EX-10.2



 





Exhibit 10.2




Share Purchase Agreement



This Share Purchase Agreement (this “Agreement”) is entered into as of May 18, 2006 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”)
and certain investors, the names and addresses of which are set forth on Exhibit I attached
hereto (each an “Investor” and 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 E 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.	 	“European Subsidiary” means Allot Communication Europe SARL, a company duly
organized and validly existing under the laws of France.
	 
	 	1.3.4.	 	“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
controlling it.
	 
	 	1.3.5.	 	“IPO” means an underwritten initial public offering of Ordinary Shares of the
Company.
	 
	 	1.3.6.	 	“Japanese Subsidiary” means Allot Communications Japan K.K., a company duly
organized and validly existing under the laws of Japan.
	 
	 	1.3.7.	 	“JVP” means Jerusalem Venture Partners IV LP, Jerusalem Venture Partners IV-A
LP, Jerusalem Venture Partners Entrepreneurs Fund IV LP, and Jerusalem Venture
Partners IV (Israel) LP, together.
	 
	 	1.3.8.	 	“Liens” means all mortgages, liens, pledges, charges, security interests, third
party rights or other claims or encumbrances of any kind whatsoever.
	 
	 	1.3.9.	 	“Ordinary Shares” means the Ordinary Shares of the Company NIS 0.01 par value.










 



 







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	 	1.3.10.	 	“Ordinary A Shares” means the Ordinary Shares (Series A) of the Company NIS
0.01 par value.
	 
	 	1.3.11.	 	“Person” means an individual, any entity, corporation, partnership, joint
venture, trust or non-incorporated organization.
	 
	 	1.3.12.	 	“Preferred A Shares” means the Series A Preferred Shares of the Company NIS
0.01 par value.
	 
	 	1.3.13.	 	“Preferred B Shares” means the Series B Preferred Shares of the Company NIS
0.01 par value.
	 
	 	1.3.14.	 	“Preferred C Shares” means the Series C Preferred Shares of the Company NIS
0.01 par value.
	 
	 	1.3.15.	 	“Preferred D Shares” means the Series D Preferred Shares of the Company NIS
0.01 par value.
	 
	 	1.3.16.	 	“Preferred E Shares” means the Series E Preferred Shares of the Company NIS
0.01 par value.
	 
	 	1.3.17.	 	“Preferred Shares” means the Preferred A Shares, the Preferred B Shares, the
Preferred C Shares, the Preferred D Shares and the Preferred E Shares.
	 
	 	1.3.18.	 	“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.
	 
	 	1.3.19.	 	“Singaporean Subsidiary” means Allot Communications (Asia Pacific) PTE. LTD., a
company duly organized and validly existing under the laws of Singapore.
	 
	 	1.3.20.	 	“Subsidiaries” means the US Subsidiary, the European Subsidiary, the Japanese
Subsidiary and the Singaporean Subsidiary.
	 
	 	1.3.21.	 	“US Subsidiary” means Allot Communications, Inc., a corporation duly organized
and validly existing under the laws of the State of California.
	 
	 	1.3.22.	 	“Walden” means Walden Israel Fund LP, Walden Israel Ventures LP, Gadish Kranot
Gmulim Ltd., Tagmulim Ltd., Katsir Kupat Tagmulim Upitzuyim Ltd., Keren Hishtalmut
Le’Academaim Bemada’ai Haruach Vehachevra Ltd. and Keren Or Kupat Tagmulim
Upitsuim Ltd., together.






	 	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 and Purchase of Shares






	 	2.1.1.	 	The Company shall issue and allot to the Investors an aggregate of 4,521,501
Preferred E Shares (the “Shares”), to be allocated among them as set forth in
Exhibit I, in consideration of the payment to the Company by each of the
Investors of US$1.21641 for each Preferred E Share (the “Original Price Per
Share”), totaling, for all Investors together, US$5,500,000 (the “Purchase
Price”).










 



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	 	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 immediately following
the Closing (as defined below), the Shares shall represent 5.759% of the share
capital of the Company, on a Fully Diluted Basis. For the purpose of this
Agreement, “Fully Diluted Basis” shall mean all issued and outstanding share
capital of the Company, including Preferred A Shares, Preferred B Shares,
Preferred C Shares, Preferred D Shares and Preferred E 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), triggered by the Closing.





3. Closing





	 	3.1.	 	Closing. The transactions contemplated hereby shall take place at a
closing (the “Closing”) to be held on May 18, 2006 (the “Closing Date”), or such other
date, time as the parties shall mutually agree. For the avoidance of doubt, the Closing
shall take place simultaneously with and contingent upon the consummation of the Walden
Share Sale (as defined below).
	 
	 	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 binding 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 E Shares and the performance of the
Company’s obligations hereunder and pursuant to all of the transactions,
agreements and instruments 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.
	 
	 	3.2.1.2.	 	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, agreements and instruments 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










 



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	 	 	 	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; (v) new Signature Rights
of the Company; and (vi) the transfer of the Company’s shares from
Walden to JVP.
	 
	 	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 Ori Rosen & Co., counsel to the Company.
	 
	 	3.2.1.6.	 	Copies of all applicable consents and waivers, including but not
limited to (i) duly executed waivers in the form attached hereto as
Exhibit 3.2.1.6 executed by all of the shareholders of the
Company, pursuant to which each of the shareholders, not exercising
preemptive rights in connection with this Agreement, shall have waived
any preemptive rights, rights of first refusal, co-sale rights, including
any such rights with respect to the sale of the Company’s shares from
Walden to JVP (the “Walden Share Sale”), or similar rights it may have
with respect to the transactions contemplated in connection with this
Agreement (the “Rights”); or (ii) evidence that the Rights have expired.
	 
	 	3.2.1.7.	 	An acknowledgement of the Office of the Chief Scientist of the
Ministry of Industry and Trade of the State of Israel, an approval of 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.
	 
	 	3.2.1.8.	 	A copy of the Company’s shareholders’ register updated as of
immediately following the Closing, reflecting the issuance of the Shares
and the Walden Share Sale.
	 
	 	3.2.1.9.	 	A copy of the Amended and Restated Investors Rights Agreement (the
“Investors Rights Agreement”) executed by the Investors, certain
shareholders of the Company, the Company and any required party, in the
form attached hereto as Exhibit 3.2.1.9.
	 
	 	3.2.1.10.	 	A duly executed copy of the Management Rights Letter addressed to
JVP, in the form attached hereto as Exhibit 3.2.1.10.
	 
	 	3.2.1.11.	 	A duly executed copy of the US Tax Requirements Letter addressed to
JVP, in the form attached hereto as Exhibit 3.2.1.11.
	 
	 	3.2.1.12.	 	Certificate of Good Standing of the US Subsidiary from the Secretary
of State of California dated as close as possible to the Closing Date and
in no event earlier than five days prior to the Closing Date.




	 	 	 	 













 



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	 	3.2.2.	 	Upon the Closing 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 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










 



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	 	 	 	the Companies to own the Intellectual Property Rights or 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, the European Subsidiary is a
company duly organized and validly existing under the laws of France, the Japanese
Subsidiary is a company duly organized and validly existing under the laws of Japan and
the Singaporean Subsidiary is a company duly organized and validly existing under the
laws of Singapore. 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 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











 



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	 	 	 	business on a consolidated basis. Attached hereto in Exhibit 4.2 are true and
accurate copies of the Company’s Certificate of Incorporation, Memorandum of
Association and current Articles of Association as in effect prior to the execution
hereof, and each of the Subsidiaries’ 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 share capital of the Company immediately prior to the Closing
shall consist of (A) 69,807,819 Ordinary Shares, of which (i) 10,862,535 shares are
issued and outstanding, (ii) 14,351,071 shares are reserved for issuance upon the
exercise of employee, director and consultant options and the Tmura warrant granted
under the Company’s Employee Stock Option Plan (the “ESOP”) or under the warrant
granted to Tmura, 14,346,396 of which are reserved for exercise of options (and the
Tmura 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, of
which (i) 7,765,580 have been designated Series A Preferred Shares, all of which are
issued and outstanding, (ii) 29,989,420 have been designated Series B Preferred Shares,
of which 27,062,220 shares are issued and outstanding, and 2,306,737 are reserved for
issuance upon exercise of options granted by the Company; (iii) 898,200 have been
designated Series C Preferred Shares all of which are issued and outstanding; and (iv)
7,851,381 have been designated Series D Preferred Shares, all of which are issued and
outstanding.
	 
	 	 	 	The authorized capital stock of the Company at the Closing shall consist of (A)
80,286,318 Ordinary Shares, of which (i) 10,862,535 shares shall be issued and
outstanding, (ii) 14,351,071 shares are reserved for issuance upon the exercise of
employee, director and consultant options and the Tmura warrant granted under the
ESOP or under the warrant granted to Tmura, of which 14,346,396 Ordinary Shares are
reserved for exercise of options (and the Tmura warrant) that have been granted and
are outstanding or promised; (B) 2,687,600 Ordinary A Shares, all of which are issued
and outstanding; (C) 51,026,082 Preferred Shares, of which (i) 7,765,580 have been
designated Series A Preferred Shares, all of which shall be issued and outstanding,
(ii) 29,989,420 have been designated Series B Preferred Shares, of which 27,062,220
shares shall be issued and outstanding, and 2,306,737 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; (iv)
7,851,381 have been designated Series D Preferred Shares, all of which are issued and
outstanding; and (v) 4,521,501 have been designated Series E 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 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 U.S. Securities Act of 1933, the Israeli Securities Law, 1968 or any other
applicable law of any other jurisdiction. 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










 



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	 	 	 	securities, outstanding warrants, options or other rights or agreements to subscribe
for, or to purchase from the Company, 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 securities from the Company. The Shares, at the time the Company
has to issue and allot the same in accordance with this Agreement, are duly
authorized, validly issued, 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 the Investors Rights Agreement, and the issuance
of Shares upon 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 in the manner and terms specified in the Corporate Documents,
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, and will have the rights, preferences, privileges and restrictions
set forth in the Corporate Documents, as amended hereunder, and the Investors Rights
Agreement, and the issuance thereof will be 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, each
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, the European Subsidiary, the Japanese Subsidiary
and the Singaporean 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, 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 no 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 or any Subsidiary; (ii) any voting agreement or other
arrangement among the Company’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 Companies’ directors or officers are set forth in Exhibit
4.6.
	 
	 	4.7.	 	Since December 31, 2005, 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.
	 	 	 	 










 



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	 	4.8.	 	The Company has furnished the Investors a draft of consolidated, United States
Dollar-denominated financial statements of the Company and the Subsidiaries for the
period ended December 31, 2005 (a true and complete copy of which is attached hereto in
Exhibit 4.8), (the “Financial Statements”). The Financial Statements are true
and accurate in all material respects, are in accordance with the books and records of
the Companies 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, 2005, the Companies have conducted each of their
businesses in the ordinary course consistent with past practice, and there has not
been: (i) to the Companies’ knowledge, 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 any 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 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) with respect to any asset of the
Companies 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 new
transaction or change of terms of an existing transaction, between the Companies and a
party who is known by the Companies to be an 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, which is reasonably likely to have a material adverse effect
on the Condition of the Companies; (viii) any sale, transfer or lease of or mortgage or
pledge or imposition of lien on any of the Companies’ assets other than in the ordinary
course of business; (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 or in Exhibit 4.9, 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 loan, security or have
otherwise










 



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	 	 	 	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. These returns and reports are true and correct in all material
respects except to the extent that a reserve has been reflected on the Financial
Statements in accordance with generally accepted accounting principles. The Companies
have paid all taxes and other assessments due, except those contested by them in good
faith that are listed in Exhibit 4.12 and except to the extent that a reserve
has been reflected on the Financial Statements in accordance with generally accepted
accounting principles. The provision for taxes of the Company as shown in the
Financial Statements is adequate for taxes due or accrued as of the date thereof. 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 a material adverse affect on
the Condition of the Companies. The US Subsidiary has not elected pursuant to the
Internal Revenue Code of 1986, as amended (the “Code”), to be treated as a Subchapter S
corporation or a collapsible corporation pursuant to Section 1362(a) or Section 341(f)
of the Code. Except as set forth in Exhibit 4.12, the Companies have never 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. No federal income tax returns and no state income or franchise
tax or sales or use tax returns have ever been audited by governmental authorities.
Since the date of the Financial Statement, the Companies have not incurred any taxes,
assessments or governmental charges other than in the ordinary course of business and
have made adequate provisions on their books of account for all taxes, assessments and
governmental charges with respect to their business, properties and operations for such
period. The Companies have withheld or collected from each payment made to each of
their employees, the amount of all taxes (including, but not limited to, federal income
taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and have paid the same when due to the
proper tax-receiving officers or authorized depositories.
	 
	 	4.13.	 	The real and personal property of the Companies includes such assets as set
forth in the Financial Statements as of the date of the Financial Statement and
additional assets purchased in the ordinary course of business. Except as set forth in
Exhibit 4.13, the 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 its leases or
licenses, and the Companies hold a valid leasehold or licensed interest in the
respective property they lease or license. To the Company’s knowledge, none of the
shareholders of any of the Company 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










 



 - 11 - 








	 	 	 	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, domain names and mask works owned by the Company and each of the
Subsidiaries, or licensed to the Companies; (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 Companies; 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 to 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 “off-the-shelf” products available
on market terms used in the operation of the Companies’ business, is necessary for
the Companies to enable them to conduct their business as currently conducted. The
only open source software or similar software that is used by the Companies is
listed in Exhibit 4.15.1B hereto and the terms of the licenses thereof
were made available to Investors’ counsel.
	 
	 	4.15.2.	 	Except as explicitly and specifically set forth in Exhibit 4.15.2, (i)
no Intellectual Property Right of any of the Companies is subject to any
stipulation or agreement, and to the Companies’ best knowledge, the Intellectual
Property Rights or any part thereof are not subject to any law or outstanding
order, or agreement, materially restricting the use or licensing thereof by the
Companies; (ii) the Companies possess all right, title, and interest in and to the
Intellectual Property Rights which the Companies purport to own and good and valid
license to the licensed Intellectual Property Rights, and the Companies own such
rights with respect to the Intellectual Property that they purport to own, 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
and the Subsidiaries, 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 the Companies purport to own and
that have been developed by the shareholders of any of the Companies and/or by
former shareholders of any of the Companies and/or by any related parties thereto
and/or by any employees or former employees of any of the Companies and/or by any
consultants or former consultants of any of the Companies and/or by any related
parties thereto, have been assigned to the Companies; (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 that the Companies purport to own are not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge that applies to
the Companies in the jurisdictions in which they are registered and conduct
business; (vii) to the best knowledge of the Company, no action, suit, proceeding,
hearing, investigation, charge,










 



 - 12 - 








	 	 	 	complaint, claim, or demand is pending or is threatened, which challenges the
legality, validity, enforceability, use or ownership of the Intellectual
Property that the Companies purport to own in the jurisdictions in which they
are 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 that the Companies
purport to own, nor is any of the Companies 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 that the Companies
purport to own, 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
Investors’ counsel, nor has the Company entered into any covenant not to
compete in any market, field or application, geographical area or with any
third party; (ix) 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 the Company’s 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 in their capacity as
such) has violated or infringed, or, by conducting its business as currently
conducted, violates or infringes, any patents, trademarks, service marks, trade
names, trade secrets, copyrights or other proprietary rights of any other Person.
	 
	 	4.15.4.	 	The Company is unaware 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 Company’s 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 that the Company purports to own to practice was any developer,
inventor or other contributor to such Intellectual Property 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.

	 	 	 	 










 



 - 13 - 







	 	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.	 	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 agreement signed by all such
employees.
	 
	 	4.15.9.	 	Each employee, officer and consultant and each former employee, officer and
consultant of the Companies, and/or any other Person who contributed to the
Intellectual Property Rights of the Company which have been developed, or are
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 forms
of such agreements have been made available to Investors’ counsel, and such
agreements are substantially in the forms attached hereto in 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 (which, with
respect to agreements and contracts with a specified value shall include only contracts
with a value of at least US$ 50,000) and all distribution, reseller and OEM agreements
to which any of the Companies is a party, or by which their property is bound and the
Companies bonus, incentive or profit sharing plans is 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 and, to the Company’s knowledge,
on the other parties thereto, and none of the Companies nor, to the best of the
Company’s knowledge, any other party thereto, is in breach of such agreements and
contracts. True and correct copies of all such contracts, or complete and accurate
summaries and/or forms thereof have been made available to Investors’ 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 Companies: (i) has been
involved in any business arrangement or relationship with the Companies, which is
material to any of the Companies or their business; (ii) has any cause of action
or other claim whatsoever against or owes any amount to, or is owed any amount by,
the Companies; (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 Companies; (iv) is a party to any contract, lease, agreement,
arrangement or commitment with the Companies that is material to any of the
Companies in their business; or (v) received from or furnished the Companies any
goods or services (with or without consideration) material to the Companies in the
conduct of their business, since their incorporation.
	 
	 	4.17.2.	 	There are no transactions or presently planned transactions between any of the











 



 - 14 - 







	 	 	 	Companies and any directors, officers or shareholders of the Companies.
	 
	 	4.17.3.	 	No employee, shareholder, officer or director of any of the Companies, is
indebted to the Companies, nor is any of the Companies 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 is 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 Investors’ counsel. Each of the Companies is, to the best of its
knowledge and was at all times, 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 any of the Companies. 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 and none
of the Companies has any accrued debt or monetary obligation (including for vacation or
salaries) to employees or former employees, except as reflected in the Financial
Statements (to the extent such debt or monetary obligations are required to be
reflected in financial statements). None of the Companies is 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 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 Companies hold insurance policies required for and reasonably covering the
risks customary and generally applicable to the conduct of their 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 Companies. There is
no claim by any of the Companies pending under any of such policies. All premiums
payable under all such policies have been paid and the Companies 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










 



 - 15 - 








	 	 	 	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 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.	 	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 or the Subsidiaries 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
any of the Companies 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. The foregoing includes, without limiting its generality, actions,
pending or threatened, involving the prior employment of any of the Companies’
employees or the use by any of them in connection with the Company’s business, of any
information, property or techniques allegedly proprietary to any of their former
employers, nor to the Companies’ knowledge is there any reasonable basis for such.
There is no action, suit, proceeding or investigation by the Companies 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 any of the Companies is or will be entitled to any broker’s or
finder’s fee or any other similar commission, acceleration, fee or other compensation
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. The Company has also received an
approval from the Investment Center of the Ministry of Industry and Trade, for its
investment plan. The Company has complied (excluding non-compliances which are
immaterial) and intends to 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











 



 - 16 - 







	 	 	 	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 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,
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.	 	Prior to or at Closing, this Agreement and the Investors Rights Agreement
shall have been duly and validly authorized, executed and delivered by the Company,
shall constitute valid and binding obligations of the Company, and, subject to all
applicable laws, shall be enforceable against the Company in accordance with their
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.	 	No insolvency proceeding of any character, including, without limitation,
bankruptcy, receivership, reorganization, composition or arrangement with creditors,
voluntary or involuntary, with respect to the Companies is pending or, to the knowledge
of the Company, threatened.
	 
	 	4.31.	 	No customer or supplier that was significant to the Company during the period
covered by the Financial Statements or that has been significant to the Company
thereafter, has terminated, materially reduced, or, to the best of the Company’s
knowledge, threatened in writing to terminate or materially reduce, its purchases from
or provision of products or services to the Company, as the case may be, which










 



 - 17 - 


	 	 	 	actual or threatened termination or reduction has or is expected to have a material
adverse effect on the Company’s business, taken as a whole.






	 	4.32.	 	Except as set forth in Exhibit 4.32, the Company has not granted
exclusive rights to manufacture, produce, assemble, license, market or sell its
products to any other Person.
	 
	 	4.33.	 	To the Company’s knowledge, there are no defects in the Companies’ products
that would materially and adversely affect, in the short term and for the life of such
products, their performance or create an unusual risk of injury to person or to
property. Except as set forth in Exhibit 4.33, to the Company’s knowledge, the
products have been designed and manufactured so as to meet and comply in all material
respects with all applicable governmental and industry standards currently in effect,
and have received all governmental approvals, if any, necessary to allow their sale and
use, except where non-compliance therewith or non-receipt thereof will not have a
material adverse effect on the Condition of the Companies. Except as disclosed in
Exhibit 4.33, since January 1, 2002, none of the Companies has received any
material customer complaints concerning their products that may have a material adverse
effect of the business of the Company, taken as a whole.
	 
	 	4.34.	 	Without limiting in any way the Investors’ reliance upon the representations
and warranties of the Companies in this Agreement, 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.





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 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 Investor to rely thereon, it represents that
based on the










 



 - 18 - 


	 	 	 	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 Investor 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 Investor
understands 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. Affirmative Covenants





	 	6.1.	 	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
operating plan, 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.
	 
	 	6.2.	 	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.
	 
	 	6.3.	 	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 8.4 herein) of the substance and form of any such statement or release.
Notwithstanding the foregoing, 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 associated therewith, and thus the parties
hereto










 



 - 19 - 


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






	 	6.4.	 	Reports, Notices. Without derogating from any provisions of this
Agreement, 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.
	 
	 	6.5.	 	ESOP. 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.
	 
	 	6.6.	 	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 JVP) in a minimum amount of
$3,000,000.
	 
	 	6.7.	 	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).





7. Indemnification





	 	7.1.	 	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 Documents”). All
representations, warranties, covenants and agreements of the Company shall survive the
execution and delivery of this Agreement and remain in full force and effect and a
claim with respect to any breach thereof may only be made 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 4.15 (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 (Tax) 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.
	 
	 	7.2.	 	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.
	 
	 	7.3.	 	Subject to the limitations set forth in Sections 7.1 and 7.2 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
(including but not limited to interest, penalties and reasonable attorneys’ fees and
disbursements incurred in connection with enforcing this indemnification)










 



 - 20 - 


	 	 	 	(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 7.3 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.





8. Miscellaneous





	 	8.1.	 	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 agreement and other
documents contemplated hereby, and out of pocket expenses of the Investors, in an
aggregate amount not to exceed US$40,000 plus Value Added Tax. For the avoidance of
doubt, such maximum amount shall include reimbursement of expenses of Tamir Fishman’s
venture funds and Partech’s venture funds in an aggregate amount not to exceed US$7,500
plus Value Added Tax. Each Investor acknowledges that payment of its fees by the
Company raises a potential conflict of interest and hereby consents to the payment
arrangement set forth herein. The costs or expenses of an Investor which are not
covered by the Company as aforesaid shall be borne solely by such Investor.
	 
	 	8.2.	 	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 hereof and to the intent of the parties
hereto.
	 
	 	8.3.	 	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










 



 - 21 - 


	 	 	 	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.






	 	8.4.	 	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 E Shares issued hereunder (the
“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.
	 
	 	8.5.	 	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.
	 
	 	8.6.	 	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.
	 
	 	8.7.	 	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.
	 
	 	8.8.	 	All remedies, either under this Agreement or by law or otherwise afforded to
any of the parties, shall be cumulative and not alternative.
	 
	 	8.9.	 	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.
	 
	 	8.10.	 	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.
	 
	 	8.11.	 	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










 



 - 22 - 


	 	 	 	by prepaid registered mail; (b) one (1) business day following the transmittal
thereof by electronic mail, or facsimile with confirmation of receipt; 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. If
a notice is, in fact, received by the addressee, then it shall be deemed to have been
duly served, when received, notwithstanding it having been defectively addressed or
failed in some other respect, to comply with the provisions of this Section 8.11.






	 	8.12.	 	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.
	 
	 	8.13.	 	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.
Executed counterparts delivered via any form of electronic transmission shall be deemed
as originals.





[Signature Pages Follow]










 



 - 23 - 


[First Signature Page to Allot 2006 Share Purchase Agreement]



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




	 	 	 	 	 	 	 	 	 	 	 
	COMPANY:
	 	 	 	 	 	 	 	 	 	 
	Allot Communications Ltd.	 	 	 	 	 	 	 	 
	By:
	 	Adi Sapiv	 	 	 	 	 	 	 	 
	 	 	 

	 	 	 	 	 	 	 	 
	Title:

	 	Chief Financial Officer
	 	 	 	 	 	 	 	 
	 


	 	 

	 	 	 	 	 	 	 	 
	Signature:

	 	/s/ Adi Sapiv	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	INVESTORS:	 	 	 	 	 	 	 	 
	Tamir Fishman Venture Capital II Ltd.	 	 	 	Tamir Fishman Ventures II (Cayman	 	 
	 	 	 	 	 	 	Islands) LP	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	Title:

	 	 

	 	 	 	Title:	 	 

	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Signature:

	 	[Illegible]	 	 	 	Signature:
	 	[Illegible]
	 

	 	 

	 	 	 	 	 	 

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

	 	 	 	 	 	By:	 	 	 	 
	Title:

	 	 

	 	 	 	Title:
	 	 

	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Signature:

	 	[Illegible]	 	 	 	Signature:
	 	[Illegible]
	 

	 	 

	 	 	 	 	 	 

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

	 	 	 	 	 	By:	 	 	 	 
	Title:

	 	 

	 	 	 	Title:
	 	 

	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Signature:

	 	[Illegible]	 	 	 	Signature:
	 	[Illegible]
	 

	 	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Partech International Growth Capital	 	 	 	 	 	 	 	 
	I LLC
	 	 	 	 	 	 	 	 	 	 
	By:
	 	Ami Amir	 	 	 	 	 	 	 	 
	 	 	 

	 	 	 	 	 	 	 	 
	Title:

	 	General Partner
	 	 	 	 	 	 	 	 
	 


	 	 

	 	 	 	 	 	 	 	 
	Signature:

	 	/s/ Ami Amir	 	 	 	 	 	 	 	 
	 

	 	 

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

	 	Ami Amir	 	 	 	By:	 	Ami Amir	 	 
	 	 	 

	 	 	 	 	 	 

	 	 
	Title:

	 	General Partner
	 	 	 	Title:

	 	General Partner
	 	 
	 


	 	 

	 	 	 	 	 	 

	 	 
	Signature:

	 	/s/ Ami Amir	 	 	 	Signature:

	 	/s/ Ami Amir	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Double Black Diamond II LLC	 	 	 	Multinvest LLC	 	 
	By:

	 	Ami Amir	 	 	 	By:	 	Ami Amir	 	 
	 	 	 

	 	 	 	 	 	 

	 	 
	Title:

	 	General Partner
	 	 	 	Title:

	 	General Partner
	 	 
	 


	 	 

	 	 	 	 	 	 

	 	 
	Signature:

	 	/s/ Ami Amir	 	 	 	Signature:

	 	/s/ Ami Amir	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 












 



 - 24 - 


[Second Signature Page to Allot 2006 Share Purchase Agreement]



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




	 	 	 	 	 	 	 	 	 	 	 
	Jerusalem Venture Partners IV LP	 	 	 	Jerusalem Venture Partners IV-A LP	 	 
	By:

	 	Erel Margalit	 	 	 	By:	 	Erel Margalit	 	 
	Title:

	 	 

	 	 	 	Title:
	 	 

	 	 
	Signature:

	 	/s/
Erel Margalit

	 	 	 	Signature:
	 	/s/
Erel Margalit

	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Jerusalem Venture Partners	 	 	 	 	 	 	 	 
	Entrepreneurs Fund IV LP	 	 	 	Jerusalem Venture Partners IV (Israel) LP	 	 
	By:

	 	Erel Margalit	 	 	 	By:	 	Erel Margalit	 	 
	Title:

	 	 

	 	 	 	Title:
	 	 

	 	 
	Signature:

	 	/s/
Erel Margalit

	 	 	 	Signature:
	 	/s/
Erel Margalit

	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Shlomo Shimshowitz	 	 	 	Eitan Mossauoff	 	 
	Signature:

	 	/s/ Shlomo Shimshowitz	 	 	 	Signature:	 	/s/ Eitan Mossauoff	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Amos Fouzailov	 	 	 	 	 	 	 	 
	Signature:
	 	/s/ Amos Fouzailov