Document:

WARRRANT DATED 05/14/03 ISSUED TO ALCHIMIA,INC.

 Exhibit 4.1 
  

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING THIS WARRANT AND/OR SUCH SECURITIES,
OR THE HOLDER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE WARRANT AND/OR SUCH SECURITIES SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE OR FOREIGN LAW. 
  
 WARRANT TO PURCHASE ORDINARY SHARES 
  
 ViryaNet Ltd., an Israeli Company whose shares are currently publicly traded on The Nasdaq SmallCap Market and on the Tel Aviv Stock Exchange (the
“Company”), hereby grants to Alchimia, Inc. (the “Holder”), the right to purchase from the Company the number of Ordinary Shares of the Company, nominal value NIS 1.0 each (the “Ordinary Shares”),
set forth below, subject to the terms and conditions set forth below, effective as of May 14, 2003 (the “Effective Date”). 
  

	 	1.	Number of Ordinary Shares Available for Purchase and Exercise Price 

  
 This Warrant may be exercised to purchase an aggregate of up to 119,336 Ordinary Shares, at an exercise price per each
Ordinary Share of $US$0.581 (the “Warrant Price”), subject to adjustments under Section 7 of this Warrant (the “Warrant Shares”). 
  

	 	2.	Term 

  
 This Warrant may be exercised, in whole, or in part (subject to Section 4 below), during the period beginning on the Effective Date and ending on May 14,
2006. 
  

	 	3.	Exercise of Warrant 

  
 This Warrant may be exercised in whole or in part on any number of occasions during its term. The Warrant may be exercised by the surrender of the Warrant
to the Company at its principal office together with the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder. This Warrant may be exercised for cash or pursuant to the cashless exercise provision set forth in
Section 14 hereof. To exercise for cash, the Notice of Exercise must be accompanied by payment in full of the amount of the aggregate purchase price of the Warrant Shares being purchased upon such exercise in immediately available funds, in U.S.
Dollars or NIS equivalent thereof, based on the representative rate of exchange published by the Bank of Israel and known at the time of payment. 

 The Company agrees that the Warrant Shares so purchased shall be issued as soon as practicable
thereafter, and that the Holder shall be deemed the record owner of such Warrant Shares as of and from the close of business on the date on which this Warrant shall be surrendered, together with payment in full as required above. In the event of a
partial exercise, the Company shall concurrently issue to the Holder a replacement Warrant on the same terms and conditions as this Warrant, but representing the number of Warrant Shares remaining after such partial exercise. 
  

	 	4.	Fractional Interest 

  
 No fractional shares will be issued in connection with any exercise hereunder, and the number of Warrant Shares issued shall be rounded down to the
nearest whole number. 
  

	 	5.	Warrant Confers No Rights of Shareholder 

  
 Except as otherwise set forth in this Warrant, the Holder shall not have any rights as a shareholder of the Company with regard to the Warrant Shares
prior to actual exercise resulting in the purchase of any Warrant Shares. 
  

	 	6.	Investment Representation 

  
 Neither this Warrant nor the Warrant Shares issuable upon the exercise of this Warrant have been registered under the Securities Act, or any other
securities laws. The Holder acknowledges by acceptance of the Warrant that (a) it has acquired this Warrant for investment and not with a view to distribution; (b) it has either a pre-existing personal or business relationship with the Company, or
its executive officers, or by reason of its business or financial experience, it has the capacity to protect its own interests in connection with the transaction; and (c) it is an accredited investor as that term is defined in Regulation D
promulgated under the Securities Act. The Holder agrees that any Warrant Shares issuable upon exercise of this Warrant will be acquired for investment and not with a view to distribution and such Warrant Shares will not be registered under the
Securities Act and applicable state securities laws and that such Warrant Shares may have to be held indefinitely unless they are subsequently registered or qualified under the Securities Act and applicable state securities laws, or based on an
opinion of counsel reasonably satisfactory to the Company, an exemption from such registration and qualification is available. The Holder, by acceptance hereof, consents to the placement of legend(s) on all securities hereunder as to the applicable
restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may issue stop
transfer instructions to its transfer agent in connection with such restrictions. 
  

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	 	7.	Adjustment of Warrant Price and Number of Shares 

  
 The number and kind of securities purchasable initially upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time
to time upon the occurrence of certain events, as follows: 
  

	 	a.	Adjustment for Shares Splits and Combinations. If the Company at any time or from time to time during the term of this Warrant effects a subdivision of the outstanding
Ordinary Shares, the number of Ordinary Shares issuable upon exercise of this Warrant immediately before the subdivision shall be proportionately increased, and conversely, if the Company at any time or from time to time combines the outstanding
Ordinary Shares, the number of Ordinary Shares issuable upon exercise of this Warrant immediately before the combination shall be proportionately decreased. Any adjustment under this Section 7(a) shall become effective at the close of business on
the date the subdivision or combination becomes effective. 

  

	 	b.	Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time, during the term of this Warrant makes, or fixes a record
date for the determination of holders of Ordinary Shares entitled to receive a dividend or other distribution payable in additional shares of Ordinary Shares, then and in each such event the number of Ordinary Shares issuable upon exercise of this
Warrant shall be increased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the number of Ordinary Shares issuable upon exercise of this Warrant by a
fraction: (i) the numerator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of Ordinary Shares issuable in
payment of such dividend or distribution, and (ii) the denominator of which is the total number of shares of Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date;
provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed thereof, the number of Ordinary Shares issuable upon exercise of this Warrant shall be recomputed
accordingly as of the close of business on such record date and thereafter the number of shares of Ordinary Shares issuable upon exercise of this Warrant shall be adjusted pursuant to this Section 7(b) as of the time of actual payment of such
dividends or distributions. 

  

	 	c.	Adjustments for Other Dividends and Distributions. In the event the Company at any time or from time to time during the term of this Warrant makes, or fixes a record
date for the determination of holders of Ordinary Shares entitled to receive a dividend or other distribution payable in securities of the Company other than Ordinary Shares, then in each such event provision shall be made so that the Holder shall
receive upon exercise of this Warrant, in addition to the number of Ordinary Shares receivable thereupon, the amount of securities of the Company that the Holder would have received had this Warrant been exercised for Ordinary Shares immediately
prior to such event (or the record date for such event) and had the Holder thereafter, during the period from the date of such event to and including the date of exercise, retained such securities receivable by it as aforesaid during such period,
subject to all other adjustments called for during such period under this Section and the Company’s Articles of Association with respect to the rights of the Holder. 

  

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	 	d.	Adjustment for Reclassification, Exchange and Substitution. If the Ordinary Shares issuable upon the exercise of this Warrant are changed into the same or a different
number of shares of any class or classes of shares, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or shares dividend or a reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section), then and in any such event the Holder shall have the right thereafter to exercise this Warrant into the kind and amount of shares and other securities receivable upon such recapitalization, reclassification
or other change, by holders of the number of shares of Ordinary Shares for which this Warrant might have been exercised immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein and
under the Company’s Articles of Association. 

  

	 	e.	Reorganization, Mergers, Consolidations or Sales of Assets. If at any time or from time to time during the term of this Warrant there is a capital reorganization of
the Ordinary Shares (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Subsection) or a merger or consolidation of the Company with or into another corporation, or the sale
of all or substantially all of the Company’s shares or properties and assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the Holder shall thereafter be entitled to
receive upon exercise of this Warrant, the number of shares or other securities or property of the Company, or of the successor corporation resulting from such merger or consolidation or sale, to which a holder of Ordinary Shares deliverable upon
conversion would have been entitled on such capital reorganization, merger, consolidation or sale. In any such case (except to the extent any cash or property is received in such transaction), appropriate adjustment shall be made in the application
of the provisions of this Subsection and the Company’s Articles of Association with respect to the rights of the Holder after the reorganization, merger, consolidation or sale to the end that the provisions of this Subsection and the
Company’s Articles of Association (including adjustment of the number of shares of Ordinary Shares issuable upon exercise of this Warrant) shall be applicable after that event and be as nearly equivalent to the provisions hereof as may be
practicable. 

  

	 	f.	Adjustment of Warrant Price. Upon each adjustment in the number of Ordinary Shares purchasable hereunder, the Warrant Price shall be proportionately increased or
decreased, as the case may be, in a manner that is the inverse of the manner in which the number of Ordinary Shares purchasable hereunder shall be adjusted. 

  

	8.	Transfer of This Warrant or Securities Issuable on Exercise Hereof 

  

	 	a.	With respect to any offer, sale or other disposition of this Warrant or securities into which such Warrant may be exercised, the Holder will give written notice to the Company prior
thereto, describing briefly the manner thereof, together with, if 

  

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 requested by the Company, a written opinion of such Holder’s counsel, to the effect that such offer,
sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Promptly, as practicable, upon receiving such written notice and opinion and warranties and representations, if so
requested, the Company, as promptly as practicable, shall deliver to the Holder one or more replacement Warrant certificates on the same terms and conditions as this Warrant for delivery to the transferees. Each Warrant thus transferred and each
certificate representing the securities thus transferred shall bear legend(s) as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is
not required in order to ensure compliance with the Securities Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. Any provision of this Warrant to the contrary notwithstanding, the
Holder may not offer, sell or otherwise dispose of this Warrant to any third party, other than to any transferee approved by the Company in writing in its sole discretion, provided however that the Company hereby acknowledges and agrees that Chris
Deren, Amanda Deburro and PeterJacobson shall be deemed to be approved transferees of the Warrant. In addition to the above, any transfer of this Warrant or the Warrant Shares shall be subject to the provisions of the Company’s Articles of
Association. 
  

	 	b.	In the event that the Company or its shareholders receive an offer to transfer all or substantially all of the shares in the Company, or to effect a merger or acquisition, or sale
of all or substantially all of the assets of the Company, then the Company shall promptly inform the Holder in writing of such offer. 

  

	9.	Representations and Warranties. 

  
 The Company represents and warrants to the Holder as follows: 
  

	 	a.	This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms. As of the Effective
Date, the Company is a corporation duly incorporated and validly existing under the laws of the State of Israel. 

  

	 	b.	The Warrant Shares are duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and not subject to any preemptive rights. 

  

	 	c.	The execution and delivery of this Warrant are not, and the issuance of the Warrant Shares upon exercise of this Warrant in accordance with the terms hereof will not be,
inconsistent with the Company’s Articles of Association, or any other organizational document of the Company. 

  

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	 	d.	The Company will not, by amendment of its Articles of Association or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities,
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder. Without limiting the generality of the foregoing, the Company will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Ordinary Shares upon the exercise of this Warrant. 

  

	 	e.	This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all the Company’s assets.

  

	10.	Loss, Theft, Destruction or Mutilation of Warrant 

  
 Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or Shares certificate,
and in case of loss, theft or destruction, of indemnity, or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Warrant or Shares
certificate, if mutilated, the Company will make and deliver a new Warrant or Shares certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or Shares certificate. 
  

	11.	Notices 

  
 Any notice or other communication hereunder shall be in writing and shall be deemed to have been given upon delivery, if personally delivered or three
business days after deposit if deposited in the mail for mailing by certified mail, postage prepaid, and addressed as follows: 
  

	

			
		
	 If to the Holder:
	 	 Alchimia, Inc., 20 Custom House Street, Suite 830, Boston,
 MA 02110

		
	 If to Company:
	 	ViryaNet Ltd.
	 	 	2 Willow Street, Southborough, Massachusetts
	 	 	Attn.: Samuel HaCohen
	 	 	Fax: 508-490-8666

  
 Each of the above
addressees may change its address for purposes of this paragraph by giving to the other addressees notice of such new address in conformance with this paragraph. 
  

	12.	Applicable Law; Jurisdiction 

  
 This Warrant shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts as applicable to contracts between two
residents of the Commonwealth of Massachusetts entered into and to be performed entirely within the Commonwealth of Massachusetts. Any dispute arising under or in relation to this 
  

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 Warrant shall be resolved exclusively in the state or federal courts in Massachusetts, and each of the
parties hereby submits irrevocably to the exclusive jurisdiction of any such court. 
  

	13.	Entire Agreement 

  
 This Warrant constitutes the entire agreement between the parties hereto with regard to the subject matters hereof, and supercedes any prior
communications, agreements and/or understandings between the parties hereto with regard to the subject matters hereof. 
  

	13A	Registration of the Warrant Shares 

  
 The Company shall include the Warrant Shares which may be issued upon exercise of this Warrant in the first Registration Statement (whether on Form F-1 or
Form F-3) to become effective after the Effective Date, if and when such Registration Statement becomes effective. 
  

	14.	Cashless Exercise. 

  
 Notwithstanding anything to the contrary contained in this Warrant, and only if a Registration Statement of the Company (as set forth in Section 13A
above) has not been declared effective prior to May 7, 2004 (the “Registration Deadline”), this Warrant may be exercised, after the Registration Deadline, in whole or in part, by presentation and surrender of this Warrant to the
Company at its principal executive offices with a written notice of the Holder’s intention to effect a cashless exercise, including the number (the “Cashless Exercise Number”) of shares of Ordinary Shares for which the Warrant
is being exercised. In the event of a cashless exercise, the Holder shall receive a number of Ordinary Shares equal to (i) the Cashless Exercise Number, multiplied by (ii) a fraction, (A) the numerator of which is the Market Price on the date of
exercise less the Warrant Price and (B) the denominator of which is the Market Price on the date of exercise. For purposes hereof, “Market Price” means, as of any date, (i) the average closing bid prices for the Ordinary Shares as
reported on The Nasdaq SmallCap Market by Bloomberg Financial Markets (“Bloomberg”) for the five (5) consecutive trading days immediately preceding such date, or (ii) if The Nasdaq SmallCap Market is not the principal trading market
for the Ordinary Shares, the average of the reported bid prices reported by Bloomberg on the principal trading market for the Ordinary Shares during the same period, or, if there is no bid price for such period, the last sales price reported by
Bloomberg for such period, or (iii) if the foregoing do not apply, the last sale price of such security in the over-the-counter market on the pink sheets or bulletin board for such security as reported by Bloomberg, or if no sale price is so
reported for such security, the last bid price of such security as reported by Bloomberg, or (iv) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the average fair market value as
reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the Holder, with the costs of the appraisal to be borne by the Company. The manner of determining the Market Price of the Ordinary Shares set
forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. 
  

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	15.	Issue Tax. 

  
 The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any
issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder.

  

	16.	Reports Under the Exchange Act. 

  
 With a view to making available to the Holder the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the
United States Securities and Exchange Commission (the “SEC”) that may at any time permit the Holder to sell securities of the Company to the public without registration (“Rule 144”), the Company agrees to use reasonable efforts
to file with the SEC in a timely manner and make and keep available all reports and other documents required of the Company under the Securities Act and the Exchange Act of 1934, as amended (the “Exchange Act”), so long as the Company
remains subject to such requirements and the filing and availability of such reports and other documents is required for the applicable provisions of Rule 144. 
  

Dated: May 14, 2003 
  

			
	 VIRYANET LTD.

		
	 By:
	 	 /s/    SAMUEL I. HACOHEN
  

	 Title:
	 	 Chairman of the Board
  

  

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 NOTICE OF EXERCISE 
  
 To: ViryaNet Limited 
  
 1. The undersigned hereby elects to purchase              shares of Ordinary Shares of
ViryaNet Limited, pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full in cash, or by surrender of securities issued by the Company (including a portion of this Warrant) having a
Market Value (in the case of a portion of this Warrant, determined in accordance with Section 14 of the Warrant) equal to $            . 
  
 2. In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Ordinary Shares are being acquired solely for the account of the undersigned and not as a nominee for any other party, or for investment, and that the undersigned will not offer, sell or otherwise dispose of any such
shares of Ordinary Shares except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. 
  
 3. Please issue a certificate representing said shares of Ordinary Shares in the name of the undersigned. 
  
 4. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned. 
  

	
	

	  
	

  
 (Date) 
 (Print Name) 

	
	  
	

  
 (Signature) 
  

 9WARRANT DATED 10/1/03 ISSUED TO S.G.H.M. LTD

 Exhibit 4.2 
  

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING THIS WARRANT AND/OR SUCH SECURITIES,
OR THE HOLDER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE WARRANT AND/OR SUCH SECURITIES SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE OR FOREIGN LAW. 
  
 WARRANT TO PURCHASE ORDINARY SHARES 
  
 ViryaNet Ltd., an Israeli Company whose shares are currently publicly traded on The Nasdaq SmallCap Market and on the Tel Aviv Stock Exchange (the “Company”), hereby grants to SHR Group Holdings and
Management [S.G.H.M] Limited (the “Holder”), the right to purchase from the Company the number of Ordinary Shares of the Company, nominal value NIS 1.0 each (the “Ordinary Shares”), set forth below, subject to the
terms and conditions set forth below, effective as of October 1, 2003 (the “Effective Date”). 
  

	1.	 	Number of Ordinary Shares Available for Purchase and Exercise Price 

  
 This Warrant may be exercised to purchase up to 52,000 Ordinary Shares, at an exercise price per each Ordinary Share of
$US1.59 (the “Warrant Price”), subject to adjustments under Section 7 of this Warrant (the “Warrant Shares”). 
  

	2.	 	Term 

  
 This Warrant may be exercised, in whole, or in part (subject to Section 4 below), during the period beginning on the Effective Date and ending 36 months
after the Effective Date. 
  

	3.	 	Exercise of Warrant 

  
 This Warrant may be exercised in whole or in part on any number of occasions during its term. The Warrant may be exercised by the surrender of the Warrant
to the Company at its principal office together with the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder. This Warrant may be exercised for cash only. To exercise for cash, the Notice of Exercise must be
accompanied by payment in full of the amount of the aggregate purchase price of the Warrant Shares being purchased upon such exercise in immediately available funds, in U.S. Dollars or NIS equivalent thereof, based on the representative rate of
exchange published by the Bank of Israel and known at the time of payment. 
  
 The Company agrees that the Warrant Shares so purchased shall be issued as soon as practicable thereafter, and that the Holder shall be deemed the record owner of such 

 Warrant Shares as of and from the close of business on the date on which this Warrant shall be
surrendered, together with payment in full as required above. In the event of a partial exercise, the Company shall concurrently issue to the Holder a replacement Warrant on the same terms and conditions as this Warrant, but representing the number
of Warrant Shares remaining after such partial exercise. 
  

	4.	 	Fractional Interest 

  
 No fractional shares will be issued in connection with any exercise hereunder, and the number of Warrant Shares issued shall be rounded down to the
nearest whole number. 
  

	5.	 	Warrant Confers No Rights of Shareholder 

  
 Except as otherwise set forth in this Warrant, the Holder shall not have any rights as a shareholder of the Company with regard to the Warrant Shares
prior to actual exercise resulting in the purchase of any Warrant Shares. 
  

	6.	 	Investment Representation 

  
 Neither this Warrant nor the Warrant Shares issuable upon the exercise of this Warrant have been registered under the Securities Act, or any other
securities laws. The Holder acknowledges by acceptance of the Warrant that (a) it has acquired this Warrant for investment and not with a view to distribution; (b) it has either a pre-existing personal or business relationship with the Company, or
its executive officers, or by reason of its business or financial experience, it has the capacity to protect its own interests in connection with the transaction; and (c) it is an accredited investor as that term is defined in Regulation D
promulgated under the Securities Act. The Holder agrees that any Warrant Shares issuable upon exercise of this Warrant will be acquired for investment and not with a view to distribution and such Warrant Shares will not be registered under the
Securities Act and applicable state securities laws and that such Warrant Shares may have to be held indefinitely unless they are subsequently registered or qualified under the Securities Act and applicable state securities laws, or based on an
opinion of counsel reasonably satisfactory to the Company, an exemption from such registration and qualification is available. The Holder, by acceptance hereof, consents to the placement of legend(s) on all securities hereunder as to the applicable
restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may issue stop
transfer instructions to its transfer agent in connection with such restrictions. 
  

	7.	 	Adjustment of Warrant Price and Number of Shares 

  
 The number and kind of securities purchasable initially upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time
to time upon the occurrence of certain events, as follows: 
  

	 	a.	 	Adjustment for Shares Splits and Combinations. If the Company at any time or from time to time during the term of this Warrant effects a subdivision of the outstanding
Ordinary Shares, the number of Ordinary Shares issuable upon exercise of this Warrant immediately before the subdivision shall be proportionately increased, and conversely, if the Company at any time or from time to time combines the outstanding
Ordinary Shares, the number of Ordinary Shares issuable upon exercise of this Warrant immediately before the 

  

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 combination shall be proportionately decreased. Any adjustment under this Section 7(a) shall become
effective at the close of business on the date the subdivision or combination becomes effective. 
  

	 	b.	 	Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time, during the term of this Warrant makes, or fixes a record
date for the determination of holders of Ordinary Shares entitled to receive a dividend or other distribution payable in additional shares of Ordinary Shares, then and in each such event the number of Ordinary Shares issuable upon exercise of this
Warrant shall be increased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the number of Ordinary Shares issuable upon exercise of this Warrant by a
fraction: (i) the numerator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of Ordinary Shares issuable in
payment of such dividend or distribution, and (ii) the denominator of which is the total number of shares of Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date;
provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed thereof, the number of Ordinary Shares issuable upon exercise of this Warrant shall be
recomputed accordingly as of the close of business on such record date and thereafter the number of shares of Ordinary Shares issuable upon exercise of this Warrant shall be adjusted pursuant to this Section 7(b) as of the time of actual payment of
such dividends or distributions. 

  

	 	c.	 	Adjustments for Other Dividends and Distributions. In the event the Company at any time or from time to time during the term of this Warrant makes, or fixes a record
date for the determination of holders of Ordinary Shares entitled to receive a dividend or other distribution payable in securities of the Company other than Ordinary Shares, then in each such event provision shall be made so that the Holder shall
receive upon exercise of this Warrant, in addition to the number of Ordinary Shares receivable thereupon, the amount of securities of the Company that the Holder would have received had this Warrant been exercised for Ordinary Shares immediately
prior to such event (or the record date for such event) and had the Holder thereafter, during the period from the date of such event to and including the date of exercise, retained such securities receivable by it as aforesaid during such period,
subject to all other adjustments called for during such period under this Section and the Company’s Articles of Association with respect to the rights of the Holder. 

  

	 	d.	 	Adjustment for Reclassification, Exchange and Substitution. If the Ordinary Shares issuable upon the exercise of this Warrant are changed into the same or a different
number of shares of any class or classes of shares, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or shares dividend or a reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section), then and in any such event the Holder shall have the right thereafter to 

  

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 exercise this Warrant into the kind and amount of shares and other securities receivable upon such
recapitalization, reclassification or other change, by holders of the number of shares of Ordinary Shares for which this Warrant might have been exercised immediately prior to such recapitalization, reclassification or change, all subject to further
adjustment as provided herein and under the Company’s Articles of Association. 
  

	 	e.	 	Reorganization, Mergers, Consolidations or Sales of Assets. If at any time or from time to time during the term of this Warrant there is a capital reorganization of
the Ordinary Shares (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Subsection) or a merger or consolidation of the Company with or into another corporation, or the sale
of all or substantially all of the Company’s shares or properties and assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the Holder shall thereafter be entitled to
receive upon exercise of this Warrant, the number of shares or other securities or property of the Company, or of the successor corporation resulting from such merger or consolidation or sale, to which a holder of Ordinary Shares deliverable upon
conversion would have been entitled on such capital reorganization, merger, consolidation or sale. In any such case (except to the extent any cash or property is received in such transaction), appropriate adjustment shall be made in the application
of the provisions of this Subsection and the Company’s Articles of Association with respect to the rights of the Holder after the reorganization, merger, consolidation or sale to the end that the provisions of this Subsection and the
Company’s Articles of Association (including adjustment of the number of shares of Ordinary Shares issuable upon exercise of this Warrant) shall be applicable after that event and be as nearly equivalent to the provisions hereof as may be
practicable. 

  

	 	f.	 	Adjustment of Warrant Price. Upon each adjustment in the number of Ordinary Shares purchasable hereunder, the Warrant Price shall be proportionately increased or
decreased, as the case may be, in a manner that is the inverse of the manner in which the number of Ordinary Shares purchasable hereunder shall be adjusted. 

  

	8.	 	Transfer of This Warrant or Securities Issuable on Exercise Hereof 

  

	 	a.	 	With respect to any offer, sale or other disposition of this Warrant or securities into which such Warrant may be exercised, the Holder will give written notice to the Company prior
thereto, describing briefly the manner thereof, together with, if requested by the Company, a written opinion of such Holder’s counsel, to the effect that such offer, sale or other distribution may be effected without registration or
qualification (under any federal or state law then in effect). Such opinion letter and all such transferees must warrant and represent that each such transferee is an “accredited” investor as that term is defined under Regulation D of the
Securities Act. Promptly, as practicable, upon receiving such written notice and opinion and warranties and representations, if so requested, the Company, as promptly as practicable, shall deliver to the Holder one or more replacement Warrant
certificates on the same terms and conditions as this Warrant for delivery to the transferees. Each Warrant thus 

  

 - 4 - 

 transferred and each certificate representing the securities thus transferred shall bear legend(s) as to
the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may
issue stop transfer instructions to its transfer agent in connection with such restrictions. Any provision of this Warrant to the contrary notwithstanding, the Holder may not offer, sell or otherwise dispose of this Warrant to any third party, other
than to any transferee approved by the Company in writing in its sole discretion. In addition to the above, any transfer of this Warrant or the Warrant Shares shall be subject to the provisions of the Company’s Articles of Association.

  

	 	b.	 	In the event that the Company or its shareholders receive an offer to transfer all or substantially all of the shares in the Company, or to effect a merger or acquisition, or sale
of all or substantially all of the assets of the Company, then the Company shall promptly inform the Holder in writing of such offer. 

  

	9.	 	Registration of the Warrant Shares. 

  
 The Company shall use best efforts to include the Warrant Shares issuable upon exercise of this Warrant in the first Registration Statement (whether on
Form F-1 or Form F-3) to become effective after the Effective Date, if and when such Registration Statement becomes effective. 
  

	10.	 	Representations and Warranties. 

  
 The Company represents and warrants to the Holder as follows: 
  

	 	a.	 	This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms.

  

	 	b.	 	The Warrant Shares are duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and not subject to any preemptive rights. 

  

	 	c.	 	The execution and delivery of this Warrant are not, and the issuance of the Warrant Shares upon exercise of this Warrant in accordance with the terms hereof will not be,
inconsistent with the Company’s Articles of Association. 

  

	11.	 	Loss, Theft, Destruction or Mutilation of Warrant 

  
 Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or Shares certificate,
and in case of loss, theft or destruction, of indemnity, or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Warrant or Shares
certificate, if mutilated, the Company will make and deliver a new Warrant or Shares certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or Shares certificate. 
  

	12.	 	Notices 

  
 Any notice or other communication hereunder shall be in writing and shall be deemed to have been given upon delivery, if personally delivered or three
business days after 
  

 - 5 - 

 deposit if deposited in the mail for mailing by certified mail, postage prepaid, and addressed as
follows: 
  

			
	 If to Holder:
	  	SHR Group Holdings and Management [S.G.H.M] Limited
	 	  	___________________________
	 If to Company:
	  	ViryaNet Ltd.
	 	  	2 Willow Street, Southborough, Massachusetts
	 	  	attn.: Samuel HaCohen
	 	  	fax: 508-490-8666

  
 Each of the above
addressees may change its address for purposes of this paragraph by giving to the other addressees notice of such new address in conformance with this paragraph. 
  

	13.	 	Applicable Law; Jurisdiction 

  
 This Warrant shall be governed by and construed in accordance with the laws of the State of Israel as applicable to contracts between two residents of the
State of Israel entered into and to be performed entirely within the State of Israel. Any dispute arising under or in relation to this Warrant shall be resolved exclusively in the competent court for Tel Aviv-Jaffa district, and each of the parties
hereby submits irrevocably to the exclusive jurisdiction of such court. 
  

	14.	 	Entire Agreement 

  
 This Warrant constitutes the entire agreement between the parties hereto with regard to the subject matters hereof, and supercedes any prior
communications, agreements and/or understandings between the parties hereto with regard to the subject matters hereof. 
  
 Dated: October 1, 2003 
  

	
	 VIRYANET LTD.

	
	 By: /s/    SAMUEL I. HACOHEN

	
	 Title: Chairman of the Board

  

 - 6 - 

 NOTICE OF EXERCISE 
  
 To: ViryaNet Limited 
  

	1.	 	The undersigned hereby elects to purchase              shares of Ordinary Shares of ViryaNet Limited, pursuant to
the terms of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full. 

  

	2.	 	In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of Ordinary Shares are being acquired solely for the account of the undersigned and not
as a nominee for any other party, or for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of Ordinary Shares except under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws. 

  

	3.	 	Please issue a certificate representing said shares of Ordinary Shares in the name of the undersigned. 

  

	4.	 	Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned. 

  

			
	 _________________________
	 	 _________________________

	 (Date)
	 	 (Print Name)

		
	 	 	 _________________________

	 	 	 (Signature)

  

 - 7 -

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