business, since its incorporation.






	 	4.17.2.	 	There are no transactions or presently planned transactions between
the Company, the US Subsidiary or the European Subsidiary and any
directors, officers or shareholders of the Company.
	 
	 	4.17.3.	 	No employee, shareholder, officer or director of the Company, the US
Subsidiary or the European Subsidiary is indebted to the Company, nor is
the Company, the US Subsidiary or the European Subsidiary indebted (or
committed to make loans or extend or guarantee credit) to any of them.






	 	4.18.	 	All of the Companies’ senior employees are as listed in
Exhibit 4.18, and a complete and accurate summary of their material
terms of employment, are as listed in a table to be provided to the Investors
on the date of Closing. True and correct copies of such senior employees’
employment agreements (including but not limited to employment, confidentiality
and non-competition agreements) have been delivered to or made available to the
Partech’s counsel. Each of the Companies is, to the best of its knowledge, in
compliance in all material respects with all applicable laws, policies,
procedures and agreements relating to employment, terms and conditions of
employment and to the proper withholding and remission to the proper tax
authorities of all sums required to be withheld from employees or persons
deemed to be employees under applicable tax laws respecting such withholding,
and in any event any noncompliance (whether known or not) is not expected to
have a material adverse effect on the Company, the US Subsidiary or the
European Subsidiary. Each of the Companies has paid in full to all of its
respective employees, wages, salaries, commissions, bonuses, benefits and other
compensation due and payable to such employees on or prior to the date hereof.
The Company is not bound by or subject to (and none of its assets or properties
is bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union except for those provisions of
general agreements between the Histadrut and any Employers’ Union or
Organization which are applicable to all the employees in Israel by
Extension Order, and except for the Company’s obligations towards










 



- 17 -


	 	 	 	the
Industrial Employers Organization, in lieu of membership fees, as set
forth in Exhibit 4.18A. No labor union has requested or has
sought to represent any of the employees, representatives or agents
of the Companies. The Companies’ relations with their respective
employees are good and, to the Companies’ knowledge, no such employee
has materially violated any term of his or her employment agreement.
To the Company’s knowledge, neither the employment by the Companies
of any of their respective employees, nor the engagement by them of
any of their respective consultants, constitutes a breach of any of
such persons’ obligations to third parties, including non-competition
or confidentiality obligations.






	 	4.19.	 	The Company holds insurance policies required for, and
reasonably covering the risks customary and generally applicable to the conduct
of its business as presently conducted and as presently planned to be
conducted. Exhibit 4.19 contains a list of all insurance policies
issued for or to the benefit of the Company, the US Subsidiary and the European
Subsidiary. There is no claim by the Company, the US Subsidiary or the European
Subsidiary pending under any of such policies. All premiums payable under all
such policies have been paid and the Company, the US Subsidiary and the
European Subsidiary are otherwise in full compliance with the material terms
and conditions of all such policies. Such policies are in full force and
effect. None of the Companies has taken any action, or to the best of the
Company’s knowledge omitted to take any action, which would render any such
insurance policy void or voidable or which could result in a material increase
in the premium for any such insurance policy.
	 
	 	4.20.	 	The Companies, to the best of their knowledge, have all
permits, licenses and any similar authority necessary for the conduct of their
business or ownership of property as currently conducted, and in any event the
absence of any such permits, licenses and any similar authority (whether known
or not) is not expected to have a material adverse effect on any of the
Companies. The Companies are in full compliance with all of the terms and
requirements of each such permits, licenses etc., and no event has occurred or
circumstance exists that may (with or without notice or lapse of time)
constitute or result directly or indirectly in a material violation of or a
material failure to comply with any term or requirement of any such permit or
license, or result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to, any such
permit or license.
	 
	 	4.21.	 	None of the Companies, to the best of their knowledge, is in
material violation of any applicable law, regulation, order, decree or judgment
of any court or any governmental body applicable to them, and in any event any
material violation (whether known or not) is not expected to have a material
adverse effect on the Condition of the Companies. The Company is not in default
under its Corporate Documents and neither of the Subsidiaries is in default
under its incorporation
documents. None of the Companies is in material default under any










 



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	 	 	 	agreement, instrument or document to which it is a party or by which
it or any of its property is bound or affected.






	 	4.22.	 	Except as set forth in Exhibit 4.22, no action,
proceeding or governmental inquiry or investigation is pending or threatened,
to the best of the Company’s and the Subsidiaries’ knowledge, against the
Company, the US Subsidiary, the European Subsidiary or any of their respective
officers, directors or employees (in their capacity as such), or against the
Companies’ properties, before any court, arbitration board or tribunal or
administrative or other governmental agency, nor is the Company, the US
Subsidiary or the European Subsidiary aware of any fact which would result in
any such proceedings. None of the Companies is a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
governmental agency or instrumentality in any jurisdiction in which the
Companies are registered or in which any of the Companies operates. There is no
action, suit, proceeding or investigation initiated by the Companies currently
pending or that the Companies intend to initiate.
	 
	 	4.23.	 	No agent or broker or any Person acting in a similar capacity
on behalf of or under the authority of the Company, the US Subsidiary or the
European Subsidiary is or will be entitled to any broker’s or finder’s fee or
any other similar commission or fee in connection with the transactions
contemplated hereby.
	 
	 	4.24.	 	Except as set forth in Exhibit 4.24, no consents,
approvals, authorizations or permits are required in connection with the
consummation by the Company of the transactions contemplated by this Agreement.
	 
	 	4.25.	 	The Company has applied for and received funding from the
Office of the Chief Scientist of the Ministry of Industry and Trade (“OCS”).
The Company has also received an approval from the Investment Center of the
Ministry of Industry and Trade (“Investment Center”), for its investment plan.
The Company has complied (excluding non-compliances which are immaterial) and
will continue to comply with the terms and provisions of such programs and
approval. The Company is not in breach of the material terms and conditions of
such approvals and undertakings, the Company is not aware of any claim
asserting that it does not comply with the material terms of such approvals and
undertakings and has not received any claim or demand asserting to the same.
	 
	 	4.26.	 	Other than as set forth in Section 4.25 above, the ability of
the Companies to conduct their business and acquire all necessary licenses,
permits and authorizations for that purpose (including, but not limited to,
export permits), is not, to the best of their knowledge, encumbered or
restricted in any material way by any Israeli governmental body, agency or
authority (a “Governmental Body”) and in any event any such encumbrance or
restriction (whether known or not) is not expected to have a material adverse
effect on the Companies. Without limiting the generality of the foregoing, to
the best knowledge of the Company, there is no claim and there is no
basis for any claim by any Governmental Body against the Company










 



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	 	 	 	with
respect to its export of its technology, and none of its technology
is currently reasonably expected to be classified as restricted
technology by any Governmental Body.






	 	4.27.	 	Neither the execution and delivery of this Agreement and the
performance of the terms hereof nor the consummation of the transactions
contemplated hereby will conflict with, or result in a violation of, or
constitute a default under the Corporate Documents of the Companies, or any
agreement or other instrument to which the Companies are a party or by which
any of them is bound, or to which their property is subject, nor will the
performance by the Company of its obligations hereunder be reasonably expected
to violate any law, consent, permit, rule, regulation or order of any court, or
any governmental agency or body having jurisdiction over the Companies or any
of their property. Such execution, delivery and compliance will not give to
others any rights, including rights of termination, cancellation or
acceleration, in or with respect to any agreement or commitment referred to in
this Section, or to any of the properties of the Companies.
	 
	 	4.28.	 	This Agreement has been duly and validly authorized, executed
and delivered by the Company, constitutes the valid and binding obligation of
the Company, and subject to all applicable laws — it is enforceable against the
Company in accordance with its terms.
	 
	 	4.29.	 	Neither of the Company or anyone acting on its behalf has
offered or will offer securities of the Company or any part thereof or any
similar securities for issuance or sale to, or solicit any offer to acquire any
of the same from, anyone so as to make issuance and sale of the Shares
hereunder not exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended or the prospectus requirements of the
Israeli Securities Law, 1968. None of the shares of the Company’s issued and
outstanding share capital has been offered or sold in such a manner as to make
the issuance and sale of such shares not exempt from such registration and
prospectus requirements.
	 
	 	4.30.	 	The Company has made all information the Investors have
requested available to the Investors. Neither this Agreement nor any agreement
or document 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.
	 
	 	4.31.	 	The Company has made all information the Investors have
requested available to the Investors. Neither this Agreement nor any agreement
or document 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. To the best
of the Company’s knowledge, there is no material fact or information relating
to the Conditions of the Companies that has not been disclosed to the Investors
by the Company.










 



- 20 -








	5.	 	Representations and Warranties of the Investors
	 
	 	 	Each of the Investors, with respect to itself, hereby represents and warrants to the other
parties hereto as follows:






	 	5.1.	 	It has the full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, and the
execution and delivery of this Agreement have been authorized by all necessary
corporate action. This Agreement constitutes the valid and binding obligation
of it, and subject to all applicable laws — it is enforceable against it in
accordance with its respective terms.
	 
	 	5.2.	 	It and each of its subsidiaries is duly organized, validly
existing and in good standing under the laws of the country of its organization
or incorporation.
	 
	 	5.3.	 	Neither the execution and delivery of this Agreement nor
performance by it of the terms hereof, will conflict with, or result in a
breach or violation of, any of the terms, conditions and provisions of: (i) any
of its corporate documents, (ii) any judgment, order, injunction, decree, or
ruling of any court or governmental authority, domestic or foreign, to which it
is subject, (iii) any agreement, contract, lease, license or commitment to
which it is party or to which it is subject, or (iv) applicable laws. Such
execution, delivery and performance will not require the consent or approval of
any Person, which consent or approval has not heretofore been obtained or which
will be obtained by the Closing.
	 
	 	5.4.	 	Without derogating from the representations and warranties made
by the Companies herein, and the right of the Investors to rely thereon, it
represents that based on the information provided by the Companies, it has been
furnished with all information it has requested and/or all such information has
been made available to it, and that it has been afforded the opportunity to ask
questions of officers or other representatives of the Companies concerning the
business of the Companies. For the avoidance of doubt, the parties acknowledge
that the inclusion of any reference to any of the agreements and/or
transactions and/or information and/or materials in any of the exhibits to the
Agreement (the “Disclosed Matters”) shall not constitute any exception to the
representations and/or warranties made by the Company in the Agreement unless,
with regard to any particular exhibit, this Agreement states explicitly that
the contents of such exhibit constitute an exception to a specific warranty
and/or representation of the Company. It understands that making the Investment
and the purchase of the Shares involves substantial risk. It has experience as
an investor in securities of companies in the development stage and
acknowledges that it is able to fend for itself, can bear the economic risks of
such investment in the Shares and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of this investment in the Shares and protecting its own interests in
connection with this
investment. The Investors are experienced investors and have reviewed
and inspected all of the data and information provided to it










 



- 21 -


	 	 	 	by the
Company in connection with this Agreement and has the requisite
knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of such an investment, and
of investing, in the Company. The Investors can bear the risk of its
investment hereunder and a complete loss thereof. The Investors are
“accredited investors” within the meaning of Rule 501 of Regulation D
promulgated under the U.S. Securities Act of 1933, as amended.






	 	5.5.	 	It is purchasing the Shares for investment purposes only. The
Investors understand that the 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 Investor’s representations as
expressed herein.






	6.	 	Investors Rights Agreement
	 
	 	 	At the Closing, the Company, the Investors and certain shareholders of the Company shall
enter into and execute the Investors Rights Agreement, in the form attached hereto as
Exhibit 6 (the “Investors Rights Agreement”).






	7.	 	Affirmative Covenants






	 	7.1.	 	Use of Proceeds. The proceeds of the Investment shall
be used by the Company for operational and capital expenditure only, in
accordance with the Company’s cash flow and budget which (i) have been
presented in detail to and approved by the Investors prior to the date hereof;
and (ii) are subject to future changes as may be determined by the Board of
Directors of the Company.
	 
	 	7.2.	 	Proprietary and Non-Competition Agreements. The Company
will not employ, or continue to employ, any person who will have access to
confidential information with respect to the Company and its operations unless
such person has executed and delivered a Proprietary Information Agreement, and
will not employ, or continue to employ, any person who is contributing or will
contribute to the Intellectual Property of the Company unless such person has
executed and delivered a Proprietary Information and Inventions Assignment
Agreement to the satisfaction (as to substance and form) of the Company’s Board
of Directors. The inclusion of a non competition undertaking with respect to
any employee hired by the Company at any time after the Closing shall be
determined by the Board of Directors.
	 
	 	7.3.	 	No Publicity. Each of the parties hereto and any person
acting on their behalf shall not issue any public statement or press release
concerning this transaction without the prior written approval by the Majority
Investors (as defined in Section 10.4 herein) of the substance and form of any
such statement or release. Notwithstanding the foregoing and without derogating
from the provisions of Section 8 below, the Company and the Investors hereby
acknowledge that
Tamir Fishman Venture Capital II Ltd. is a public traded company, and
as such, has reporting requirements under Israeli laws 










 



- 22 -


	 	 	 	associated
therewith, and thus the parties hereto agree to the publishing by
Tamir Fishman Venture Capital II Ltd. of a report regarding this
transaction, as required pursuant to such laws.






	 	7.4.	 	Reports, Notices, Stamp Duty. Without derogating from
any provisions of this Agreement: (i) the Company will duly and timely file all
reports and notices required under any applicable law, regulation or instrument
to which the Company is party, in respect of consummation of the transactions
contemplated hereunder, and (ii) the Company shall fully bear and duly and
timely pay any stamp duty due under Israeli law on the issuance of the Shares
(including the issuance of any Company securities into which the Shares are
convertible).
	 
	 	7.5.	 	ESOP. The Company shall increase the reservation of
Ordinary Shares under the ESOP, by 1,712,093 Ordinary Shares (the “Increased
Reservation”), such that the total number of Ordinary Shares free for future
allocation under the ESOP at the Closing shall be 1,712,093 Ordinary Shares
which shall represent 2.5% of the Company’s issued and outstanding share
capital immediately subsequent to the Closing calculated on a Fully Diluted
Basis. The Company undertakes that all options and/or securities issued
pursuant to the ESOP subsequent to the Closing shall be subject to a vesting
period of at least 4 years from the date of grant or as otherwise determined by
the Board of Directors of the Company.
	 
	 	7.6.	 	Directors and Officers Insurance. The Company shall
maintain in full force and effect Directors and Officers Insurance policy,
covering the directors of the Company (including the director to be appointed
by Partech) in the scope and amount acceptable to the Majority Investors.
	 
	 	7.7.	 	Key Employees. The Company shall use its best efforts
to appoint a Qualified CEO for the Company promptly following the Closing.
Yigal Jacoby shall continue to serve as an active chairman of the Board of
Directors until the appointment of a Qualified CEO as aforesaid. For the
purpose hereof, the term “Qualified CEO” shall mean a CEO that has been
appointed with the consent of at least two-thirds (2/3) of the members of the
Board of Directors.
	 
	 	7.8.	 	Conduct Until Closing. The Company agrees, that until
the Closing, the Company shall conduct its business solely in the ordinary
course of business and, among other matters, shall not declare or make any
distribution to any shareholders, enter into any related party transactions or
sell any material assets of the Company (other than the Company’s products sold
in the ordinary course of business).






	8.	 	Confidentiality
	 
	 	 	Without derogating from any other agreement or undertaking to which any of the parties
hereto is or may become in the future subject and in addition to any such agreement or
undertaking, each Investor undertakes that it shall keep in confidence, and not use for any
purpose whatsoever except for internal purposes, any and all information relating to the
Company which has been provided to it by the Company or was otherwise obtained by it,










 



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	 	 	except
information which (i) is or shall be in the public domain not due to any act or omission of
such Investor in breach of law or agreement; (ii) was known to such Investor prior to the
disclosure as evidenced in written records; (iii) was legally transmitted or disclosed to
such Investor by a third party which to such Investor’s knowledge owes no obligation of
confidentiality to the Company; or (iv) is required to be disclosed pursuant to an order of
the court or other governmental body, stock exchange or regulatory body or by law or other
regulations, provided that to the extent possible and legally permissible: (a) such Investor
notifies the Company in writing of such a need to disclose as soon as reasonably possible;
and (b) discloses only such information as the Investor reasonably believes is required.
Notwithstanding the aforesaid, in connection with periodic reports to its shareholders,
investors, partners, or Permitted Transferees (as defined in the Amended Articles), an
Investor may make general statements, not containing technical or other confidential
information regarding the nature and progress of the Company’s business, and may provide
summary financial information of the Company regarding the Company’s financial information
in its reports to its respective shareholders, investors or partners, but may not annex to
such reports the full financial information provided by the Company. Furthermore, it is
hereby clarified that an Investor that is an investment fund shall be entitled to distribute
to its investors also the information regarding the Company set forth in Exhibit 8 hereto.






	9.	 	Indemnification






	 	9.1.	 	The Investors have the right to rely fully upon the
representations, warranties, covenants and agreements of the Company contained
in this Agreement or any Exhibit hereto or any other ancillary agreement or
document executed or delivered in connection with or pursuant to any of the
foregoing (“Transaction Document”). All representations, warranties, covenants
and agreements of the Companies shall survive the execution and delivery of
this Agreement and remain in full force and effect until the earlier of: (i) an
IPO; and (ii) the lapse of two (2) years following the Closing, provided,
however, that the representations and warranties of the Company in Section 4.14
(IP) shall survive and remain in full force and effect until the earlier of:
(i) an IPO; and (ii) the lapse of four (4) years following the Closing, and
provided, further, that the representations and warranties of the Company in
Section 4.12 shall survive and remain in full force and effect until the
earlier of: (i) an IPO; and (ii) the lapse of the statute of limitations
regarding such matter.
	 
	 	9.2.	 	The Company’s liability to each Investor for a breach of any of
its representations or warranties under this Agreement shall be limited to the
amount invested by such Investor hereunder plus an amount equal to 8% thereof
per annum (compounded annually). No claim shall be asserted by any or all of
the Investors in an amount lower than $50,000, provided that in case of a claim
in excess of the aforesaid threshold, the claim can be submitted for the entire
amount.
	 
	 	9.3.	 	Subject to the limitations set forth in Sections 9.1 and 9.2
above, the Company agrees to indemnify, defend and hold harmless the Investors
and their successors and assigns from and against all direct
claims, actions, suits, losses, liabilities, damages, deficiencies,
judgments, settlements, costs of investigation or other expenses










 



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	 	 	 	(including but not limited to interest, penalties and reasonable
attorneys’ fees and disbursements incurred in connection with
enforcing this indemnification) (collectively, “Losses”) based upon
or arising out of or any (i) inaccuracy in or any breach of any
representation or warranty of the Companies contained in this
Agreement and/or any Transaction Document; or (ii) failure of the
Company to comply with its obligations under the Transaction
Documents.






	 	 	 	In the event that any of the Investors shall sustain or incur any Losses in
respect of which indemnification may be sought by it pursuant hereto, such
Investor shall assert a claim for indemnification by giving prompt written
notice thereof (a “Claims Notice”) which shall describe in reasonable detail
the facts and circumstances upon which the asserted claim for indemnification
is based, to the party providing indemnification (the “Indemnitor”) and shall
thereafter keep the Indemnitor reasonably informed with respect thereto;
provided that failure of such Investor to give the Indemnitor prompt notice as
provided herein shall not relieve the Indemnitor of any of its obligations
hereunder, except to the extent that the Indemnitor is materially prejudiced
by such failure. In case any claim, action, suit, hearing or other proceeding
(a “Claim”) is brought against an Investor, the Indemnitor shall have the
right to assume, conduct and control the defense, compromise or settlement
thereof, by written notice to the Investor of its intention to do so within
ten (10) days after receipt of the Claims Notice, with counsel reasonably
satisfactory to the Investor, at the Indemnitor’s own expense, and thereupon
to prosecute in the name and on behalf of the Investor any available
cross-claims, counterclaims or third-party claims arising with respect to the
Claim. If the Indemnitor shall assume the defense of such Claim, it shall not
settle such Claim unless such settlement includes as an unconditional term
thereof the giving by the claimant or the plaintiff of a release of the
Investor, satisfactory to the Investor, from all liability with respect to
such Claim. Notwithstanding the assumption by the Indemnitor of the defense of
any Claim as provided in this Section 9.3 and without limiting the
Indemnitor’s right to assume, conduct and control the defense, compromise or
settlement thereof, the Investor shall be permitted to join in the defense of
such Claim and to employ counsel at its own expense, so long as such joining
does not interfere with the Indemnitor’s right to conduct and control such
matter.






	10.	 	Miscellaneous






	 	10.1.	 	The Company will pay promptly following the Closing, if and
only if, the transactions contemplated herein and the Closing hereunder shall
occur, all reasonable legal and other fees and costs incurred by the Investors,
including in connection with technical, legal and accounting due diligence
matters, the Transaction Documents, and out of pocket expenses of the
Investors, in an aggregate amount not to exceed US$40,000 plus Value Added Tax.
The costs or expenses of an Investor which are not covered by the Company as
aforesaid shall be born solely by such Investor.
	 
	 	10.2.	 	Each of the parties shall take such actions, including the
execution
and delivery of further instruments and voting its shares in the
Company, as may be necessary to give full effect to the provisions










 



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	 	 	 	hereof and to the intent of the parties hereto.






	 	10.3.	 	Each Investor agrees that no other Investor nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Investor shall be liable for any action herein or hereafter taken or omitted to
be taken by any of them in connection with the execution hereof or actions
contemplated herein, and each Investor shall be liable only for its own
representations, warranties, undertakings and obligations and shall not be
liable for any breach by any other Investor or for any action taken or omitted
to be taken by any other Investor in connection with the execution hereof and
the transactions and actions contemplated herein.






	 	10.4.	 	Any term of this Agreement may be amended only with the
written consent of the Company and the holders of the majority of the Preferred
D Shares (“Majority Investors”). Notwithstanding the foregoing, any term of the
Amended Articles and/or any term of an agreement attached as an exhibit hereto,
and/or any term of any document ancillary hereto or thereto, may be amended
only in accordance with the respective terms thereof.






	 	10.5.	 	Each of the Investors shall be entitled to transfer and assign
all or a part of its shares in the Company, rights and obligations hereunder,
in accordance with the provisions set forth in the Amended Articles with regard
to the transfer of shares of the Company. A condition to any such transfer or
assignment shall be that the transferee or assignee shall confirm in writing
its agreement to be bound by all the provisions hereof in respect of the rights
and duties transferred or assigned to it. The provisions hereof shall inure to
the benefit of, and be binding upon, such permitted successors, assigns, heirs,
executors, and administrators of the parties hereto.






	 	10.6.	 	This Agreement and the Exhibits hereto, and the Schedules and
Exhibits to such Exhibits, constitute the full and entire understanding and
agreement between the parties with regard to the subject matters hereof and
thereof. A party may waive any of its rights hereunder provided, however, that
such waiver shall be in writing and shall apply only to such party’s rights
hereunder.






	 	10.7.	 	No delay or omission to exercise any right, power, or remedy
accruing to any party upon any breach or default under this Agreement, shall be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent, or approval of any kind or character on
the part of any party of any breach or default under this Agreement, or any
waiver on the part of any party of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing.






	 	10.8.	 	All remedies, either under this Agreement or by law or
otherwise afforded to any of the parties, shall be cumulative and not
alternative.






	 	10.9.	 	This Agreement shall be governed exclusively by and construed
solely in accordance with, the laws of the State of Israel, without
regard to conflict of law principles thereof.










 



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	 	10.10.	 	If any provision of this Agreement is held by a court of competent
jurisdiction to be unenforceable under applicable law, then such provision
shall be excluded from this Agreement and the remainder of this Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms; provided, however, that in such event this
Agreement shall be interpreted so as to give effect, to the greatest extent
consistent with and permitted by applicable law, to the meaning and intention
of the excluded provision as determined by such court of competent
jurisdiction.






	 	10.11.	 	Any notice under this Agreement shall be in writing and shall be deemed to
have been duly given for all purposes (a) when received or seven (7) days after
it is mailed by prepaid registered mail; (b) upon the transmittal thereof by
facsimile; or (c) upon the manual delivery thereof, to the respective addressee
or fax numbers set forth above or to such other address of which notice as
aforesaid is actually received.






	 	10.12.	 	All Preferred Shares and Ordinary Shares issued upon conversion thereof held
or acquired by affiliated entities of an Investor (i.e. entities or persons
that are under common control of such Investor (“control” defined as ownership
of more than 50% of the securities or voting power in such entity)) or the
Permitted Transferees as defined in the Amended Articles of an Investor shall
be aggregated together for the purpose of determining the availability of any
rights under this Agreement.






	 	10.13.	 	This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and enforceable against the parties actually
executing such counterpart, and all of which together shall constitute one and
the same instrument.




IN WITNESS WHEREOF the parties have signed this Agreement as of the date first hereinabove set
forth.




	 	 	 	 	 
	Allot Communications Ltd.	 	 
	 
	 	 	 	 
	By:
	 	Yigal Jacoby	 	 
	 

	 	 	 	 
	Title:
	 	CEO and Chairman	 	 
	 

	 	 	 	 
	Signature:
	 	/s/ Yigal Jacoby	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	BancBoston Investments Inc.	 	 
	 
	 	 	 	 
	By:
	 	David T. Jeffrey	 	 
	 

	 	 	 	 
	Title:
	 	Director	 	 
	 

	 	 	 	 
	Signature:
	 	/s/ David T. Jeffrey	 	 
	 

	 	 	 	 











 



- 27 -



	 	 	 	 	 	 	 	 	 
	Gemini Israel II LP  	 	Gemini Israel II Parallel Fund LP
	 
	 	 	 	 	 	 	 	 
	By:

	 	David Cohen	 	 	 	By:	 	David Cohen
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	CFO	 	 	 	Title:	 	CFO
	 

	 	 
	 	 	 	 	 	 
	Signature:

	 	/s/ David Cohen	 	 	 	Signature:	 	/s/ David Cohen
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Gemini Partner Investors LP	 	Advent PGGM Gemini LP
	 
	 	 	 	 	 	 	 	 
	By:

	 	David Cohen	 	 	 	By:	 	David Cohen
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	CFO	 	 	 	Title:	 	CFO
	 

	 	 
	 	 	 	 	 	 
	Signature:

	 	/s/ David Cohen	 	 	 	Signature:	 	/s/ David Cohen
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Tamir Fishman Venture Capital II Ltd.	 	Tamir Fishman Ventures II (Cayman

Islands) LP
	 
	 	 	 	 	 	 	 	 
	By:

	 	[Illegible]	 	 	 	By:	 	[Illegible]
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	[Illegible]	 	 	 	Title:	 	[Illegible]
	 

	 	 
	 	 	 	 	 	 
	Signature:

	 	/s/ [Illegible]	 	 	 	Signature:	 	/s/ [Illegible]
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Tamir Fishman Ventures II CEO Funds

(U.S) LP	 	Tamir Fishman Ventures II LP
	 
	 	 	 	 	 	 	 	 
	By:

	 	[Illegible]	 	 	 	By:	 	[Illegible]
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	[Illegible]	 	 	 	Title:	 	[Illegible]
	 

	 	 
	 	 	 	 	 	 
	Signature:

	 	/s/ [Illegible]	 	 	 	Signature:	 	/s/ [Illegible]
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Tamir Fishman Ventures II CEO Funds LP	 	Tamir Fishman Ventures II (Israel) LP
	 
	 	 	 	 	 	 	 	 
	By:

	 	[Illegible]	 	 	 	By:	 	[Illegible]
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	[Illegible]	 	 	 	Title:	 	[Illegible]
	 

	 	 
	 	 	 	 	 	 
	Signature:

	 	/s/ [Illegible]	 	 	 	Signature:	 	/s/ [Illegible]
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Peter Grant — TFV Advisory Board member	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	Peter Grant	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Signature:
	 	/s/ Peter Grant	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Partech International Growth Capital 

I LLC	 	Partech International Growth Capital

II LLC
	 
	 	 	 	 	 	 	 	 
	By:

	 	[Illegible]	 	 	 	By:	 	[Illegible]
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	General Partner	 	 	 	Title:	 	General Partner
	 

	 	 
	 	 	 	 	 	 
	Signature:

	 	/s/ [Illegible]	 	 	 	Signature:	 	/s/ [Illegible]
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Partech International Growth Capital 

III LLC	 	AXA Growth Capital II L.P.
	 
	 	 	 	 	 	 	 	 
	By:

	 	[Illegible]	 	 	 	By:	 	[Illegible]
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	General Partner	 	 	 	Title:	 	General Partner
	 

	 	 
	 	 	 	 	 	 
	Signature:

	 	/s/ [Illegible]	 	 	 	Signature:	 	/s/ [Illegible]
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 











 



- 28 -


	 	 	 	 	 	 	 	 	 
	Double Black Diamond II LLC	 	Multinvest LLC
	 
	 	 	 	 	 	 	 	 
	By:

	 	[Illegible]	 	 	 	By:	 	[Illegible]
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	General Partner	 	 	 	Title:	 	General Partner
	 

	 	 
	 	 	 	 	 	 
	Signature:

	 	/s/ Illegible	 	 	 	Signature:	 	/s/ Illegible