Document:

PURCHASE AGREEMENT

 Exhibit 4(A)(21) 
 PURCHASE AGREEMENT 
 THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 5th day
of August, 2005 by and among ViryaNet Ltd., an Israeli corporation (the “Company”), and the Investors set forth on the signature pages affixed hereto (each an “Investor” and collectively the “Investors”). 
 Recitals 
 A. The Investors have
previously purchased US$2,500,000 in aggregate principal amount of the Company’s 7.5% Convertible Notes due 2014 (the “Existing Notes”). 
 B. The Company and the Investors want to amend and restate the Existing Notes. 
 C. The Company and the
Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (“Regulation D”), as promulgated by the U.S. Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended; and 
 D. The Investors wish to purchase from the Company, and the
Company wishes to sell and issue to the Investors, upon the terms and conditions stated in this Agreement, an aggregate of (i) US$480,000 of the Company’s 7.5% Convertible Notes due 2013 in the form attached hereto as Exhibit A (the
“Notes”), which are convertible into Ordinary Shares, par value 1.0 NIS, of the Company’s capital stock (the “Ordinary Shares”) at a conversion price of US$2.205 (subject to adjustment), (ii) 333,333 Ordinary Shares
(the “Shares”) at a purchase price of US$2.10 per share, and (iii) warrants to purchase an aggregate of 116,666 Ordinary Shares (subject to adjustment) at an exercise price of US$2.10 per share (subject to adjustment) in the form
attached hereto as Exhibit B (the “Warrants”); and 
 E. Simultaneously with the sale of the Notes, the Shares and the
Warrants, the Existing Notes will be amended and restated to contain the same terms and conditions of the Notes (as so amended and restated, the “Restated Notes”). 
 F. Contemporaneous with the sale of the Notes, the Shares and the Warrants and the amendment and restatement of the Existing Notes, the parties hereto
are executing and delivering a Registration Rights Agreement, in the form attached hereto as Exhibit C (the “Registration Rights Agreement”), pursuant to which the Company will agree to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and applicable state securities laws. 

 In consideration of the mutual promises made herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
 1. Definitions. In addition to those
terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below: 
 “Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such
Person. 
 “Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City are
open for the general transaction of business. 
 “Company’s Knowledge” means the actual knowledge of the
executive officers (as defined in Rule 405 under the 1933 Act) of the Company, after due inquiry. 
 “Confidential
Information” means trade secrets, confidential information and know-how (including but not limited to ideas, formulae, compositions, processes, procedures and techniques, research and development information, computer program code,
performance specifications, support documentation, drawings, specifications, designs, business and marketing plans, and customer and supplier lists and related information). 
 “Control” (including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 
 “Conversion Shares” means the Ordinary Shares issuable upon the conversion of the Notes and the Restated Notes, excluding
the Payment Shares. 
 “Intellectual Property” means all of the following: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and Internet domain names, together
with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals for any of the foregoing; and (v) proprietary computer software (including but not
limited to data, data bases and documentation). 
 “Liens” means any pledge, hypothecation, assignment,
deposit arrangement, lien, charge, claim, security interest, security title, mortgage, security deed or deed of trust, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction). For the avoidance of doubts, Liens do not include the placement of Company’s source codes in escrow under escrow agreements with third parties in the ordinary course of
business. 
  

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 “Material Adverse Effect” means a material adverse effect on
(i) the assets, liabilities, results of operations, condition (financial or otherwise), business, or prospects of the Company and its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform its obligations under the
Transaction Documents. 
 “Nasdaq” means The Nasdaq Stock Market, Inc. 
 “Payment Shares” means Ordinary Shares issued as payment pursuant to Section 7 of the Notes and the Restated Notes.

 “Permitted Liens” means (a) Liens imposed by law for taxes that are not yet due or are being
contested in good faith and for which adequate reserves have been established in accordance with generally accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith and by appropriate proceedings; (c) pledges and deposits made in
the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property. 
 “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association,
joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. 
 “Purchase Price” shall mean One Million One Hundred Eighty Thousand United States Dollars (US$1,180,000). 
 “Registration Statement” has the meaning set forth in the Registration Rights Agreement. 
 “SEC Filings” has the meaning set forth in Section 4.6. 
 “Securities” means the Notes, the Restated Notes, the Shares, the Warrants, the Warrant Shares, the Conversion Shares and
the Payment Shares. 
 “Senior Debt” means all amounts due to Bank Hapolaim under the Loan Agreement, dated
July 14, 2003, the Factoring Agreement, dated June 25, 2002, the Credit Line and the Overdraft Facility made available to the Company. 
 “Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at 

  

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least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which)
is owned directly or indirectly by such first Person. 
 “Transaction Documents” means this Agreement, the
Notes, the Restated Notes, the Warrants and the Registration Rights Agreement. 
 “Warrant Shares” means the
Ordinary Shares issuable upon the exercise of the Warrants. 
 “1933 Act” means the Securities Act of 1933,
as amended, or any successor statute, and the rules and regulations promulgated thereunder. 
 “1934 Act”
means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder. 
 2.
Purchase and Sale of the Notes, Shares and Warrants; Restatement of Existing Notes. Subject to the terms and conditions of this Agreement, on the Closing Date, each of the Investors shall severally, and not jointly, purchase, and the Company
shall sell and issue to the Investors, the Shares, the Notes and the Warrants in the respective amounts set forth opposite the Investors’ names on the signature pages attached hereto in exchange for the Purchase Price as specified in
Section 3(a) below. Also on the Closing Date, the Existing Notes shall automatically and without any action on the part of the Investors be amended and restated into the Restated Notes. 
 3. Closing. Upon confirmation that the other conditions to the Closing specified herein have been satisfied or duly waived by the Investors, the
Company shall deliver to Lowenstein Sandler PC, in trust, the Notes, the Restated Notes, the Warrants and certificates representing the Shares, registered in such name or names as the Investors may designate, with instructions that such securities
are to be held for release to the Investors only upon (i) payment in full of the Purchase Price by all the Investors and (ii) the delivery of the Existing Notes to the Company. Upon such receipt by Lowenstein Sandler PC of the Notes, the
Existing Notes, the Warrants and the certificates representing the Shares, each Investor shall promptly, but no more than one Business Day thereafter, (i) cause a wire transfer in same day funds to be sent to the account of the Company as
instructed in writing by the Company, in an amount representing such Investor’s pro rata portion of the Purchase Price as set forth on the signature pages to this Agreement and (ii) deliver the Existing Notes to the Company. On the date
(the “Closing Date”) the Company receives the Purchase Price and the Existing Notes, the Notes, the Existing Notes, the Warrants and the certificates representing the Shares shall be released to the Investors (the “Closing”). The
Closing shall take place at the offices of Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th Floor, New York,
New York, or at such other location and on such other date as the Company and the Investors shall mutually agree. 
  

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 4. Representations and Warranties of the Company. The Company hereby represents and warrants to
the Investors that, except as set forth in the schedules delivered herewith (collectively, the “Disclosure Schedules”): 
 4.1 Organization, Good Standing and Qualification. Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing (to the extent relevant) under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on its business as now conducted and to own its properties. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary unless the failure to so qualify has not and could not reasonably be expected to have a Material
Adverse Effect. The Company’s Subsidiaries are listed on Schedule 4.1 hereto. 
 4.2 Authorization. The
Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and shareholders necessary for (i) the authorization, execution and delivery of the Transaction Documents,
(ii) authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities. The Transaction Documents constitute the
legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors’ rights generally. 
 4.3 Capitalization. Schedule 4.3 sets forth
(a) the authorized capital stock of the Company on the date hereof; (b) the number of shares of capital stock issued and outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock plans; and
(d) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Notes, the Restated Notes and the Warrants) exercisable for, or convertible into or exchangeable for any shares of capital stock
of the Company. All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights and were issued in full compliance with
applicable securities laws and any rights of third parties. Except as described on Schedule 4.3, all of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid,
nonassessable and free of pre-emptive rights, were issued in full compliance with applicable securities laws and any rights of third parties and are owned by the Company, beneficially and of record, subject to no Liens. Except as described on
Schedule 4.3, no Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company. Except as described on Schedule 4.3, there are no outstanding warrants, options, convertible
securities or other rights, agreements or arrangements of any character under which the Company or any of its Subsidiaries is or may be obligated to issue any equity securities of any kind and except as contemplated by this Agreement, neither the
Company nor any of its Subsidiaries is currently in negotiations for the issuance of any equity securities of any kind. Except as described on Schedule 4.3 and except for the Registration Rights Agreement, there are no voting agreements,
buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among the Company and any of the securityholders of the Company relating to the securities of the Company held by them. Except as described on
Schedule 4.3 and except as provided in the Registration Rights Agreement, no Person has the right to require the Company to register any 

  

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securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own
account or for the account of any other Person. 
 Except as described on Schedule 4.3, the issuance and sale of the
Securities hereunder will not obligate the Company to issue Ordinary Shares or other securities to any other Person (other than the Investors) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any
outstanding security. 
 Except as described on Schedule 4.3, the Company does not have outstanding shareholder
purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events. 
 4.4 Valid Issuance. The Shares have been duly and validly authorized, executed and delivered and, upon payment of the Purchase
Price as contemplated in Section 3, will be validly issued, fully paid and non-assessable free and clear of all Liens, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and
except for those created by the Investors. The Notes and the Restated Notes have been duly and validly authorized. The Conversion Shares issuable upon the conversion of the Notes and the Restated Notes have been duly and validly authorized and, upon
the due conversion of the Notes or the Restated Notes, as applicable, will be validly issued, fully paid and non-assessable free and clear of all Liens, except for restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws and except for those created by the Investors. The Payment Shares issuable in respect of the Notes and the Restated Notes are duly and validly authorized and, upon issuance pursuant to the terms of the Notes or the
Restated Notes, as applicable, will be validly issued, fully paid and non-assessable free and clear of all Liens, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for
those created by the Investors. The Warrants have been duly and validly authorized. Upon the due exercise of the Warrants, the Warrant Shares will be validly issued, fully paid and non-assessable free and clear of all encumbrances and restrictions,
except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investors. The Company has reserved a sufficient number of Ordinary Shares for issuance of the
Warrant Shares and the Conversion Shares and the Payment Shares, free and clear of all Liens, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the
Investors. 
 4.5 Consents. The execution, delivery and performance by the Company of the Transaction Documents and the
offer, issuance and sale of the Securities require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official, except for filings that have been made pursuant to applicable securities laws and the
approvals by the Israeli Investment Center, the Israeli Chief Scientist, which have been obtained and which are in full force and effect, and post-sale filings pursuant to applicable securities laws which the Company undertakes to file within the
applicable time periods. Except as described in the immediately preceding sentence and subject to the accuracy of the representations and warranties 

  

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of each Investor set forth in Section 5 hereof, the Company has taken all action necessary to exempt (i) the issuance and sale of the Securities,
(ii) the issuance of the Warrant Shares upon due exercise of the Warrants, (iii) the issuance of the Conversion Shares upon due conversion of the Notes and the Restated Notes, (iv) the issuance of the Payment Shares in accordance with
the terms of the Notes and the Restated Notes, and (v) the other transactions contemplated by the Transaction Documents from the provisions of any shareholder rights plan or other “poison pill” arrangement, any anti-takeover, business
combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company’s memorandum of association or articles of association that is or
could reasonably be expected to become applicable to the Investors as a result of the transactions contemplated hereby, including without limitation, the issuance of the Securities and the ownership, disposition or voting of the Securities by the
Investors or the exercise of any right granted to the Investors pursuant to this Agreement or the other Transaction Documents. 
 4.6 Delivery of SEC Filings; Business. The Company has made available to the Investors through the EDGAR system, true and complete copies of the Company’s most recent Annual Report on Form 20-F for the fiscal year ended
December 31, 2004 (as amended prior to the date hereof, the “20-F”), and all other reports filed by the Company pursuant to the 1934 Act since the filing of the 20-F and prior to the date hereof (collectively, the “SEC
Filings”). The SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such period. The Company and its Subsidiaries are engaged in all material respects only in the business described in the SEC Filings and the
SEC Filings contain a complete and accurate description in all material respects of the business of the Company and its Subsidiaries, taken as a whole. 
 4.7 Use of Proceeds. The net proceeds of the sale of the Notes, Warrants and Shares hereunder shall be used by the Company for working capital and general corporate purposes. 
 4.8 No Material Adverse Change. Since December 31, 2004, except as identified and described in the SEC Filings or as described
on Schedule 4.8, there has not been: 
 (i) any change in the consolidated assets, liabilities, financial condition or
operating results of the Company from that reflected in the financial statements included in the 20-F, except for changes in the ordinary course of business which have not and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate; 
 (ii) any declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or repurchase of any securities of the Company; 
 (iii) any material damage, destruction or loss, whether or not covered by insurance to any assets or properties of the Company or its Subsidiaries; 
  

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 (iv) any waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it; 
 (v) any satisfaction or discharge of any Liens or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of business and which is not material to the assets, properties, financial condition, operating results or business of the Company and its Subsidiaries taken as a whole (as
such business is presently conducted and as it is proposed to be conducted); 
 (vi) any change or amendment to the
Company’s memorandum of association or articles of association, or material change to any material contract or arrangement by which the Company or any Subsidiary is bound or to which any of their respective assets or properties is subject;

 (vii) any material labor difficulties or labor union organizing activities with respect to employees of the Company or any
Subsidiary; 
 (viii) any material transaction entered into by the Company or a Subsidiary other than in the ordinary course
of business; 
 (ix) the loss of the services of any key employee, or material change in the composition or duties of the
senior management of the Company or any Subsidiary; 
 (x) the loss or threatened loss of any customer which has had or could
reasonably be expected to have a Material Adverse Effect; or 
 (xi) any other event or condition of any character that has
had or could reasonably be expected to have a Material Adverse Effect. 
 4.9 SEC Filings; F-3 Eligibility. 

(a) At the time of filing thereof, the SEC Filings complied as to form in all material respects with the requirements of the 1934 Act
and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. 
 (b) Each registration statement and any amendment thereto filed by the Company since January 1, 2002 pursuant to the 1933 Act and the
rules and regulations thereunder, as of the date such statement or amendment became effective, complied as to form in all material respects with the 1933 Act and did not contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements made therein not misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of the closing of any sale of securities
pursuant thereto did not contain any untrue statement of a material fact or omit to state any material fact 

  

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required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not
misleading. 
 (c) The Company is eligible to use Form F-3 to register the Registrable Securities (as such term is defined in
the Registration Rights Agreement) for sale by the Investors as contemplated by the Registration Rights Agreement. 
 4.10
No Conflict, Breach, Violation or Default. The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the
terms and provisions of, or constitute a default under (i) the Company’s memorandum of association or articles of association, both as in effect on the date hereof (true and complete copies of which have been made provided to the
Investors), or (ii)(a) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company, any Subsidiary or any of their respective assets or properties, or (b) any
agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or a Subsidiary is bound or to which any of their respective assets or properties is subject. 
 4.11 Tax Matters. The Company and each Subsidiary has timely prepared and filed all tax returns required to have been filed by the
Company or such Subsidiary with all appropriate governmental agencies and timely paid all taxes shown thereon or otherwise owed by it. The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are
adequate in all material respects, and there are no material unpaid assessments against the Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of any additional taxes, penalties or interest for any fiscal
period or audits by any federal, state or local taxing authority except for any assessment which is not material to the Company and its Subsidiaries, taken as a whole. All taxes and other assessments and levies that the Company or any Subsidiary is
required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due. There are no tax Liens or claims pending or, to the Company’s Knowledge, threatened against
the Company or any Subsidiary or any of their respective assets or property. There are no outstanding tax sharing agreements or other such arrangements between the Company and any Subsidiary or other corporation or entity. 
 4.12 Title to Properties. Except as disclosed in the SEC Filings, the Company and each Subsidiary has good and marketable title to
all real properties and all other properties and assets owned by it, in each case free from Liens, other than Permitted Liens and Liens securing the Senior Debt, and defects that would materially affect the value thereof or materially interfere with
the use made or currently planned to be made thereof by them; and except as disclosed in the SEC Filings, the Company and each Subsidiary holds any leased real or personal property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof by them. 
 4.13 Certificates, Authorities
and Permits. The Company and each Subsidiary possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, and neither the Company nor any

  

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Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined
adversely to the Company or such Subsidiary, could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate. 
 4.14 No Labor Disputes. No material labor dispute with the employees of the Company or any Subsidiary exists or, to the Company’s Knowledge, is imminent. 
 4.15 Intellectual Property. 
 (a) No Intellectual Property of the Company or its Subsidiaries which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted has been or is now involved in any cancellation, dispute or litigation, and, to the Company’s Knowledge, no such action is threatened. Neither the Company nor its Subsidiaries owns any right, title and interest in any
patent or patent application. 
 (b) All of the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted to which the Company or any Subsidiary is a
party or by which any of their assets are bound (other than generally commercially available, non-custom, off-the-shelf software application programs having a retail acquisition price of less than $10,000 per license) (collectively, “License
Agreements”) are valid and binding obligations of the Company or its Subsidiaries that are parties thereto and, to the Company’s Knowledge, the other parties thereto, enforceable in accordance with their terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally, and there exists no event or condition which will
result in a material violation or breach of or constitute (with or without due notice or lapse of time or both) a default by the Company or any of its Subsidiaries under any such License Agreement. 
 (c) The Company and its Subsidiaries own or have the valid right to use all of the Intellectual Property that is necessary for the conduct
of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted and for the ownership, maintenance and operation of the Company’s and its Subsidiaries’ properties and assets, free and clear of all
Liens, other than Permitted Liens and Liens securing the Senior Debt, adverse claims or obligations to license all such owned Intellectual Property and Confidential Information, other than licenses entered into in the ordinary course of the
Company’s and its Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and enforceable right to use all third party Intellectual Property and Confidential Information used or held for use in the respective businesses of
the Company and its Subsidiaries. 
 (d) To the Company’s Knowledge, the conduct of the Company’s and its
Subsidiaries’ businesses as currently conducted does not infringe or otherwise impair or conflict with (collectively, “Infringe”) any Intellectual Property rights of any third party or any 

  

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confidentiality obligation owed to a third party, and, to the Company’s Knowledge, the Intellectual Property and Confidential Information of the Company
and its Subsidiaries which are necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted are not being Infringed by any third party. There is no litigation or order pending or
outstanding or, to the Company’s Knowledge, threatened or imminent, that seeks to limit or challenge or that concerns the ownership, use, validity or enforceability of any Intellectual Property or Confidential Information of the Company and its
Subsidiaries and the Company’s and its Subsidiaries’ use of any Intellectual Property or Confidential Information owned by a third party, and, to the Company’s Knowledge, there is no valid basis for the same. 
 (e) The consummation of the transactions contemplated hereby and by the other Transaction Documents will not result in the alteration,
loss, impairment of or restriction on the Company’s or any of its Subsidiaries’ ownership or right to use any of the Intellectual Property or Confidential Information which is necessary for the conduct of Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted. 
 (f) The Company
and its Subsidiaries have taken reasonable steps to protect the Company’s and its Subsidiaries’ rights in their Intellectual Property and Confidential Information. Each employee, consultant and contractor who has had access to Confidential
Information which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted has executed an agreement to maintain the confidentiality of
such Confidential Information and has executed appropriate agreements that are substantially consistent with the Company’s standard forms thereof. Except under confidentiality obligations, there has been no material disclosure of any of the
Company’s or its Subsidiaries’ Confidential Information to any third party. 
 4.16 Environmental Matters.
Neither the Company nor any Subsidiary is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), owns or operates any real property contaminated with any substance that is
subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, and is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim has had or
could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the Company’s Knowledge, threatened investigation that might lead to such a claim. 
 4.17 Litigation. Except as described on Schedule 4.17, there are no pending actions, suits or proceedings against or
affecting the Company, its Subsidiaries or any of its or their properties; and to the Company’s Knowledge, no such actions, suits or proceedings are threatened or contemplated. 
 4.18 Financial Statements. The financial statements included in each SEC Filing present fairly, in all material respects, the
consolidated financial position of the Company 

  

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as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in
conformity with United States generally accepted accounting principles applied on a consistent basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and, in the case of quarterly financial statements, as permitted by
Form 6-K under the 1934 Act). Except as set forth in the financial statements of the Company included in the SEC Filings filed prior to the date hereof or as described on Schedule 4.18, neither the Company nor any of its Subsidiaries has
incurred any liabilities, contingent or otherwise, except those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse Effect. 
 4.19 Insurance Coverage. The
Company and each Subsidiary maintains in full force and effect insurance coverage that is customary for comparably situated companies for the business being conducted and properties owned or leased by the Company and each Subsidiary, and the Company
reasonably believes such insurance coverage to be adequate against all liabilities, claims and risks against which it is customary for comparably situated companies to insure. 
 4.20 Compliance with Nasdaq Continued Listing Requirements. Except as described in Schedule 4.20, the Company is in
compliance with applicable Nasdaq continued listing requirements. There are no proceedings pending or, to the Company’s Knowledge, threatened against the Company relating to the continued listing of the Company’s Ordinary Shares on Nasdaq
and the Company has not received any notice of, nor to the Company’s Knowledge is there any basis for, the delisting of the Ordinary Shares from Nasdaq. The issuance of the Shares, the Warrants, the Notes and the amendment and restatement of
the Existing Notes as contemplated hereby do not and will not require approval of the Company’s shareholders pursuant to Nasdaq Marketplace Rule 4350(i). 
 4.21 Brokers and Finders. No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid
right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company. 
 4.22 No Directed Selling Efforts or General Solicitation. Neither the Company nor any Person acting on its behalf has conducted any
general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Securities. 
 4.23 No Integrated Offering. Neither the Company nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any Company security or
solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(2) for the exemption from registration for the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act. 
  

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 4.24 Private Placement. The offer and sale of the Securities to the Investors as
contemplated hereby is exempt from the registration requirements of the 1933 Act. 
 4.25 Questionable
Payments. Neither the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of their respective current or former shareholders, directors, officers, employees, agents or other Persons acting on behalf of the
Company or any Subsidiary, has on behalf of the Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets;
(d) made any false or fictitious entries on the books and records of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature. 
 4.26 Transactions with Affiliates. Except as disclosed in the SEC Filings, none of the officers or directors of the Company and, to
the Company’s Knowledge, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than as holders of stock options and/or warrants, and for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or
such employee or, to the Company’s Knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 
 4.27 Internal Controls. Except as described in the SEC Filings, the Company is in material compliance with the provisions of the
Sarbanes-Oxley Act of 2002 currently applicable to the Company. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences. Since the date of the 20-F, there have been no significant changes in the Company’s internal controls (as such term is defined in Item 307(b) of Regulation S-K) or, to the Company’s
Knowledge, in other factors that could significantly affect the Company’s internal controls. The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with GAAP and the
applicable requirements of the 1934 Act. 
 4.28 Disclosures. Neither the Company nor any Person acting on its behalf
has provided the Investors or their agents or counsel with any information that constitutes or might constitute material, non-public information. The written materials delivered to the Investors in connection with the transactions contemplated by
the Transaction Documents do not contain any 

  

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untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. 
 5. Representations and Warranties of the Investors. Each of the Investors
hereby severally, and not jointly, represents and warrants to the Company that: 
 5.1 Organization and Existence. Such
Investor is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement.

 5.2 Authorization. The execution, delivery and performance by such Investor of the Transaction Documents to which
such Investor is a party have been duly authorized and will each constitute the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally. 
 5.3 Purchase Entirely for Own Account. The Securities to be received by such Investor hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a view to the resale
or distribution of any part thereof in violation of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to
such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by such
Investor to hold the Securities for any period of time. Such Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a business that would require it to be so registered. 
 5.4 Investment Experience. Such Investor acknowledges that it can bear the economic risk and complete loss of its investment in the
Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby. 
 5.5 Disclosure of Information. Such Investor has had an opportunity to receive all information related to the Company requested by
it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities. Such Investor acknowledges receipt of copies of the SEC Filings. Neither such
inquiries nor any other due diligence investigation conducted by such Investor shall modify, amend or affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement. 
 5.6 Restricted Securities. Such Investor understands that the Securities are characterized as “restricted securities”
under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that 

  

 -14- 

 
under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.

 5.7 Legends. It is understood that, except as provided below, certificates evidencing the Securities may bear the
following or any similar legend: 
 (a) “The securities represented hereby may not be transferred unless (i) such
securities have been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel reasonably satisfactory to it
that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws.” 
 (b) If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such
state authority. 
 5.8 Accredited Investor. Such Investor is an accredited investor as defined in Rule 501(a) of
Regulation D, as amended, under the 1933 Act. 
 5.9 No General Solicitation. Such Investor did not learn of the
investment in the Securities as a result of any public advertising or general solicitation. 
 5.10 Brokers and
Finders. No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation
pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor. 
 6. Conditions to Closing.

 6.1 Conditions to the Investors’ Obligations. The obligation of each Investor to purchase the Notes, the Shares
and the Warrants at the Closing and to amend and restate the Existing Notes is subject to the fulfillment to such Investor’s satisfaction, on or prior to the Closing Date, of the following conditions, any of which may be waived by such Investor
(as to itself only): 
 (a) The representations and warranties made by the Company in Section 4 hereof qualified as to
materiality shall be true and correct at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and
correct as of such earlier date, and, the representations and warranties made by the Company in Section 4 hereof not qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Closing Date,
except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date. The Company shall have
performed in all 

  

 -15- 

 
material respects all obligations and conditions herein required to be performed or observed by it on or prior to the Closing Date. 
 (b) The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary or appropriate for
consummation of the purchase and sale of the Notes, the Shares and the Warrants, the amendment and restatement of the Existing Notes and the consummation of the other transactions contemplated by the Transaction Documents to be consummated on or
prior to the Closing Date, all of which shall be in full force and effect. 
 (c) The Company shall have executed and
delivered the Registration Rights Agreement. 
 (d) The Company shall have (i) received oral confirmation from Nasdaq to
the effect that the issuance and sale of the Notes, the Shares and the Warrants and the amendment and restatement of the Existing Notes as contemplated hereby will not require stockholder approval pursuant to the requirements of Nasdaq Marketplace
Rule 4350(i), and (ii) provided written notification to Nasdaq of the proposed issuance of the Shares, the Conversion Shares, the Warrant Shares and the Payment Shares so that such securities will be approved for inclusion in the Nasdaq
SmallCap Market upon official notice of issuance promptly after the Closing. 
 (e) No judgment, writ, order, injunction,
award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any
governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents. 
 (f) The Company shall have delivered a Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in subsections (a), (b), (d), (e) and (i) of this Section 6.1. 
 (g) The Company shall
have delivered a Certificate, executed on behalf of the Company by its Secretary, dated as of the Closing Date, certifying the resolutions adopted by the Board of Directors of the Company approving the transactions contemplated by this Agreement and
the other Transaction Documents and the issuance of the Securities, certifying the current versions of the memorandum of association or articles of association of the Company and certifying as to the signatures and authority of persons signing the
Transaction Documents and related documents on behalf of the Company. 
 (h) The Investors shall have received opinions from
the Company’s counsel, dated as of the Closing Date, covering such matters as the Investors may reasonably request. 
  

 -16- 

 (i) No stop order or suspension of trading shall have been imposed by Nasdaq, the SEC or
any other governmental or regulatory body with respect to public trading in the Ordinary Shares. 
 6.2 Conditions to
Obligations of the Company. The Company’s obligation to sell and issue the Notes, the Shares and the Warrants at the Closing and to amend and restate the Existing Notes is subject to the fulfillment to the satisfaction of the Company on or
prior to the Closing Date of the following conditions, any of which may be waived by the Company: 
 (a) The representations
and warranties made by the Investors in Section 5 hereof, other than the representations and warranties contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and correct in all
material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date. The Investment Representations shall be true and correct in all
respects when made, and shall be true and correct in all respects on the Closing Date with the same force and effect as if they had been made on and as of said date. The Investors shall have performed in all material respects all obligations and
conditions herein required to be performed or observed by them on or prior to the Closing Date. 
 (b) The Investors shall
have executed and delivered the Registration Rights Agreement. 
 (c) The Investors shall have paid the Purchase Price and
delivered the Existing Notes to the Company as provided in Section 3(a). 
 (d) No judgment, writ, order, injunction,
award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any
governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents. 
 6.3 Termination of Obligations to Effect Closing; Effects. 
 (a) The obligations of
the Company, on the one hand, and the Investors, on the other hand, to effect the Closing shall terminate as follows: 
 (i)
Upon the mutual written consent of the Company and the Investors; 
 (ii) By the Company if any of the conditions set forth
in Section 6.2 shall have become incapable of fulfillment, and shall not have been waived by the Company; 
  

 -17- 

 (iii) By an Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the Investor; or 
 (iv) By
either the Company or any Investor (with respect to itself only) if the Closing has not occurred on or prior to August 10, 2005; 
 provided, however,
that, except in the case of clause (i) above, the party seeking to terminate its obligation to effect the Closing shall not then be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the
other Transaction Documents if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate its obligation to effect the Closing. 
 (b) In the event of termination by the Company or any Investor of its obligations to effect the Closing pursuant to this Section 6.5,
written notice thereof shall forthwith be given to the other Investors and the other Investors shall have the right to terminate their obligations to effect the Closing upon written notice to the Company and the other Investors. Nothing in this
Section 6.3 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance
by any other party of its obligations under this Agreement or the other Transaction Documents. 
 7. Covenants and Agreements of the
Company. 
 7.1 Reservation of Ordinary Shares. The Company shall at all times reserve and keep available out of
its authorized but unissued Ordinary Shares, solely for the purpose of providing for the conversion of the Notes, the exercise of the Warrants and the issuance of the Payment Shares, such number of Ordinary Shares as shall from time to time equal
the number of Conversion Shares, the Warrant Shares and the maximum number of Payment Shares that may be issued under the Notes or the Restated Notes. 
 7.2 [Intentionally Omitted] 
 7.3 No Conflicting Agreements. The Company will not take
any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the Company’s obligations to the Investors under the Transaction Documents. 
 7.4 [Intentionally Omitted] 
 7.5 [Intentionally Omitted] 
 7.6 Listing of Underlying Shares and Related Matters.
Promptly following the date hereof, the Company shall take all necessary action to cause the Shares, the Warrant Shares, the Conversion Shares and the Payment Shares to be listed on the Nasdaq SmallCap Market as soon as possible after the Closing
Date. Further, if the Company applies to have its Ordinary Shares or other securities traded on any other principal stock exchange or market, it 

  

 -18- 

 
shall include in such application the Shares, the Conversion Shares, the Warrant Shares and the Payment Shares and will take such other action as is
necessary to cause such Ordinary Shares to be so listed. The Company will use commercially reasonable efforts to continue the listing and trading of its Ordinary Shares on the Nasdaq SmallCap Market and, in accordance, therewith, will use
commercially reasonable efforts to comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of such market or exchange, as applicable. 
 7.7 Termination of Covenants. The provisions of Sections 7.2 through 7.5 shall terminate and be of no further force and effect on
the date on which the Company’s obligations under the Registration Rights Agreement to register or maintain the effectiveness of any registration covering the Registrable Securities (as such term is defined in the Registration Rights Agreement)
shall terminate. 
 7.8 Removal of Legends. Upon the earlier of (i) registration for resale pursuant to the
Registration Rights Agreement and receipt by the Company of the Investor’s written confirmation that such Securities will not be disposed of except in compliance with the prospectus delivery requirements of the 1933 Act or (ii) Rule 144(k)
becoming available the Company shall, upon an Investor’s written request, promptly cause certificates evidencing the Investor’s Securities to be replaced with certificates which do not bear such restrictive legends, and Warrant Shares
subsequently issued upon exercise of the Warrants, Conversion Shares subsequently issued upon due conversion of the Notes and Payment Shares subsequently issued under the terms of the Notes shall not bear such restrictive legends provided the
provisions of either clause (i) or clause (ii) above, as applicable, are satisfied with respect to such Conversion Shares and Payment Shares. When the Company is required to cause unlegended certificates to replace previously issued
legended certificates, if unlegended certificates are not delivered to an Investor within seven (7) Business Days of submission by that Investor of legended certificate(s) to the Company’s transfer agent together with a representation
letter in customary form, the Company shall be liable to the Investor for liquidated damages in an amount equal to 1% of the aggregate purchase price of the Securities evidenced by such certificate(s) for each thirty (30) day period (or portion
thereof on a pro rata basis) beyond such seven (7) Business Day that the unlegended certificates have not been so delivered. For avoidance of doubt and as an example only, in the event that the Company is three days late in causing an
unlegended US$100,000 certificate to be delivered to Investor after the lapse of the initial seven (7) Business Days, the Company would be liable for liquidated damages in the amount of US$100.00. 
 7.9 Negative Pledge. So long as any amounts are outstanding under the Notes or the Restated Notes, the Company shall not, and shall
cause each of its Subsidiaries not to, create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired other than (i) Liens securing the Senior Debt, (ii) Permitted Liens and
(iii) indebtedness for borrowed money which is subordinated in right of payment to the Notes and the Restated Notes on terms reasonably satisfactory to the Investors. 
  

 -19- 

 8. Survival and Indemnification. 
 8.1 Survival. The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing of
the transactions contemplated by this Agreement for a period of two years. 
 8.2 Indemnification. The Company agrees
to indemnify and hold harmless each Investor and its Affiliates and their respective directors, officers, employees and agents from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable
attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) to
which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Transaction Documents, and will reimburse any such Person for all such
amounts as they are incurred by such Person. 
 8.3 Conduct of Indemnification Proceedings. Promptly
after receipt by any Person (the “Indemnified Person”) of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity
may be sought pursuant to Section 8.2, such Indemnified Person shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided, however, that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that
the Company is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of counsel to such Indemnified Person representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent, or if there be a final judgment for the plaintiff, the Company shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such
settlement or judgment. Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such
proceeding. 
 9. Miscellaneous. 
 9.1 Successors and Assigns. This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Investors, as applicable, provided, however, that an Investor may assign
its rights and delegate its duties hereunder in whole or in part to an Affiliate or to a third party acquiring some or all of its Securities in a 

  

 -20- 

 
private transaction without the prior written consent of the Company or the other Investors, after notice duly given by such Investor to the Company and the
other Investors, provided, that no such assignment or obligation shall affect the obligations of such Investor hereunder. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and
assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason
of this Agreement, except as expressly provided in this Agreement. 
 9.2 Counterparts; Faxes. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original.

 9.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement. 
 9.4 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given
by telex or telecopier, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after
delivery to such carrier. All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party: 
 If to the Company: 
 ViryaNet Ltd. 
 8 HaMarpe Street 
 Har Hotzvim 
 P.O. Box 45041 
 Jerusalem 91450 
 Israel 
 Attention:       Albert A. Gabrielli, Chief Financial Officer 
 Fax: 011-508-490-8666

 With a copy to: 
 Meitar Liquornik Geva & Leshem Brandwein 
 16 Abba Hillel Silver Rd. 
 Ramat Gan 52506, Israel 
 Attention: Raanan Lerner, Adv. 
 Fax: 011-9723-610-3111 
  

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 If to the Investors: 
 to the addresses set forth on the signature pages hereto. 
 9.5 Expenses. The parties
hereto shall pay their own costs and expenses in connection herewith, except that the Company shall pay the reasonable fees and expenses of counsel to the Investors not to exceed US$[30,000] in the aggregate. Such expenses shall be paid not later
than the Closing Date. The Company shall reimburse the Investors upon demand for all reasonable out-of-pocket expenses incurred by the Investors, including without limitation reimbursement of attorneys’ fees and disbursements, in connection
with any amendment, modification or waiver of this Agreement or the other Transaction Documents requested by the Company. In the event that legal proceedings are commenced by any party to this Agreement against another party to this Agreement in
connection with this Agreement or the other Transaction Documents, the party or parties which do not prevail in such proceedings shall severally, but not jointly, pay their pro rata share of the reasonable attorneys’ fees and other reasonable
out-of-pocket costs and expenses incurred by the prevailing party in such proceedings. 
 9.6 Amendments and Waivers.
Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the
Investors. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding, each future holder of all such Securities, and the Company.

 9.7 Publicity. Except as set forth below, no public release or announcement concerning the transactions contemplated
hereby shall be issued by the Company or the Investors without the prior consent of the Company (in the case of a release or announcement by the Investors) or the Investors (in the case of a release or announcement by the Company) (which consents
shall not be unreasonably withheld), except as such release or announcement may be required by law or the applicable rules or regulations of any securities exchange or securities market, in which case the Company or the Investors, as the case may
be, shall allow the Investors or the Company, as applicable, to the extent reasonably practicable in the circumstances, reasonable time to comment on such release or announcement in advance of such issuance. By 8:30 a.m. (New York City time) on the
trading day immediately following the Closing Date, the Company shall issue a press release disclosing the consummation of the transactions contemplated by this Agreement. No later than the third trading day following the Closing Date, the Company
will file a Report of Foreign Issuer on Form 6-K attaching the press release described in the foregoing sentence as well as copies of the Transaction Documents. In addition, the Company will make such other filings and notices in the manner and time
required by the SEC and Nasdaq. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or include the name of any Investor in any filing with the SEC (other than the Registration Statement and any exhibits
to filings made in respect of this transaction in 

  

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accordance with periodic filing requirements under the 1934 Act) or any regulatory agency or Nasdaq, without the prior written consent of such Investor,
except to the extent such disclosure is required by law or trading market regulations, in which case the Company shall provide the Investors with prior notice of such disclosure. 
 9.8 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision
of law which renders any provision hereof prohibited or unenforceable in any respect. 
 9.9 Entire Agreement. This
Agreement, including the Exhibits and the Disclosure Schedules, and the other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof. 
 9.10
Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the
fulfillment of the agreements herein contained. 
 9.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of
the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and
the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this
Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES
ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. 
 9.12 Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document
are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the 

  

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obligations of any other Investor under any Transaction Document. The decision of each Investor to purchase Securities pursuant to the Transaction Documents
has been made by such Investor independently of any other Investor. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the
Securities or enforcing its rights under the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that each of the Investors has been provided with the same Transaction
Documents for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor. 
 [signature page follows] 
  

 -24- 

 IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to
execute this Agreement as of the date first above written. 
  

									
	 The Company:
	 		 	 VIRYANET LTD

					
		 		 		 	 By:
	 	  
		 		 		 	 Name:
	 	
		 		 		 	 Title:
	 	

  

 -25- 

									
	 The Investors:
	 		 	 LIBERTYVIEW SPECIAL OPPORTUNITIES
 FUND, LP

				
		 		 	 By:
	 	  
		 		 		 	 Name:
	 	 Steven S. Rogers

		 		 		 	 Title:
	 	 Authorized Person

 Purchase Price: US$1,180,000 
 Principal Amount of Notes: US$480,000 
 Number of Shares: 333,333 
 Number of Warrants: 116,666 
 Address for Notice: 
  

			
		
		  	 111 River Street — Suite 1000
 Hoboken, NJ
07030-5776
 Attn: Steven S. Rogers
 Telephone:
201.595.2950
 Facsimile: 201.216.8625
  
 with a copy to:
  
 Lowenstein Sandler PC
 65 Livingston Avenue
 Roseland,
NJ 07068
 Attn: John D. Hogoboom, Esq.
 Telephone:
973.597.2500
 Facsimile: 973.597.2400

  

 -26- 

 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. 
 AMENDED AND RESTATED
7  1/2% CONVERTIBLE NOTE 
 WHEREAS, the Company have issued to the Holder, as such terms are defined herein, a 7  1/2% Convertible Note as of July 26, 2004 (the “Existing Note”), and 
 Whereas, the Company nad the Holder wish to
amend certain terms and conditions of the Existing Note, and to amend and restate the form of such Existing Note; 
 Therefore, the terms and conditions of
the Existing Note are hereby amended and restated such that the terms and conditions of this Amended and Restated 7  1/2% Convertible Note, replace and supersede the terms and conditions of the Existing Note in their entirety. 
  

			
	 US$2,500,000.00
	  	August 5, 2005

 FOR VALUE RECEIVED, ViryaNet Ltd., an Israeli corporation (the “Company”), hereby
unconditionally promises to pay to the order of LibertyView Special Opportunities Fund, L.P. (the “Holder”), having an address at c/o Neuberger Berman, LLC, 111 River Street – Suite 1000, Hoboken, NJ 07030, at such address or
at such other place as may be designated in writing by the Holder, or its assigns, the aggregate principal sum of Two Million Fife Hundred Thousand United States Dollars (US$2,500,000), together with interest from August 5, 2005 on the unpaid
principal balance of this Note outstanding at a rate equal to seven and one-half percent (7.5%) (computed on the basis of the actual number of days elapsed in a 360-day year) per annum and continuing on the outstanding principal until this
7 1/2% Convertible Note (the “Note”) is converted into Ordinary Shares as provided herein or
indefeasibly and irrevocably paid in full by the Company. Interest on this Note shall accrue and be compounded quarterly and shall be payable quarterly on the fifteenth day of July, October, January and April of each year (each, an “Interest
Payment Date”), commencing on October 15, 2005, to the Holder of record on the immediately preceding July 1, October 1, January 1 or April 1, as applicable (each, an “Interest Record
Date”). Subject to the other provisions of this Note, the principal of this Note and all accrued and unpaid interest hereon shall mature and become due and payable on August 3, 2013 (the “Stated Maturity Date”). Except
as provided herein, all payments of principal and interest by the Company under this Note shall be made in United States dollars in immediately available funds to an account specified by the Holder. 
 From and after the Stated Maturity Date, all amounts due and owing under this Note shall automatically, and without action by any party hereto, bear
interest at an annual rate of twelve percent (12%). In no event shall any interest charged, collected or reserved under this 

 
Note exceed the maximum rate then permitted by applicable law and if any such payment is paid by the Company, then such excess sum shall be credited by the
Holder as a payment of principal. 
 1. Definitions. Capitalized terms used herein shall have the respective meanings ascribed thereto
in the Purchase Agreement unless otherwise defined herein. Unless the context otherwise requires, when used herein the following terms shall have the meaning indicated: 
 “Additional Shares” shall have the meaning ascribed to such term in Section 7. 
 “Affiliate” shall mean, with respect to any Person, any other Person which directly or indirectly through one or more
intermediaries Controls, is controlled by, or is under common control with, such Person. 
 “Board” shall
mean the Board of Directors of Company. 
 “Business Day” other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business. 
 “Change of Control” means, at any time
(i) any Person or any Persons acting together that would constitute a “group” for purposes of Section 13(d) under the Exchange Act, or any successor provision thereto, shall acquire beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision thereto) in a single transaction or a series of related transactions, of more than 50% of the aggregate voting power of the Company; or (ii) the Company merges into or consolidates
with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of
the Company or the successor entity of such transaction; or (iii) the Company sells or transfers its assets, as an entirety or substantially as an entirety, to another Person. 
 “Change of Control Conditions” means either (A) the consideration received by holders of the Ordinary Shares in
connection with the Change of Control transaction consists of all cash, (B) the Person effecting the Change of Control does not have a class of equity securities registered pursuant to Section 12(b) or 12(g) of the Exchange Act or
(C) the Person effecting the Change of Control has a Market Capitalization of less than US$25,000,000 
 “Company” shall have the meaning ascribed to such term in the first paragraph herein. 
 “Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 
 “Conversion Price” shall mean US$2.205 per share, subject to adjustment as provided in Section 6; provided, however, that in the event that the Conversion Rate is adjusted pursuant to Section 7 hereof, the
Conversion Price shall equal US$1,000 divided by the Conversion Rate in effect after giving effect to any adjustment pursuant to Section 7. 
 “Conversion Rate” shall mean initially US$1,000 divided by the Conversion Price then in effect, subject to adjustments as provided in Section 7. 
  

 -2- 

 “Designated Event” means the occurrence of either (i) a Change of
Control meeting the Change of Control Conditions or (ii) a Termination of Trading. 
 “Designated Event
Repurchase Date” shall have the meaning ascribed to such term in Section 5 hereof. 
 “Designated Event
Repurchase Notice” shall have the meaning ascribed to such term in Section 5 hereof. 
 “Designated
Event Repurchase Price” shall have the meaning ascribed to such term in Section 5 hereof. 
 “Effective
Date” shall have the meaning ascribed to such term in Section 7. 
 “Event of Default” shall
have the meaning ascribed to such term in Section 7 herein. 
 “Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended. 
 “Hedging Agreement” means any interest rate swap, collar, cap, floor or
forward rate agreement or other agreement regarding the hedging of interest rate risk exposure executed in connection with hedging the interest rate exposure of any Person and any confirming letter executed pursuant to such agreement, all as
amended, supplemented, restated or otherwise modified from time to time. 
 “Holder” shall have the meaning
ascribed to such term in the first paragraph herein. 
 “Indebtedness” means any liability or obligation
(i) for borrowed money, other than trade payables incurred in the ordinary course of business, (ii) evidenced by bonds, debentures, notes, or other similar instruments, (iii) in respect of letters of credit or other similar
instruments (or reimbursement obligations with respect thereto), except letters of credit or other similar instruments issued to secure payment of trade payables arising in the ordinary course of business consistent with past practices, (iv) to
pay the deferred purchase price of property or services, except trade payables arising in the ordinary course of business consistent with past practices, (v) as lessee under capitalized leases, (vi) secured by a Lien on any asset of the
Company or a Subsidiary, whether or not such obligation is assumed by the Company or such Subsidiary. 
 “Interest
Payment Date” shall have the meaning ascribed to such term in the first paragraph herein. 
 “Interest Record
Date” shall have the meaning ascribed to such term in the first paragraph herein. 
 “Investment”
means, for any Person: (a) the acquisition (whether for cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person or any
agreement to make any such acquisition (including, without limitation, any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such sale); (b) the making of any deposit
with, or advance, loan or other extension of credit to, any other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person), but
excluding any 

  

 -3- 

 
such advance, loan or extension of credit having a term not exceeding 90 days arising in connection with the sale of inventory or supplies by such Person in
the ordinary course of business; (c) the entering into of any guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person; or (d) the entering into of any Hedging Agreement. 
 “Investors” shall have
the meaning ascribed to such term in the Purchase Agreement. 
 “Lien” means any lien, mortgage, deed of
trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any of the foregoing). 
 “Market Capitalization” shall mean, as to any Person on any date of determination, the product of (i) the number of
shares of capital stock or other similar equity interests of such Person issued and outstanding as of the date of determination (excluding, for this purpose, any shares of capital stock or other similar equity interests issued by such Person in
connection with a Change of Control transaction) and (ii) the average Market Price per share of such shares of capital stock or other similar equity interests for each of the ten Trading Days ending immediately prior to the date of
determination. 
 “Market Price”, as of a particular date (the “Valuation Date”), shall mean
the following with respect to any class of securities: (A) if such security is then listed on a national stock exchange, the Market Price shall be the closing bid price of one share of such security on such exchange on the last Trading Day
prior to the Valuation Date, provided that if such security has not traded in the prior ten (10) trading sessions, the Market Price shall be the average closing bid price of such security in the most recent ten (10) trading sessions during
which such security has traded; (B) if such security is then included in The Nasdaq Stock Market, Inc. (“Nasdaq”), the Market Price shall be the closing bid price of one share of such security on Nasdaq on the last Trading Day
prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low ask price quoted on Nasdaq as of the end of the last Trading Day prior to the Valuation Date, provided that if such security has not
traded in the prior ten (10) trading sessions, the Market Price shall be the average closing price of one share of such security in the most recent ten (10) trading sessions during which such security has traded; (C) if such security
is then included in the Over-the-Counter Bulletin Board, the Market Price shall be the closing sale price of one share of such security on the Over-the-Counter Bulletin Board on the last Trading Day prior to the Valuation Date or, if no such closing
sale price is available, the average of the high bid and the low ask price quoted on the Over-the-Counter Bulletin Board as of the end of the last Trading Day prior to the Valuation Date, provided that if such stock has not traded in the prior ten
(10) trading sessions, the Market Price shall be the average closing price of one share of such security in the most recent ten (10) trading sessions during which such security has traded; or (D) if such security is then included in
the “pink sheets,” the Market Price shall be the closing sale price of one share of such security on the “pink sheets” on the last Trading Day prior to the Valuation Date or, if no such closing sale price is available, the
average of the high bid and the low ask price quoted on the “pink sheets” as of the end of the last Trading Day prior to the Valuation Date, provided that if such stock has not traded in the prior ten (10) trading sessions, the Market
Price shall be the average closing price of one share of such security in the most recent ten (10) trading sessions during which such security has traded. 
  

 -4- 

 “Note” shall have the meaning ascribed to such term in the first
paragraph herein. 
 “Ordinary Shares” shall mean the Ordinary shares, par value NIS 1.0 per share, of
the Company. 
 “Permitted Indebtedness” means: 
 (a) Unsecured Indebtedness existing on the Closing Date and refinancings, renewals and extensions of any such Indebtedness if (i) the
average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced or extended (ii) if the principal amount thereof or interest payable thereon is not increased, and (iii) the terms thereof are not less
favorable to the Company or the Subsidiary incurring such Indebtedness than the Indebtedness being refinanced, renewed or extended; 
 (b) Guaranties by any Subsidiary of any “Permitted Indebtedness” of the Company or another Subsidiary; 
 (c) Indebtedness representing the deferred purchase price of property and capital lease obligations which collectively does not exceed $1,000,000 in aggregate principal amount; and 
 (d) Indebtedness of the Company to any wholly owned Subsidiary and Indebtedness of any wholly owned Subsidiary to the Company or another
wholly owned Subsidiary which constitutes “Permitted Indebtedness.” 
 “Permitted Investments”
means: 
 (a) direct obligations of the United States of America, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States of America, or of any agency thereof, in either case maturing not more than 90 days from the date of acquisition thereof; 
 (b) certificates of deposit issued by any bank or trust company organized under the laws of the United States of America or any State
thereof and having capital, surplus and undivided profits of at least $500,000,000, maturing not more than 90 days from the date of acquisition thereof; and 
 (c) commercial paper rated A-1 or better or P-1 by Standard & Poor’s Ratings Services or Moody’s Investors Services,
Inc., respectively, maturing not more than 90 days from the date of acquisition thereof; in each case so long as the same (x) provide for the payment of principal and interest (and not principal alone or interest alone) and (y) are not
subject to any contingency regarding the payment of principal or interest. 
 “Permitted Liens” means:

 (a) Liens imposed by law for taxes that are not yet due or are being contested in good faith and for which adequate
reserves have been established on the Company’s books and records in accordance with U.S. generally accepted accounting principles, consistently applied; 
 (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law,
arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith and by appropriate proceedings; 
  

 -5- 

 (c) pledges and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or regulations; 
 (d) deposits to secure
the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; 
 (e) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Company or any of its Subsidiaries; and 
 (f) Liens granted to secure the obligations of the Company or any Subsidiary under any Indebtedness permitted under clause (c) of the
definition of “Permitted Indebtedness” provided the Lien is limited to the property acquired or so financed. 
 “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein. 
 “Purchase Agreement” shall mean the
Purchase Agreement, dated as of August 4, 2005, and as that agreement may be amended from time to time, by and among the Company and the Investors. 
 “Registration Rights Agreement” shall mean the Registration Rights Agreement, dated as of August 3, 2005, and as that agreement may be amended from time to time, by and among the Company and the
Investors. 
 “Repurchase Date” shall have the meaning ascribed to such term in Section 4 hereof.

 “Repurchase Notice” shall have the meaning ascribed to such term in Section 4 hereof. 
 “Repurchase Price” shall have the meaning ascribed to such term in Section 4 hereof. 
 “Stated Maturity Date” shall have the meaning ascribed to such term in the first paragraph herein. 
 “Stock Price” shall have the meaning ascribed to such term in Section 7. 
 “Termination of Trading” will be deemed to have occurred at any time when the Ordinary Shares is neither listed for
trading on a U.S. national securities exchange nor approved for trading on the Nasdaq Stock Market or any similar system of automated dissemination of quotations of securities prices. 
 “Trading Day” means (i) if the relevant stock or security is listed or admitted for trading on The New York Stock
Exchange, Inc. or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq Stock Market or any other system of automated dissemination of
quotations of securities 

  

 -6- 

 
prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on
any national securities exchange or quoted on the Nasdaq Stock Market or any other system of automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over-the-counter
market and for which a closing bid and a closing asked price for such stock or security are available, shall mean a day, other than a Saturday or Sunday, on which The New York Stock Exchange, Inc. is open for trading. 
 2. Purchase Agreement. This Note is one of the several 7 1/2% Convertible Notes of the Company issued pursuant to the Purchase Agreement (collectively, the “Company Notes”). This Note is subject to the terms and
conditions of, and entitled to the benefit of, the provisions of the Purchase Agreement. This Note is transferable and assignable to any person to whom such transfer is permissible under the Purchase Agreement and applicable law. The Company agrees
to issue from time to time a replacement Note in the form hereof to facilitate such transfers and assignments. In addition, after delivery of an indemnity in form and substance reasonably satisfactory to the Company, the Company also agrees to
promptly issue a replacement Note if this Note is lost, stolen, mutilated or destroyed. 
 3. No Right of Prepayment or
Redemption. This Note shall not be prepayable or redeemable by the Company prior to the Stated Maturity Date. 
 4. Repurchase of the
Note at the Option of the Holder. 
 (a) The Note shall be purchased by the Company at the option of the Holder on
July 15, 2008, July 15, 2009 and July 15, 2011 (each, a “Repurchase Date”), at a purchase price equal to 100% of the principal amount of this Note, plus accrued and unpaid interest on this Note, to (but
excluding) such Repurchase Date (the “Repurchase Price”). If the Repurchase Date is on a date that is after an Interest Record Date and on or prior to the corresponding Interest Payment Date, the Company shall pay such interest to
the Holder of record on the corresponding Interest Record Date and the Repurchase Price shall only be 100% of the principal amount of the Note. 
 (b) Purchases of this Note shall be made, at the option of the Holder thereof, upon delivery to the Company by the Holder of (i) a written notice of repurchase (a “Repurchase Notice”) at any time
prior to 5:00 p.m., New York time, on the relevant Repurchase Date stating the portion of the Note which the Holder will deliver to be purchased, which portion must be in principal amounts of $1,000 or an integral multiple of $1,000, and irrevocably
agreeing that such principal amount of the Note shall be purchased by the Company as of the Repurchase Date and (ii) this Note. 
 (c) In the event that this Note is repurchased in part, upon surrender of this Note, the Company shall execute and deliver to the Holder a new Note equal in principal amount to the unpurchased portion of the Note surrendered. 
  

 -7- 

 5. Repurchase of the Note at the Option of the Holder Upon Certain Events. 
 (a) If a Designated Event occurs, this Note shall be purchased by the Company, at the option of the Holder thereof, at a cash purchase
price equal to 101% of the principal amount of those Securities, plus accrued and unpaid interest (the “Designated Event Repurchase Price”) to, but not including, the later of (i) the date that is 30 days following the date of
the notice of a Designated Event delivered by the Company pursuant to clause (b) below and (ii) the effective date of the Designated Event (the later of such dates, the “Designated Event Repurchase Date”), subject to
satisfaction by or on behalf of the Holder of the requirements set forth in clause (c) below. If the Designated Event Repurchase Date is on a date that is after an Interest Record Date and on or prior to the corresponding Interest Payment Date,
the Company shall pay such interest to the holder of record on the corresponding Interest Record Date and the Designated Event Repurchase Price shall only be 101% of the principal amount of this Note. 
 (b) No later than 30 days after the occurrence of a Designated Event, the Company shall give written notice thereof to the Holder, which
notice shall include a form of repurchase notice to be completed by the Holder and shall (i) state briefly, the events causing a Designated Event and the date of such Designated Event, (ii) specify the Designated Event Repurchase Price and
(iii) the Designated Event Repurchase Date. 
 (c) The Holder may exercise its rights specified in this Section 5
upon delivery to the Company of (i) a written notice of purchase (a “Designated Event Repurchase Notice”) to the Company at any time on or prior to 5:00 p.m., New York time, on the Designated Event Repurchase Date stating the
portion of the Note which the Holder will deliver to be purchased, which portion must be in principal amounts of $1,000 or an integral multiple of $1,000, and irrevocably agreeing that such principal amount of the Note shall be purchased by the
Company as of the Designated Event Repurchase Date and (ii) this Note. 
 (d) In the event that this Note is repurchased
in part, upon surrender of this Note, the Company shall execute and deliver to the Holder a new Note equal in principal amount to the unpurchased portion of the Note surrendered. 
 6. Conversion Rights. 
 (a) Subject to and upon compliance with the provisions of this Note, prior to the Stated Maturity Date, the Holder shall have the right, at its option at any time, to convert some or all of the Note into such number of fully paid and
nonassessable Ordinary Shares as is obtained by: (i) adding (A) the principal amount of this Note to be converted and (B) the amount of any accrued but unpaid interest with respect to such portion of this Note to be converted; and
(ii) dividing the result obtained pursuant to clause (i) above by the Conversion Price then in effect The rights of conversion set forth in this Section 6 shall be exercised by the Holder by giving written notice to the Company that
the Holder elects to convert a stated amount of this Note into Ordinary Shares and by surrender of this Note (or, in lieu thereof, by delivery of an appropriate lost security affidavit in the event this Note shall have been lost or destroyed) to the
Company at its principal office (or such other office or agency of the Company as the Company may designate by notice in writing to the Holder) at any time on the date set forth in such notice (which date shall not be earlier than the Company’s
receipt of such notice), together with a 

  

 -8- 

 
statement of the name or names (with address) in which the certificate or certificates for Ordinary Shares shall be issued. 
 (b) Promptly after receipt of the written notice referred to in Section 6(a) above and surrender of this Note (or, in lieu thereof,
by delivery of an appropriate lost security affidavit in the event this Note shall have been lost or destroyed), but in no event more than three (3) Business Days thereafter, the Company shall issue and deliver, or cause to be issued and
delivered, to the Holder, registered in such name or names as the Holder may direct in writing, a certificate or certificates for the number of whole Ordinary Shares issuable upon the conversion of such portion of this Note. To the extent permitted
by law, such conversion shall be deemed to have been effected, and the Conversion Price shall be determined, as of the close of business on the date on which such written notice shall have been received by the Company and this Note shall have been
surrendered as aforesaid (or, in lieu thereof, an appropriate lost security affidavit has been delivered to the Company), and at such time, the rights of the Holder shall cease with respect to the principal amount of the Notes being converted, and
the Person or Persons in whose name or names any certificate or certificates for Ordinary Shares shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby. 
 (c) No fractional shares shall be issued upon any conversion of this Note into Ordinary Shares. If any fractional share of Ordinary Shares
would, except for the provisions of the first sentence of this Section 6(c), be delivered upon such conversion, the Company, in lieu of delivering such fractional share, shall pay to the Holder an amount in cash equal to the Market Price of
such fractional share of Ordinary Shares. In case the principal amount of this Note exceeds the principal amount being converted, the Company shall, upon such conversion, execute and deliver to the Holder, at the expense of the Company, a new Note
for the principal amount of this Note surrendered which is not to be converted. 
 (d) If the Company shall, at any time or
from time to time while this Note is outstanding, pay a dividend or make a distribution on its Ordinary Shares in Ordinary Shares, subdivide its outstanding Ordinary Shares into a greater number of shares or combine its outstanding Ordinary Shares
into a smaller number of shares or issue by reclassification of its outstanding Ordinary Shares any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing
corporation), then the Conversion Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Holder thereafter converting this Note shall be entitled to receive the
number of Ordinary Shares or other capital stock which the Holder would have received if the Note had been converted immediately prior to such event upon payment of a Conversion Price that has been adjusted to reflect a fair allocation of the
economics of such event to the Holder, without regard to any conversion limitation specified in this Section 6. Such adjustments shall be made successively whenever any event listed above shall occur. 
 (e) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with
another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation shall be effected, then, as a condition of such 

  

 -9- 

 
reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby the Holder
shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Ordinary Shares immediately theretofore issuable upon conversion of this Note, without regard to any
conversion limitation specified in Section 6, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Ordinary Shares equal to the number of Ordinary Shares immediately
theretofore issuable upon conversion of this Note, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, without regard to any conversion limitation specified in Section 6, and in
any such case appropriate provision shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Conversion Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other
disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other
appropriate corporation or entity shall assume the obligation to deliver to the Holder, at the last address of the Holder appearing on the books of the Company, such shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder may be entitled to purchase, without regard to any conversion limitation specified in Section 6, and the other obligations under this Note. The provisions of this paragraph (e) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions. 
 (f) In case the
Company shall fix a payment date for the making of a distribution to all holders of Ordinary Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences
of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 6(d)), or subscription rights or Notes, the Conversion Price
to be in effect after such payment date shall be determined by multiplying the Conversion Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of Ordinary Shares outstanding
multiplied by the Market Price of Ordinary Shares immediately prior to such payment date, less the fair market value (as determined by the Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such
subscription rights or Notes, and the denominator of which shall be the total number of Ordinary Shares outstanding multiplied by such Market Price immediately prior to such payment date. Such adjustment shall be made successively whenever such a
payment date is fixed. 
 (g) An adjustment to the Conversion Price shall become effective immediately after the payment date
in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment. 
 (h) In the event that, as a result of an adjustment made pursuant to this Section 6, the Holder shall become entitled to receive any shares of capital stock of the Company other than Ordinary Shares, the number
of such other shares so receivable upon conversion of this 

  

 -10- 

 
Note shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in
this Note. 
 (i) Notwithstanding anything herein to the contrary, in no event shall the Holder be entitled to convert any
portion of this Note in excess of that portion upon conversion of which the sum of (1) the number of Ordinary Shares beneficially owned by such Holder and its Affiliates (other than Ordinary Shares which may be deemed beneficially owned through
ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the holder subject to a limitation on conversion analogous to the limitations contained herein) and (2) the number of Ordinary
Shares issuable upon the conversion of that portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its Affiliates of more than 9.99% of the then outstanding
Ordinary Shares. The waiver by the Holder of any limitation contained in an Option or Convertible Security now or hereafter held by such holder that is similar or analogous to the limitations set forth in this Section 6(i) shall not be deemed a
waiver or otherwise effect the limitation set forth in this Section 6(i), unless such waiver expressly states it is a waiver of the provisions of this Section 6(i). For purposes of this Section 6(i), beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The Holder may waive the limitations set forth herein by sixty-one (61) days
written notice to the Company. 
 (j) In case at any time: 
 (i) the Company shall declare any dividend upon its Ordinary Shares or any other class or series of capital stock of the Company payable
in cash or stock or make any other distribution to the holders of its Ordinary Shares or any such other class or series of capital stock; 
 (ii) the Company shall offer for subscription pro rata to the holders of its Ordinary Shares or any other class or series of capital stock of the Company any additional shares of stock of any class or
other rights; or 
 (iii) there shall be any capital reorganization or reclassification of the capital stock of the Company,
any acquisition or a liquidation, dissolution or winding up of the Company; 
 then, in any one or more of said cases, the Company shall give, by delivery in
person or by certified or registered mail, return receipt requested, addressed to the Holder at the address of such Holder as shown on the books of the Company, (a) at least ten (10) Business Days’ prior written notice of the date on
which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any event set forth in clause (iii) of this Section 6(j) and
(b) in the case of any event set forth in clause (iii) of this Section 6(j), at least ten (10) Business Days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing
clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Ordinary Shares or such other class or series of capital stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which the holders of Ordinary Shares and such other series or class of capital stock shall 

  

 -11- 

 
be entitled to exchange their Ordinary Shares and other stock for securities or other property deliverable upon consummation of the applicable event set
forth in clause (iii) of this Section 6(j). 
 (k) Upon any adjustment of the Conversion Price, then and in each
such case the Company shall give prompt written notice thereof, by delivery in person or by certified or registered mail, return receipt requested, addressed to the Holder at the address of such Holder as shown on the books of the Company, which
notice shall state the Conversion Price resulting from such adjustment and setting forth in reasonable detail the method upon which such calculation is based. 
 (l) The Company shall at all times to reserve and keep available out of its authorized Ordinary Shares, solely for the purpose of issuance
upon conversion of this Note as herein provided, such number of Ordinary Shares as shall then be issuable upon the conversion of this Note without regard to the conversion limitations set forth in Section 6. The Company covenants that all
Ordinary Shares which shall be so issued shall be duly and validly issued and fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, and that
the Company will from time to time take all such action as may be requisite to assure that the par value per share of the Ordinary Shares is at all times equal to or less than the Conversion Price in effect at the time. The Company shall take all
such action as may be necessary to assure that all such Ordinary Shares may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange upon which the Ordinary Shares may be listed.
The Company shall not take any action which results in any adjustment of the Conversion Price if the total number of Ordinary Shares issued and issuable after such action upon conversion of this Note would exceed the total number of Ordinary Shares
then authorized by the Company’s articles of association or memorandum of association. 
 (m) The issuance of
certificates for Ordinary Shares upon conversion of this Note shall be made without charge to the holders thereof for any issuance tax 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 that of the Holder. 
 (n) The
Company will not at any time close its transfer books against the transfer, as applicable, of this Note or of any Ordinary Shares issued or issuable upon the conversion of this Note in any manner which interferes with the timely conversion of this
Note, except as may otherwise be required to comply with applicable securities laws. 
 7. Additional Adjustments Upon a Change of
Control. 
 (a) If a Change of Control meeting the Change of Control Conditions occurs on or prior to July 15, 2008,
and the Holder elects to convert this Note at any time from and after the effective date of such Change of Control transaction (the “Effective Date”) and prior to 5:00 p.m., New York time, on the Designated Event Repurchase Date, then the
Conversion Rate in respect of such conversion shall be increased by a number of additional Ordinary Shares (the “Additional Shares”) as described below. 
  

 -12- 

 (b) The number of Additional Shares will be determined by reference to the table attached
as Schedule A hereto, based on the effective date of the Change of Control transaction (the “Effective Date”) and the price (the “Stock Price”) paid per share of the Ordinary Shares in such Change of Control
transaction. If holders of Ordinary Shares receive only cash in such transaction, the Stock Price shall be the cash amount paid per share. Otherwise, the Stock Price shall be the average of the Market Price of Ordinary Shares on the five Trading
Days up to but not including the Effective Date of the transaction. 
 (c) The Stock Prices set forth in the first row of the
table in Schedule A hereto will be adjusted as of any date on which the Conversion Rate of this Note is adjusted as a result of an adjustment of the Conversion Price pursuant to Section 6. The adjusted Stock Price will equal the Stock Price
applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Stock Price adjustment and the denominator of which is the Conversion
Rate as so adjusted. The number of Additional Shares will be adjusted in the same manner as the Conversion Price, as set forth in Section 6. 
 (d) The exact Stock Prices and Effective Dates may not be set forth in the table in Schedule A, in which case: if the Stock Price is between two Stock Price amounts in the table or the Effective Date is between two
Effective Dates in the table, the number of Additional Shares will be determined by a straight-line interpolation between the number of Additional Shares set forth for the higher and lower Stock Price amounts and the two dates, as applicable, based
on a 365-day year, 
 (e) Any adjustment of the Conversion Rate pursuant to this Section 7 shall result in an immediate,
concomitant adjustment in the Conversion Price. 
 8. Covenants. 
 (a) So long as any amount due under this Note is outstanding and until indefeasible payment in full of all amounts payable by the Company
hereunder: 
 (i) The Company shall and shall cause each of its Subsidiaries to (A) carry on and conduct its business in
substantially the same manner and in substantially the same fields of enterprise as it is presently conducting, (B) do all things necessary to remain duly organized, validly existing, and in good standing as a domestic corporation under the
laws of its state of incorporation and (C) maintain all requisite authority to conduct its business in those jurisdictions in which its business is conducted. 
 (ii) The Company shall promptly notify the Holder in writing of (A) any change in the business or the operations the Company or any
Subsidiary which could reasonably be expected to have a Material Adverse Effect, and (B) any information which indicates that any financial statements which are the subject of any representation contained in the Transaction Documents, or which
are furnished to the Holder pursuant to the Transaction Documents, fail, in any material respect, to present fairly, as of the date thereof and for the period covered thereby, the financial condition and results of operations purported to be
presented therein, disclosing the nature thereof. 
  

 -13- 

 (iii) The Company shall promptly notify the Holder of the occurrence of any Event of
Default or any event which, with the giving of notice, the lapse of time or both would constitute an Event of Default, which notice shall include a written statement as to such occurrence, specifying the nature thereof and the action (if any) which
is proposed to be taken with respect thereto. 
 (iv) The Company shall promptly notify the Holder of any action, suit or
proceeding at law or in equity or by or before any governmental instrumentality or other agency against the Company or any Subsidiary or to which the Company or any Subsidiary may be subject which alleges damages in excess of One Hundred Thousand
United States Dollars (US$100,000). 
 (v) The Company shall promptly notify the Holder of any default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which the Company or any Subsidiary is a party which default could reasonably be expected to have a Material Adverse Effect.

 (vi) The Company shall and shall cause each Subsidiary to pay when due all taxes, assessments and governmental charges and
levies upon it or its income, profits or property, except those that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside. 
 (vii) The Company shall and shall cause each Subsidiary to all times maintain with financially sound and reputable insurance companies
insurance covering its assets and its businesses in such amounts and covering such risks (including, without limitation, hazard, business interruption and public liability) as is consistent with sound business practice and as may be obtained at
commercially reasonable rates. 
 (viii) The Company shall and shall cause each Subsidiary to comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which they may be subject except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. 
 (ix) The Company shall and shall cause each Subsidiary to use commercially reasonable efforts to do all things necessary to maintain,
preserve, protect and keep its properties in good repair, working order and condition and use commercially reasonable efforts to make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith
may be properly conducted. 
 (x) At its own expense, the Company shall and shall cause each Subsidiary to make, execute,
endorse, acknowledge file and/or deliver any documents and take all actions necessary or required to maintain its ownership rights in its Intellectual Property, including, without limitation, (i) any action reasonably required to protect the
Intellectual Property in connection with any infringement, suspected infringement, passing off, act of unfair competition or other unlawful interference with the rights of the Company or any Subsidiary in and to such Intellectual Property, and
(ii) any registrations with the United States Patent & Trademark Office and any corresponding foreign patent and/or trademark office required for the Company or any 

  

 -14- 

 
Subsidiary to carry on its business as presently conducted and as presently proposed to be conducted. Except for non-exclusive licenses granted in the
ordinary course of business, the Company shall not and shall cause each Subsidiary not to transfer, assign or otherwise convey the Intellectual Property, any registrations or applications thereof and all goodwill associate therewith, to any person
or entity. 
 (xi) Promptly after the occurrence thereof, the Company shall and shall cause each Subsidiary to inform the
Holder of all material developments, including without limitation (i) entering into material agreements outside the ordinary course of business consistent with past practice, (ii) any issuance of debt securities by the Company or any
Subsidiary, (iii) the incurrence of any Indebtedness by the Company or any Subsidiary, (iv) a change in the number of the Board of Directors of the Company, (v) a sale, lease or transfer of any material portion of the assets of the
Company or any Subisdiary and (v) any change in ownership of any Subsidiary (specifying the details of any such change, including the identity and ownership amount of any new owner). 
 (b) So long as any amount due under this Note is outstanding and until indefeasible payment in full of all amounts payable by the Company
hereunder: 
 (i) The Company shall not and shall cause each Subsidiary not to create, incur, guarantee, issue, assume or in
any manner become liable in respect of any Indebtedness, other than Permitted Indebtedness. 
 (ii) The Company shall not and
shall cause each Subsidiary not to create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired other than (i) Liens created pursuant to the Bank Control Agreement and (ii) Permitted
Liens. The Company shall not be bound by any agreement which limits the ability of any Company to grant Liens. 
 (iii) The
Company shall not and shall cause each Subsidiary not to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property
or the rendering of any service) with, or for the benefit of, any of its Affiliates other than a wholly owned Subsidiary. 
 (iv) The Company shall not, and shall cause each of its Subsidiaries not to, directly or indirectly, declare or pay any dividends on account of any shares of any class or series of its capital stock now or hereafter outstanding, or set
aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class of its capital stock (or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or pay any interest, premium if any, or principal of any Indebtedness or redeem, retire, defease,
repurchase or otherwise acquire any Indebtedness (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration or apply or set apart any sum, or make any other payment in respect thereof or agree to do any of the
foregoing (each of the foregoing is herein called a “Restricted Payment”); provided, that (i) the Company may make payments of interest, premium if any, and principal of the Notes in accordance with the terms hereof and
(ii) provided that no Event of Default or event 

  

 -15- 

 
which, with the giving of notice, the lapse of time or both would constitute an Event of Default has occurred and is continuing, the Company and its
Subsidiaries may make regularly scheduled payments of interest and principal of any Permitted Indebtedness, (iii) any Subsidiary directly or indirectly wholly owned by the Company may pay dividends on its capital stock and (iv) the Company
may repurchase capital stock from a former employee in connection with the termination or other departure of such employee, strictly in accordance with the terms of any agreement entered into with such employee and in effect on the Closing Date (as
defined in the Purchase Agreement), provided that (A) such repurchase is approved by a majority of the Board, (B) payments permitted under this clause (iv) shall not exceed $1,000,000 in the aggregate, and (C) no such payment may
be made if an Event of Default or an event which, with the giving of notice, the lapse of time or both would constitute an Event of Default has occurred and is continuing or would result from such payment. 
 (v) The Company shall not and shall cause each Subsidiary not to, directly or indirectly, engage in any new line of business. 

(vi) The Company shall not and shall cause each Subsidiary not to make or own any Investment in any Person, including without
limitation any joint venture, other than (A) Permitted Investments, (B) operating deposit accounts with banks, (C) Hedging Agreements entered into in the ordinary course of the Company’s financial planning and not for speculative
purposes and (D) investments by the Company in the capital stock of any wholly owned Subsidiary. 
 (vii) The Company
shall not and shall cause each Subsidiary not to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease of any property (whether real, personal or mixed), whether now owned or hereafter
acquired, which the Company or any Subsidiary (a) has sold or transferred or is to sell or to transfer to any other Person, or (b) intends to use for substantially the same purpose as any other property which has been or is to be sold or
transferred by the Company or any Subsidiary to any Person in connection with such lease. 
 (viii) The Company shall not and
shall cause each Subsidiary not to settle, or agree to indemnify or defend third parties against, any material lawsuit, except as may be required by judicial or regulatory order or by agreements entered into prior to the date hereof on a basis
consistent with past practice. A material lawsuit shall be any lawsuit in which the amount in controversy exceeds $250,000. The provisions of this Section 7(b)(viii) shall not apply to commercial indemnities entered into by the Company or any
Subsidiary in the ordinary course of business consistent with past practices. 
 (ix) The Company shall not and shall cause
each Subsidiary not to amend its bylaws, certificate of incorporation or other charter document in a manner adverse to the Holder. 
  

 -16- 

 9. Event of Default. The occurrence of any of following events shall constitute an “Event
of Default” hereunder: 
 (a) the failure of the Company to make any payment of principal on this Note or any of the
Company Notes when due, whether at maturity, upon acceleration or otherwise, and such failure continues for more than five (5) days; 
 (b) the failure of the Company to make any payment of interest on this Note or any other Company Note, or any other amounts due under the Transaction Documents when due, whether at maturity, upon acceleration or
otherwise, and such failure continues for more than five (5) days; 
 (c) the Company and/or its Subsidiaries fail to
make a required payment or payments on indebtedness for borrowed money of Two Hundred Fifty Thousand United States Dollars (US$250,000) or more in aggregate principal amount and such failure continues for more than ten (10) days; 
 (d) there shall have occurred an acceleration of the stated maturity of any indebtedness for borrowed money of the Company or its
Subsidiaries of Two Hundred Fifty Thousand United States Dollars (US$250,000) or more in aggregate principal amount (which acceleration is not rescinded, annulled or otherwise cured within ten (10) days of receipt by the Company or a Subsidiary
of notice of such acceleration); 
 (e) the Company makes an assignment for the benefit of creditors or admits in writing its
inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Company as bankrupt or insolvent; or any order for relief with respect to the Company is entered under the Federal Bankruptcy Code
or any other bankruptcy or insolvency law; or the Company petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company or of any substantial part of the assets of the Company, or commences
any proceeding relating to it under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced,
against the Company and either (i) the Company by any act indicates its approval thereof, consents thereto or acquiescence therein or (ii) such petition application or proceeding is not dismissed within sixty (60) days; 
 (f) a final, non-appealable judgment which, in the aggregate with other outstanding final judgments against the Company and its
Subsidiaries, exceeds Two Hundred Fifty Thousand United States Dollars (US$250,000) shall be rendered against the Company or a Subsidiary and within sixty (60) days after entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within sixty (60) days after the expiration of such stay, such judgment is not discharged; 
 (g) the Company is in breach of the requirements of Section 7.9 of the Purchase Agreement; 
 (h) if any
representation or statement of fact made in the Purchase Agreement or any other Transaction Document proves to have been false in any material respect when made 

  

 -17- 

 
or furnished within two years of the Closing Date, or if any other representation or statement of fact furnished to the Holder at any time by or on behalf of
the Company proves to have been false in any material respect when made or furnished; or 
 (i) if the Company fails to
observe or perform in any material respect any of its covenants contained in the Transaction Documents (other than any failure which is covered by Section 9(a), (b) or (g)), and such failure continues for thirty (30) days after
receipt by the Company of notice thereof. 
 Upon the occurrence of any such Event of Default all unpaid principal and accrued
interest under this Note shall become immediately due and payable (A) upon election of the Holder, with respect to (a) through (d) and (f) through (i), and (B) automatically, with respect to (e). Upon the occurrence of any
Event of Default, the Holder may, in addition to declaring all amounts due hereunder to be immediately due and payable, pursue any available remedy, whether at law or in equity, including, without limitation, exercising its rights under the other
Transaction Documents. If an Event of Default occurs, the Company shall pay to the Holder the reasonable attorneys’ fees and disbursements and all other reasonable out-of-pocket costs incurred by the Holder in order to collect amounts due and
owing under this Note or otherwise to enforce the Holder’s rights and remedies hereunder and under the other Transaction Documents. 
 10. No waiver. No delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one
occasion be deemed a bar to or waiver of the same or any other right on any future occasion. 
 11. Amendments in Writing. None of the
terms or provisions of this Note may be excluded, modified or amended except by a written instrument duly executed by the Holder and the Company expressly referring to this Note and setting forth the provision so excluded, modified or amended.

 12. Waivers. The Company hereby forever waives presentment, demand, presentment for payment, protest, notice of protest, notice of
dishonor of this Note and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note. 
 13. Waiver of Jury Trial. THE COMPANY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS NOTE OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER CLAIMS. THE COMPANY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 
 14. Governing Law; Consent to Jurisdiction. This Note
shall be governed by and construed under the law of the State of New York, without giving effect to the conflicts of law principles thereof. The Company and, by accepting this Note, the Holder, each irrevocably submits to the exclusive jurisdiction
of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Note and the
transactions contemplated hereby. Service of process in connection with any such suit, action or 

  

 -18- 

 
proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Note. The
Company and, by accepting this Note, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. The Company and, by accepting this Note, the Holder,
each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. 
 15. Costs. In the event that legal proceedings are commenced by the Holder or the Company in connection with
Note, the party or parties which do not prevail in such proceedings shall severally, but not jointly, pay their pro rata share of the reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing
party in such proceedings. 
 16. Notices. All notices hereunder shall be given in writing and shall be deemed delivered when received
by the other party hereto at the address set forth in the Purchase Agreement or at such other address as may be specified by such party from time to time in accordance with the Purchase Agreement. 
 17. Successors and Assigns. This Note shall be binding upon the successors or assigns of the Company and shall inure to the benefit of the
successors and assigns of the Holder. 
 [Remainder of Page Intentionally Left Blank] 
  

 -19- 

			
	 VIRYANET LTD.

		
	 By:
	 	  
		 	 Name:
 Title:

  

 -20- 

 SCHEDULE A 
 The following table sets forth the number of Additional Shares to be received per $1,000 principal amount of Notes. 
  

																							
	  	  	Stock Price
	 Effective Date
	  	$2.10	  	$2.50	  	$3.00	  	$3.50	  	$4.00	  	$4.50	  	$5.00	  	$5.50	  	$6.00	  	$6.50	  	$7.00
	 July 31, 2005
	  	95.24	  	73.65	  	54.76	  	41.27	  	31.15	  	23.28	  	16.98	  	11.83	  	7.54	  	3.91	  	0.79
	 July 31, 2006
	  	76.19	  	58.92	  	43.81	  	33.02	  	24.92	  	18.62	  	13.59	  	9.47	  	6.03	  	3.13	  	0.63
	 July 31, 2007
	  	57.14	  	44.19	  	32.86	  	24.76	  	18.69	  	13.97	  	10.19	  	7.10	  	4.52	  	2.34	  	0.48
	 July 31, 2008
	  	38.04	  	29.42	  	21.87	  	16.49	  	12.44	  	9.30	  	6.78	  	4.73	  	3.01	  	1.56	  	0.32
	 July 31, 2009
	  	19.00	  	14.69	  	10.92	  	8.23	  	6.21	  	4.64	  	3.39	  	2.36	  	1.50	  	0.78	  	0.16

  

 -21- 

 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. 
 7  1/2% CONVERTIBLE NOTE 
  

			
	 US$480,000.00
	 	August 5, 2005

 FOR VALUE RECEIVED, ViryaNet Ltd., an Israeli corporation (the “Company”), hereby
unconditionally promises to pay to the order of LibertyView Special Opportunities Fund, L.P. (the “Holder”), having an address at c/o Neuberger Berman, LLC, 111 River Street – Suite 1000, Hoboken, NJ 07030, at such address or
at such other place as may be designated in writing by the Holder, or its assigns, the aggregate principal sum of Four Hundred Eighty Thousand United States Dollars (US$480,000), together with interest from August 3, 2005 on the unpaid
principal balance of this Note outstanding at a rate equal to seven and one-half percent (7.5%) (computed on the basis of the actual number of days elapsed in a 360-day year) per annum and continuing on the outstanding principal until this
7 1/2% Convertible Note (the “Note”) is converted into Ordinary Shares as provided herein or
indefeasibly and irrevocably paid in full by the Company. Interest on this Note shall accrue and be compounded quarterly and shall be payable quarterly on the fifteenth day of July, October, January and April of each year (each, an “Interest
Payment Date”), commencing on October 15, 2005, to the Holder of record on the immediately preceding July 1, October 1, January 1 or April 1, as applicable (each, an “Interest Record
Date”). Subject to the other provisions of this Note, the principal of this Note and all accrued and unpaid interest hereon shall mature and become due and payable on August 3, 2013 (the “Stated Maturity Date”). Except
as provided herein, all payments of principal and interest by the Company under this Note shall be made in United States dollars in immediately available funds to an account specified by the Holder. 
 From and after the Stated Maturity Date, all amounts due and owing under this Note shall automatically, and without action by any party hereto, bear
interest at an annual rate of twelve percent (12%). In no event shall any interest charged, collected or reserved under this Note exceed the maximum rate then permitted by applicable law and if any such payment is paid by the Company, then such
excess sum shall be credited by the Holder as a payment of principal. 
 1. Definitions. Capitalized terms used herein shall have the
respective meanings ascribed thereto in the Purchase Agreement unless otherwise defined herein. Unless the context otherwise requires, when used herein the following terms shall have the meaning indicated: 
 “Additional Shares” shall have the meaning ascribed to such term in Section 7. 

 “Affiliate” shall mean, with respect to any Person, any other Person
which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person. 
 “Board” shall mean the Board of Directors of Company. 
 “Business
Day” other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business. 
 “Change of Control” means, at any time (i) any Person or any Persons acting together that would constitute a “group” for purposes of Section 13(d) under the Exchange Act, or any successor provision
thereto, shall acquire beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision thereto) in a single transaction or a series of related transactions, of more than 50% of the aggregate voting power of
the Company; or (ii) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to
such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction; or (iii) the Company sells or transfers its assets, as an entirety or substantially as an entirety, to another Person.

 “Change of Control Conditions” means either (A) the consideration received by holders of the Ordinary
Shares in connection with the Change of Control transaction consists of all cash, (B) the Person effecting the Change of Control does not have a class of equity securities registered pursuant to Section 12(b) or 12(g) of the Exchange Act
or (C) the Person effecting the Change of Control has a Market Capitalization of less than US$25,000,000 
 “Company” shall have the meaning ascribed to such term in the first paragraph herein. 
 “Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 
 “Conversion Price” shall mean US$2.205 per share, subject to adjustment as provided in Section 6; provided, however, that in the event that the Conversion Rate is adjusted pursuant to Section 7 hereof, the
Conversion Price shall equal US$1,000 divided by the Conversion Rate in effect after giving effect to any adjustment pursuant to Section 7. 
 “Conversion Rate” shall mean initially US$1,000 divided by the Conversion Price then in effect, subject to adjustments as provided in Section 7. 
 “Designated Event” means the occurrence of either (i) a Change of Control meeting the Change of Control Conditions
or (ii) a Termination of Trading. 
 “Designated Event Repurchase Date” shall have the meaning ascribed
to such term in Section 5 hereof. 
 “Designated Event Repurchase Notice” shall have the meaning
ascribed to such term in Section 5 hereof. 
  

 -2- 

 “Designated Event Repurchase Price” shall have the meaning ascribed to
such term in Section 5 hereof. 
 “Effective Date” shall have the meaning ascribed to such term in
Section 7. 
 “Event of Default” shall have the meaning ascribed to such term in Section 7 herein.

 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
 “Hedging Agreement” means any interest rate swap, collar, cap, floor or forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with hedging the interest rate exposure of any Person and any confirming letter executed pursuant to such agreement, all as amended, supplemented, restated or otherwise
modified from time to time. 
 “Holder” shall have the meaning ascribed to such term in the first paragraph
herein. 
 “Indebtedness” means any liability or obligation (i) for borrowed money, other than trade
payables incurred in the ordinary course of business, (ii) evidenced by bonds, debentures, notes, or other similar instruments, (iii) in respect of letters of credit or other similar instruments (or reimbursement obligations with respect
thereto), except letters of credit or other similar instruments issued to secure payment of trade payables arising in the ordinary course of business consistent with past practices, (iv) to pay the deferred purchase price of property or
services, except trade payables arising in the ordinary course of business consistent with past practices, (v) as lessee under capitalized leases, (vi) secured by a Lien on any asset of the Company or a Subsidiary, whether or not such
obligation is assumed by the Company or such Subsidiary. 
 “Interest Payment Date” shall have the meaning
ascribed to such term in the first paragraph herein. 
 “Interest Record Date” shall have the meaning
ascribed to such term in the first paragraph herein. 
 “Investment” means, for any Person: (a) the
acquisition (whether for cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such sale); (b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person), but excluding any such advance, loan or
extension of credit having a term not exceeding 90 days arising in connection with the sale of inventory or supplies by such Person in the ordinary course of business; (c) the entering into of any guarantee of, or other contingent obligation
with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person; or (d) the entering into of any Hedging Agreement. 
  

 -3- 

 “Investors” shall have the meaning ascribed to such term in the Purchase
Agreement. 
 “Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any of the foregoing). 
 “Market Capitalization” shall mean, as to any Person on any date of determination, the product of (i) the number of
shares of capital stock or other similar equity interests of such Person issued and outstanding as of the date of determination (excluding, for this purpose, any shares of capital stock or other similar equity interests issued by such Person in
connection with a Change of Control transaction) and (ii) the average Market Price per share of such shares of capital stock or other similar equity interests for each of the ten Trading Days ending immediately prior to the date of
determination. 
 “Market Price”, as of a particular date (the “Valuation Date”), shall mean
the following with respect to any class of securities: (A) if such security is then listed on a national stock exchange, the Market Price shall be the closing bid price of one share of such security on such exchange on the last Trading Day
prior to the Valuation Date, provided that if such security has not traded in the prior ten (10) trading sessions, the Market Price shall be the average closing bid price of such security in the most recent ten (10) trading sessions during
which such security has traded; (B) if such security is then included in The Nasdaq Stock Market, Inc. (“Nasdaq”), the Market Price shall be the closing bid price of one share of such security on Nasdaq on the last Trading Day
prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low ask price quoted on Nasdaq as of the end of the last Trading Day prior to the Valuation Date, provided that if such security has not
traded in the prior ten (10) trading sessions, the Market Price shall be the average closing price of one share of such security in the most recent ten (10) trading sessions during which such security has traded; (C) if such security
is then included in the Over-the-Counter Bulletin Board, the Market Price shall be the closing sale price of one share of such security on the Over-the-Counter Bulletin Board on the last Trading Day prior to the Valuation Date or, if no such closing
sale price is available, the average of the high bid and the low ask price quoted on the Over-the-Counter Bulletin Board as of the end of the last Trading Day prior to the Valuation Date, provided that if such stock has not traded in the prior ten
(10) trading sessions, the Market Price shall be the average closing price of one share of such security in the most recent ten (10) trading sessions during which such security has traded; or (D) if such security is then included in
the “pink sheets,” the Market Price shall be the closing sale price of one share of such security on the “pink sheets” on the last Trading Day prior to the Valuation Date or, if no such closing sale price is available, the
average of the high bid and the low ask price quoted on the “pink sheets” as of the end of the last Trading Day prior to the Valuation Date, provided that if such stock has not traded in the prior ten (10) trading sessions, the Market
Price shall be the average closing price of one share of such security in the most recent ten (10) trading sessions during which such security has traded. 
 “Note” shall have the meaning ascribed to such term in the first paragraph herein. 
 “Ordinary Shares” shall mean the Ordinary shares, par value NIS 1.0 per share, of the Company. 
  

 -4- 

 “Permitted Indebtedness” means: 
 (a) Unsecured Indebtedness existing on the Closing Date and refinancings, renewals and extensions of any such Indebtedness if (i) the
average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced or extended (ii) if the principal amount thereof or interest payable thereon is not increased, and (iii) the terms thereof are not less
favorable to the Company or the Subsidiary incurring such Indebtedness than the Indebtedness being refinanced, renewed or extended; 
 (b) Guaranties by any Subsidiary of any “Permitted Indebtedness” of the Company or another Subsidiary; 
 (c) Indebtedness representing the deferred purchase price of property and capital lease obligations which collectively does not exceed $1,000,000 in aggregate principal amount; and 
 (d) Indebtedness of the Company to any wholly owned Subsidiary and Indebtedness of any wholly owned Subsidiary to the Company or another
wholly owned Subsidiary which constitutes “Permitted Indebtedness.” 
 “Permitted Investments”
means: 
 (a) direct obligations of the United States of America, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States of America, or of any agency thereof, in either case maturing not more than 90 days from the date of acquisition thereof; 
 (b) certificates of deposit issued by any bank or trust company organized under the laws of the United States of America or any State
thereof and having capital, surplus and undivided profits of at least $500,000,000, maturing not more than 90 days from the date of acquisition thereof; and 
 (c) commercial paper rated A-1 or better or P-1 by Standard & Poor’s Ratings Services or Moody’s Investors Services,
Inc., respectively, maturing not more than 90 days from the date of acquisition thereof; in each case so long as the same (x) provide for the payment of principal and interest (and not principal alone or interest alone) and (y) are not
subject to any contingency regarding the payment of principal or interest. 
 “Permitted Liens” means:

 (a) Liens imposed by law for taxes that are not yet due or are being contested in good faith and for which adequate
reserves have been established on the Company’s books and records in accordance with U.S. generally accepted accounting principles, consistently applied; 
 (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law,
arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith and by appropriate proceedings; 
 (c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and
other social security laws or regulations; 
  

 -5- 

 (d) deposits to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; 
 (e) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Company or any of its Subsidiaries; and 
 (f) Liens granted to secure the obligations of the Company or any Subsidiary under any Indebtedness permitted under clause (c) of the
definition of “Permitted Indebtedness” provided the Lien is limited to the property acquired or so financed. 
 “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein. 
 “Purchase Agreement” shall mean the
Purchase Agreement, dated as of August 4, 2005, and as that agreement may be amended from time to time, by and among the Company and the Investors. 
 “Registration Rights Agreement” shall mean the Registration Rights Agreement, dated as of August 3, 2005, and as that agreement may be amended from time to time, by and among the Company and the
Investors. 
 “Repurchase Date” shall have the meaning ascribed to such term in Section 4 hereof.

 “Repurchase Notice” shall have the meaning ascribed to such term in Section 4 hereof. 
 “Repurchase Price” shall have the meaning ascribed to such term in Section 4 hereof. 
 “Stated Maturity Date” shall have the meaning ascribed to such term in the first paragraph herein. 
 “Stock Price” shall have the meaning ascribed to such term in Section 7. 
 “Termination of Trading” will be deemed to have occurred at any time when the Ordinary Shares is neither listed for
trading on a U.S. national securities exchange nor approved for trading on the Nasdaq Stock Market or any similar system of automated dissemination of quotations of securities prices. 
 “Trading Day” means (i) if the relevant stock or security is listed or admitted for trading on The New York Stock
Exchange, Inc. or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq Stock Market or any other system of automated dissemination of
quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq Stock
Market or any other system of automated dissemination of quotation of 

  

 -6- 

 
securities prices, a day on which the relevant stock or security is traded in a regular way in the over-the-counter market and for which a closing bid and a
closing asked price for such stock or security are available, shall mean a day, other than a Saturday or Sunday, on which The New York Stock Exchange, Inc. is open for trading. 
 2. Purchase Agreement. This Note is one of the several 7 1/2% Convertible Notes of the Company issued pursuant to the Purchase Agreement (collectively, the “Company Notes”). This Note is subject to the terms and
conditions of, and entitled to the benefit of, the provisions of the Purchase Agreement. This Note is transferable and assignable to any person to whom such transfer is permissible under the Purchase Agreement and applicable law. The Company agrees
to issue from time to time a replacement Note in the form hereof to facilitate such transfers and assignments. In addition, after delivery of an indemnity in form and substance reasonably satisfactory to the Company, the Company also agrees to
promptly issue a replacement Note if this Note is lost, stolen, mutilated or destroyed. 
 3. No Right of Prepayment or
Redemption. This Note shall not be prepayable or redeemable by the Company prior to the Stated Maturity Date. 
 4. Repurchase of the
Note at the Option of the Holder. 
 (a) The Note shall be purchased by the Company at the option of the Holder on
July 15, 2008, July 15, 2009 and July 15, 2011 (each, a “Repurchase Date”), at a purchase price equal to 100% of the principal amount of this Note, plus accrued and unpaid interest on this Note, to (but
excluding) such Repurchase Date (the “Repurchase Price”). If the Repurchase Date is on a date that is after an Interest Record Date and on or prior to the corresponding Interest Payment Date, the Company shall pay such interest to
the Holder of record on the corresponding Interest Record Date and the Repurchase Price shall only be 100% of the principal amount of the Note. 
 (b) Purchases of this Note shall be made, at the option of the Holder thereof, upon delivery to the Company by the Holder of (i) a written notice of repurchase (a “Repurchase Notice”) at any time
prior to 5:00 p.m., New York time, on the relevant Repurchase Date stating the portion of the Note which the Holder will deliver to be purchased, which portion must be in principal amounts of $1,000 or an integral multiple of $1,000, and irrevocably
agreeing that such principal amount of the Note shall be purchased by the Company as of the Repurchase Date and (ii) this Note. 
 (c) In the event that this Note is repurchased in part, upon surrender of this Note, the Company shall execute and deliver to the Holder a new Note equal in principal amount to the unpurchased portion of the Note surrendered. 
 5. Repurchase of the Note at the Option of the Holder Upon Certain Events. 
 (a) If a Designated Event occurs, this Note shall be purchased by the Company, at the option of the Holder thereof, at a cash purchase
price equal to 101% of the principal amount of those Securities, plus accrued and unpaid interest (the “Designated Event Repurchase Price”) to, but not including, the later of (i) the date that is 30 days following the 

  

 -7- 

 
date of the notice of a Designated Event delivered by the Company pursuant to clause (b) below and (ii) the effective date of the Designated Event
(the later of such dates, the “Designated Event Repurchase Date”), subject to satisfaction by or on behalf of the Holder of the requirements set forth in clause (c) below. If the Designated Event Repurchase Date is on a date
that is after an Interest Record Date and on or prior to the corresponding Interest Payment Date, the Company shall pay such interest to the holder of record on the corresponding Interest Record Date and the Designated Event Repurchase Price shall
only be 101% of the principal amount of this Note. 
 (b) No later than 30 days after the occurrence of a Designated Event,
the Company shall give written notice thereof to the Holder, which notice shall include a form of repurchase notice to be completed by the Holder and shall (i) state briefly, the events causing a Designated Event and the date of such Designated
Event, (ii) specify the Designated Event Repurchase Price and (iii) the Designated Event Repurchase Date. 
 (c) The
Holder may exercise its rights specified in this Section 5 upon delivery to the Company of (i) a written notice of purchase (a “Designated Event Repurchase Notice”) to the Company at any time on or prior to 5:00 p.m., New
York time, on the Designated Event Repurchase Date stating the portion of the Note which the Holder will deliver to be purchased, which portion must be in principal amounts of $1,000 or an integral multiple of $1,000, and irrevocably agreeing that
such principal amount of the Note shall be purchased by the Company as of the Designated Event Repurchase Date and (ii) this Note. 
 (d) In the event that this Note is repurchased in part, upon surrender of this Note, the Company shall execute and deliver to the Holder a new Note equal in principal amount to the unpurchased portion of the Note
surrendered. 
 6. Conversion Rights. 
 (a) Subject to and upon compliance with the provisions of this Note, prior to the Stated Maturity Date, the Holder shall have the right, at its option at any time, to convert some or all of the Note into such number
of fully paid and nonassessable Ordinary Shares as is obtained by: (i) adding (A) the principal amount of this Note to be converted and (B) the amount of any accrued but unpaid interest with respect to such portion of this Note to be
converted; and (ii) dividing the result obtained pursuant to clause (i) above by the Conversion Price then in effect The rights of conversion set forth in this Section 6 shall be exercised by the Holder by giving written notice to the
Company that the Holder elects to convert a stated amount of this Note into Ordinary Shares and by surrender of this Note (or, in lieu thereof, by delivery of an appropriate lost security affidavit in the event this Note shall have been lost or
destroyed) to the Company at its principal office (or such other office or agency of the Company as the Company may designate by notice in writing to the Holder) at any time on the date set forth in such notice (which date shall not be earlier than
the Company’s receipt of such notice), together with a statement of the name or names (with address) in which the certificate or certificates for Ordinary Shares shall be issued. 
 (b) Promptly after receipt of the written notice referred to in Section 6(a) above and surrender of this Note (or, in lieu thereof,
by delivery of an appropriate lost security affidavit in the event this Note shall have been lost or destroyed), but in no event more than three 

  

 -8- 

 
(3) Business Days thereafter, the Company shall issue and deliver, or cause to be issued and delivered, to the Holder, registered in such name or names as
the Holder may direct in writing, a certificate or certificates for the number of whole Ordinary Shares issuable upon the conversion of such portion of this Note. To the extent permitted by law, such conversion shall be deemed to have been effected,
and the Conversion Price shall be determined, as of the close of business on the date on which such written notice shall have been received by the Company and this Note shall have been surrendered as aforesaid (or, in lieu thereof, an appropriate
lost security affidavit has been delivered to the Company), and at such time, the rights of the Holder shall cease with respect to the principal amount of the Notes being converted, and the Person or Persons in whose name or names any certificate or
certificates for Ordinary Shares shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby. 
 (c) No fractional shares shall be issued upon any conversion of this Note into Ordinary Shares. If any fractional share of Ordinary Shares
would, except for the provisions of the first sentence of this Section 6(c), be delivered upon such conversion, the Company, in lieu of delivering such fractional share, shall pay to the Holder an amount in cash equal to the Market Price of
such fractional share of Ordinary Shares. In case the principal amount of this Note exceeds the principal amount being converted, the Company shall, upon such conversion, execute and deliver to the Holder, at the expense of the Company, a new Note
for the principal amount of this Note surrendered which is not to be converted. 
 (d) If the Company shall, at any time or
from time to time while this Note is outstanding, pay a dividend or make a distribution on its Ordinary Shares in Ordinary Shares, subdivide its outstanding Ordinary Shares into a greater number of shares or combine its outstanding Ordinary Shares
into a smaller number of shares or issue by reclassification of its outstanding Ordinary Shares any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing
corporation), then the Conversion Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Holder thereafter converting this Note shall be entitled to receive the
number of Ordinary Shares or other capital stock which the Holder would have received if the Note had been converted immediately prior to such event upon payment of a Conversion Price that has been adjusted to reflect a fair allocation of the
economics of such event to the Holder, without regard to any conversion limitation specified in this Section 6. Such adjustments shall be made successively whenever any event listed above shall occur. 
 (e) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with
another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions
herein specified and in lieu of the Ordinary Shares immediately theretofore issuable upon conversion of this Note, without regard to any conversion limitation specified in Section 6, such shares of stock, securities or assets as would have been
issuable or payable with respect to or in exchange for a 

  

 -9- 

 
number of Ordinary Shares equal to the number of Ordinary Shares immediately theretofore issuable upon conversion of this Note, had such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition not taken place, without regard to any conversion limitation specified in Section 6, and in any such case appropriate provision shall be made with respect to the
rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Conversion Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any
shares of stock, securities or assets thereafter deliverable upon the conversion hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof
the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to
the Holder, at the last address of the Holder appearing on the books of the Company, such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase, without regard to any conversion
limitation specified in Section 6, and the other obligations under this Note. The provisions of this paragraph (e) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other
dispositions. 
 (f) In case the Company shall fix a payment date for the making of a distribution to all holders of Ordinary
Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends or distributions referred to in Section 6(d)), or subscription rights or Notes, the Conversion Price to be in effect after such payment date shall be determined by multiplying the Conversion
Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of Ordinary Shares outstanding multiplied by the Market Price of Ordinary Shares immediately prior to such payment date, less the
fair market value (as determined by the Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or Notes, and the denominator of which shall be the total number of Ordinary Shares
outstanding multiplied by such Market Price immediately prior to such payment date. Such adjustment shall be made successively whenever such a payment date is fixed. 
 (g) An adjustment to the Conversion Price shall become effective immediately after the payment date in the case of each dividend or
distribution and immediately after the effective date of each other event which requires an adjustment. 
 (h) In the event
that, as a result of an adjustment made pursuant to this Section 6, the Holder shall become entitled to receive any shares of capital stock of the Company other than Ordinary Shares, the number of such other shares so receivable upon conversion
of this Note shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in this Note. 
 (i) Notwithstanding anything herein to the contrary, in no event shall the Holder be entitled to convert any portion of this Note in
excess of that portion upon conversion of which the sum of (1) the number of Ordinary Shares beneficially owned by such Holder and 

  

 -10- 

 
its Affiliates (other than Ordinary Shares which may be deemed beneficially owned through ownership of the unconverted portion of this Note or the
unexercised or unconverted portion of any other security of the holder subject to a limitation on conversion analogous to the limitations contained herein) and (2) the number of Ordinary Shares issuable upon the conversion of that portion of
this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its Affiliates of more than 9.99% of the then outstanding Ordinary Shares. The waiver by the Holder of any
limitation contained in an Option or Convertible Security now or hereafter held by such holder that is similar or analogous to the limitations set forth in this Section 6(i) shall not be deemed a waiver or otherwise effect the limitation set
forth in this Section 6(i), unless such waiver expressly states it is a waiver of the provisions of this Section 6(i). For purposes of this Section 6(i), beneficial ownership shall be determined in accordance with Section 13(d)
of the Exchange Act and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The Holder may waive the limitations set forth herein by sixty-one (61) days written notice to the Company. 
 (j) In case at any time: 
 (i) the Company shall declare any dividend upon its Ordinary Shares or any other class or series of capital stock of the Company payable in cash or stock or make any other distribution to the holders of its Ordinary
Shares or any such other class or series of capital stock; 
 (ii) the Company shall offer for subscription pro
rata to the holders of its Ordinary Shares or any other class or series of capital stock of the Company any additional shares of stock of any class or other rights; or 
 (iii) there shall be any capital reorganization or reclassification of the capital stock of the Company, any acquisition or a liquidation,
dissolution or winding up of the Company; 
 then, in any one or more of said cases, the Company shall give, by delivery in person or by certified or
registered mail, return receipt requested, addressed to the Holder at the address of such Holder as shown on the books of the Company, (a) at least ten (10) Business Days’ prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any event set forth in clause (iii) of this Section 6(j) and (b) in the case of any
event set forth in clause (iii) of this Section 6(j), at least ten (10) Business Days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Ordinary Shares or such other class or series of capital stock shall be entitled thereto and such notice in accordance with the
foregoing clause (b) shall also specify the date on which the holders of Ordinary Shares and such other series or class of capital stock shall be entitled to exchange their Ordinary Shares and other stock for securities or other property
deliverable upon consummation of the applicable event set forth in clause (iii) of this Section 6(j). 
 (k) Upon
any adjustment of the Conversion Price, then and in each such case the Company shall give prompt written notice thereof, by delivery in person or by certified or registered mail, return receipt requested, addressed to the Holder at the address of
such Holder as 

  

 -11- 

 
shown on the books of the Company, which notice shall state the Conversion Price resulting from such adjustment and setting forth in reasonable detail the
method upon which such calculation is based. 
 (l) The Company shall at all times to reserve and keep available out of its
authorized Ordinary Shares, solely for the purpose of issuance upon conversion of this Note as herein provided, such number of Ordinary Shares as shall then be issuable upon the conversion of this Note without regard to the conversion limitations
set forth in Section 6. The Company covenants that all Ordinary Shares which shall be so issued shall be duly and validly issued and fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof,
and, without limiting the generality of the foregoing, and that the Company will from time to time take all such action as may be requisite to assure that the par value per share of the Ordinary Shares is at all times equal to or less than the
Conversion Price in effect at the time. The Company shall take all such action as may be necessary to assure that all such Ordinary Shares may be so issued without violation of any applicable law or regulation, or of any requirement of any national
securities exchange upon which the Ordinary Shares may be listed. The Company shall not take any action which results in any adjustment of the Conversion Price if the total number of Ordinary Shares issued and issuable after such action upon
conversion of this Note would exceed the total number of Ordinary Shares then authorized by the Company’s articles of association or memorandum of association. 
 (m) The issuance of certificates for Ordinary Shares upon conversion of this Note shall be made without charge to the holders thereof for
any issuance tax 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 that of the Holder.

 (n) The Company will not at any time close its transfer books against the transfer, as applicable, of this Note or of any
Ordinary Shares issued or issuable upon the conversion of this Note in any manner which interferes with the timely conversion of this Note, except as may otherwise be required to comply with applicable securities laws. 
 7. Additional Adjustments Upon a Change of Control. 
 (a) If a Change of Control meeting the Change of Control Conditions occurs on or prior to July 15, 2008, and the Holder elects to convert this Note at any time from and after the effective date of such Change of
Control transaction (the “Effective Date”) and prior to 5:00 p.m., New York time, on the Designated Event Repurchase Date, then the Conversion Rate in respect of such conversion shall be increased by a number of additional Ordinary Shares
(the “Additional Shares”) as described below. 
 (b) The number of Additional Shares will be determined by
reference to the table attached as Schedule A hereto, based on the effective date of the Change of Control transaction (the “Effective Date”) and the price (the “Stock Price”) paid per share of the Ordinary Shares
in such Change of Control transaction. If holders of Ordinary Shares receive only cash in such transaction, the Stock Price shall be the cash amount paid per share. 

  

 -12- 

 
Otherwise, the Stock Price shall be the average of the Market Price of Ordinary Shares on the five Trading Days up to but not including the Effective Date of
the transaction. 
 (c) The Stock Prices set forth in the first row of the table in Schedule A hereto will be adjusted as of
any date on which the Conversion Rate of this Note is adjusted as a result of an adjustment of the Conversion Price pursuant to Section 6. The adjusted Stock Price will equal the Stock Price applicable immediately prior to such adjustment,
multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Stock Price adjustment and the denominator of which is the Conversion Rate as so adjusted. The number of Additional Shares
will be adjusted in the same manner as the Conversion Price, as set forth in Section 6. 
 (d) The exact Stock Prices and
Effective Dates may not be set forth in the table in Schedule A, in which case: if the Stock Price is between two Stock Price amounts in the table or the Effective Date is between two Effective Dates in the table, the number of Additional Shares
will be determined by a straight-line interpolation between the number of Additional Shares set forth for the higher and lower Stock Price amounts and the two dates, as applicable, based on a 365-day year, 
 (e) Any adjustment of the Conversion Rate pursuant to this Section 7 shall result in an immediate, concomitant adjustment in the
Conversion Price. 
 8. Covenants. 
 (a) So long as any amount due under this Note is outstanding and until indefeasible payment in full of all amounts payable by the Company hereunder: 
 (i) The Company shall and shall cause each of its Subsidiaries to (A) carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently conducting, (B) do all things necessary to remain duly organized, validly existing, and in good standing as a domestic corporation under the laws of its state of
incorporation and (C) maintain all requisite authority to conduct its business in those jurisdictions in which its business is conducted. 
 (ii) The Company shall promptly notify the Holder in writing of (A) any change in the business or the operations the Company or any Subsidiary which could reasonably be expected to have a Material Adverse Effect,
and (B) any information which indicates that any financial statements which are the subject of any representation contained in the Transaction Documents, or which are furnished to the Holder pursuant to the Transaction Documents, fail, in any
material respect, to present fairly, as of the date thereof and for the period covered thereby, the financial condition and results of operations purported to be presented therein, disclosing the nature thereof. 
 (iii) The Company shall promptly notify the Holder of the occurrence of any Event of Default or any event which, with the giving of
notice, the lapse of time or both would constitute an Event of Default, which notice shall include a written statement as to such occurrence, specifying the nature thereof and the action (if any) which is proposed to be taken with respect thereto.

  

 -13- 

 (iv) The Company shall promptly notify the Holder of any action, suit or proceeding at
law or in equity or by or before any governmental instrumentality or other agency against the Company or any Subsidiary or to which the Company or any Subsidiary may be subject which alleges damages in excess of One Hundred Thousand United States
Dollars (US$100,000). 
 (v) The Company shall promptly notify the Holder of any default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which the Company or any Subsidiary is a party which default could reasonably be expected to have a Material Adverse Effect. 
 (vi) The Company shall and shall cause each Subsidiary to pay when due all taxes, assessments and governmental charges and levies upon it
or its income, profits or property, except those that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside. 
 (vii) The Company shall and shall cause each Subsidiary to all times maintain with financially sound and reputable insurance companies
insurance covering its assets and its businesses in such amounts and covering such risks (including, without limitation, hazard, business interruption and public liability) as is consistent with sound business practice and as may be obtained at
commercially reasonable rates. 
 (viii) The Company shall and shall cause each Subsidiary to comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which they may be subject except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. 
 (ix) The Company shall and shall cause each Subsidiary to use commercially reasonable efforts to do all things necessary to maintain,
preserve, protect and keep its properties in good repair, working order and condition and use commercially reasonable efforts to make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith
may be properly conducted. 
 (x) At its own expense, the Company shall and shall cause each Subsidiary to make, execute,
endorse, acknowledge file and/or deliver any documents and take all actions necessary or required to maintain its ownership rights in its Intellectual Property, including, without limitation, (i) any action reasonably required to protect the
Intellectual Property in connection with any infringement, suspected infringement, passing off, act of unfair competition or other unlawful interference with the rights of the Company or any Subsidiary in and to such Intellectual Property, and
(ii) any registrations with the United States Patent & Trademark Office and any corresponding foreign patent and/or trademark office required for the Company or any Subsidiary to carry on its business as presently conducted and as
presently proposed to be conducted. Except for non-exclusive licenses granted in the ordinary course of business, the Company shall not and shall cause each Subsidiary not to transfer, assign or otherwise convey the Intellectual Property, any
registrations or applications thereof and all goodwill associate therewith, to any person or entity. 
  

 -14- 

 (xi) Promptly after the occurrence thereof, the Company shall and shall cause each
Subsidiary to inform the Holder of all material developments, including without limitation (i) entering into material agreements outside the ordinary course of business consistent with past practice, (ii) any issuance of debt securities by
the Company or any Subsidiary, (iii) the incurrence of any Indebtedness by the Company or any Subsidiary, (iv) a change in the number of the Board of Directors of the Company, (v) a sale, lease or transfer of any material portion of
the assets of the Company or any Subisdiary and (v) any change in ownership of any Subsidiary (specifying the details of any such change, including the identity and ownership amount of any new owner). 
 (b) So long as any amount due under this Note is outstanding and until indefeasible payment in full of all amounts payable by the Company
hereunder: 
 (i) The Company shall not and shall cause each Subsidiary not to create, incur, guarantee, issue, assume or in
any manner become liable in respect of any Indebtedness, other than Permitted Indebtedness. 
 (ii) The Company shall not and
shall cause each Subsidiary not to create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired other than (i) Liens created pursuant to the Bank Control Agreement and (ii) Permitted
Liens. The Company shall not be bound by any agreement which limits the ability of any Company to grant Liens. 
 (iii) The
Company shall not and shall cause each Subsidiary not to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property
or the rendering of any service) with, or for the benefit of, any of its Affiliates other than a wholly owned Subsidiary. 
 (iv) The Company shall not, and shall cause each of its Subsidiaries not to, directly or indirectly, declare or pay any dividends on account of any shares of any class or series of its capital stock now or hereafter outstanding, or set
aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class of its capital stock (or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or pay any interest, premium if any, or principal of any Indebtedness or redeem, retire, defease,
repurchase or otherwise acquire any Indebtedness (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration or apply or set apart any sum, or make any other payment in respect thereof or agree to do any of the
foregoing (each of the foregoing is herein called a “Restricted Payment”); provided, that (i) the Company may make payments of interest, premium if any, and principal of the Notes in accordance with the terms hereof and
(ii) provided that no Event of Default or event which, with the giving of notice, the lapse of time or both would constitute an Event of Default has occurred and is continuing, the Company and its Subsidiaries may make regularly scheduled
payments of interest and principal of any Permitted Indebtedness, (iii) any Subsidiary directly or indirectly wholly owned by the Company may pay dividends on its capital stock and (iv) the Company may repurchase capital stock from a
former employee in connection with the termination or other departure of such employee, strictly in accordance with the terms of any 

  

 -15- 

 
agreement entered into with such employee and in effect on the Closing Date (as defined in the Purchase Agreement), provided that (A) such repurchase is
approved by a majority of the Board, (B) payments permitted under this clause (iv) shall not exceed $1,000,000 in the aggregate, and (C) no such payment may be made if an Event of Default or an event which, with the giving of notice,
the lapse of time or both would constitute an Event of Default has occurred and is continuing or would result from such payment. 
 (v) The Company shall not and shall cause each Subsidiary not to, directly or indirectly, engage in any new line of business. 
 (vi) The Company shall not and shall cause each Subsidiary not to make or own any Investment in any Person, including without limitation any joint venture, other than (A) Permitted Investments, (B) operating
deposit accounts with banks, (C) Hedging Agreements entered into in the ordinary course of the Company’s financial planning and not for speculative purposes and (D) investments by the Company in the capital stock of any wholly owned
Subsidiary. 
 (vii) The Company shall not and shall cause each Subsidiary not to, directly or indirectly, become or remain
liable as lessee or as a guarantor or other surety with respect to any lease of any property (whether real, personal or mixed), whether now owned or hereafter acquired, which the Company or any Subsidiary (a) has sold or transferred or is to
sell or to transfer to any other Person, or (b) intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by the Company or any Subsidiary to any Person in connection with such lease.

 (viii) The Company shall not and shall cause each Subsidiary not to settle, or agree to indemnify or defend third parties
against, any material lawsuit, except as may be required by judicial or regulatory order or by agreements entered into prior to the date hereof on a basis consistent with past practice. A material lawsuit shall be any lawsuit in which the amount in
controversy exceeds $250,000. The provisions of this Section 7(b)(viii) shall not apply to commercial indemnities entered into by the Company or any Subsidiary in the ordinary course of business consistent with past practices. 
 (ix) The Company shall not and shall cause each Subsidiary not to amend its bylaws, certificate of incorporation or other charter document
in a manner adverse to the Holder. 
 9. Event of Default. The occurrence of any of following events shall constitute an
“Event of Default” hereunder: 
 (a) the failure of the Company to make any payment of principal on this Note
or any of the Company Notes when due, whether at maturity, upon acceleration or otherwise, and such failure continues for more than five (5) days; 
 (b) the failure of the Company to make any payment of interest on this Note or any other Company Note, or any other amounts due under the Transaction Documents when due, whether at maturity, upon acceleration or
otherwise, and such failure continues for more than five (5) days; 
  

 -16- 

 (c) the Company and/or its Subsidiaries fail to make a required payment or payments on
indebtedness for borrowed money of Two Hundred Fifty Thousand United States Dollars (US$250,000) or more in aggregate principal amount and such failure continues for more than ten (10) days; 
 (d) there shall have occurred an acceleration of the stated maturity of any indebtedness for borrowed money of the Company or its
Subsidiaries of Two Hundred Fifty Thousand United States Dollars (US$250,000) or more in aggregate principal amount (which acceleration is not rescinded, annulled or otherwise cured within ten (10) days of receipt by the Company or a Subsidiary
of notice of such acceleration); 
 (e) the Company makes an assignment for the benefit of creditors or admits in writing its
inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Company as bankrupt or insolvent; or any order for relief with respect to the Company is entered under the Federal Bankruptcy Code
or any other bankruptcy or insolvency law; or the Company petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company or of any substantial part of the assets of the Company, or commences
any proceeding relating to it under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced,
against the Company and either (i) the Company by any act indicates its approval thereof, consents thereto or acquiescence therein or (ii) such petition application or proceeding is not dismissed within sixty (60) days; 
 (f) a final, non-appealable judgment which, in the aggregate with other outstanding final judgments against the Company and its
Subsidiaries, exceeds Two Hundred Fifty Thousand United States Dollars (US$250,000) shall be rendered against the Company or a Subsidiary and within sixty (60) days after entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within sixty (60) days after the expiration of such stay, such judgment is not discharged; 
 (g) the Company is in breach of the requirements of Section 7.9 of the Purchase Agreement; 
 (h) if any
representation or statement of fact made in the Purchase Agreement or any other Transaction Document proves to have been false in any material respect when made or furnished within two years of the Closing Date, or if any other representation or
statement of fact furnished to the Holder at any time by or on behalf of the Company proves to have been false in any material respect when made or furnished; or 
 (i) if the Company fails to observe or perform in any material respect any of its covenants contained in the Transaction Documents (other
than any failure which is covered by Section 9(a), (b) or (g)), and such failure continues for thirty (30) days after receipt by the Company of notice thereof. 
 Upon the occurrence of any such Event of Default all unpaid principal and accrued interest under this Note shall become immediately due
and payable (A) upon election of 

  

 -17- 

 
the Holder, with respect to (a) through (d) and (f) through (i), and (B) automatically, with respect to (e). Upon the occurrence of any
Event of Default, the Holder may, in addition to declaring all amounts due hereunder to be immediately due and payable, pursue any available remedy, whether at law or in equity, including, without limitation, exercising its rights under the other
Transaction Documents. If an Event of Default occurs, the Company shall pay to the Holder the reasonable attorneys’ fees and disbursements and all other reasonable out-of-pocket costs incurred by the Holder in order to collect amounts due and
owing under this Note or otherwise to enforce the Holder’s rights and remedies hereunder and under the other Transaction Documents. 
 10. No waiver. No delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one
occasion be deemed a bar to or waiver of the same or any other right on any future occasion. 
 11. Amendments in Writing. None of the
terms or provisions of this Note may be excluded, modified or amended except by a written instrument duly executed by the Holder and the Company expressly referring to this Note and setting forth the provision so excluded, modified or amended.

 12. Waivers. The Company hereby forever waives presentment, demand, presentment for payment, protest, notice of protest, notice of
dishonor of this Note and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note. 
 13. Waiver of Jury Trial. THE COMPANY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS NOTE OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER CLAIMS. THE COMPANY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 
 14. Governing Law; Consent to Jurisdiction. This Note
shall be governed by and construed under the law of the State of New York, without giving effect to the conflicts of law principles thereof. The Company and, by accepting this Note, the Holder, each irrevocably submits to the exclusive jurisdiction
of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Note and the
transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Note. The
Company and, by accepting this Note, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. The Company and, by accepting this Note, the Holder,
each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. 
 15. Costs. In the event that legal proceedings are commenced by the Holder or the Company in connection with
Note, the party or parties which do not prevail in such proceedings shall severally, but not jointly, pay their pro rata share of the reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing
party in such proceedings. 
  

 -18- 

 16. Notices. All notices hereunder shall be given in writing and shall be deemed delivered when
received by the other party hereto at the address set forth in the Purchase Agreement or at such other address as may be specified by such party from time to time in accordance with the Purchase Agreement. 
 17. Successors and Assigns. This Note shall be binding upon the successors or assigns of the Company and shall inure to the benefit of the
successors and assigns of the Holder. 
 [Remainder of Page Intentionally Left Blank] 
  

 -19- 

			
	 VIRYANET LTD.

		
	By:	 	  
		 	 Name:

		 	 Title:

  

 -20- 

 SCHEDULE A 
 The following table sets forth the number of Additional Shares to be received per $1,000 principal amount of Notes. 
  

																							
	 	  	Stock Price
	 Effective Date
	  	$2.10	  	$2.50	  	$3.00	  	$3.50	  	$4.00	  	$4.50	  	$5.00	  	$5.50	  	$6.00	  	$6.50	  	$7.00
	 July 31, 2005
	  	95.24	  	73.65	  	54.76	  	41.27	  	31.15	  	23.28	  	16.98	  	11.83	  	7.54	  	3.91	  	0.79
	 July 31, 2006
	  	76.19	  	58.92	  	43.81	  	33.02	  	24.92	  	18.62	  	13.59	  	9.47	  	6.03	  	3.13	  	0.63
	 July 31, 2007
	  	57.14	  	44.19	  	32.86	  	24.76	  	18.69	  	13.97	  	10.19	  	7.10	  	4.52	  	2.34	  	0.48
	 July 31, 2008
	  	38.04	  	29.42	  	21.87	  	16.49	  	12.44	  	9.30	  	6.78	  	4.73	  	3.01	  	1.56	  	0.32
	 July 31, 2009
	  	19.00	  	14.69	  	10.92	  	8.23	  	6.21	  	4.64	  	3.39	  	2.36	  	1.50	  	0.78	  	0.16

  

 -21- 

 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN
REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY
BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. 
 SUBJECT TO THE
PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON AUGUST 4, 2010 (THE “EXPIRATION DATE”). 
 No. 1

 VIRYANET LTD. 
 WARRANT TO PURCHASE 116,666 ORDINARY SHARES, 
 PAR VALUE 1.0 NIS PER SHARE 
 For VALUE RECEIVED, LibertyView Special Opportunities Fund, L.P. (“Warrantholder”), is entitled to purchase, subject to the provisions of this
Warrant, from ViryaNet Ltd., an Israeli corporation (“Company”), at any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an exercise price per share equal to US$2.10 (the exercise price in effect
being herein called the “Warrant Price”), 116,666 Ordinary Shares (“Warrant Shares”) of the Company’s Ordinary Shares, par value 1.0 NIS per share (“Ordinary Shares”). The number of Warrant Shares purchasable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. 
 Section 1.
Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. 
 Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for
that purpose, upon surrender hereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of
its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee
and the surrendered Warrant shall be canceled by the Company. 

 Section 3. Exercise of Warrant. Subject to the provisions hereof, the Warrantholder may
exercise this Warrant, in whole or in part, at any time prior to its expiration upon surrender of the Warrant, together with delivery of a duly executed Warrant exercise form, in the form attached hereto as Appendix A (the “Exercise
Agreement”) and payment by cash, certified check or wire transfer of funds (or by cashless exercise as provided below) of the aggregate Warrant Price for that number of Warrant Shares then being purchased, to the Company during normal business
hours on any business day at the Company’s principal executive offices (or such other office or agency of the Company as it may designate by notice to the Warrantholder). The Warrant Shares so purchased shall be deemed to be issued to the
Warrantholder or the Warrantholder’s designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered (or the date evidence of loss, theft or destruction thereof and
security or indemnity satisfactory to the Company has been provided to the Company), the Warrant Price shall have been paid and the completed Exercise Agreement shall have been delivered. Certificates for the Warrant Shares so purchased shall be
delivered to the Warrantholder within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the
Warrantholder and shall be registered in the name of the Warrantholder or such other name as shall be designated by the Warrantholder, as specified in the Exercise Agreement. If this Warrant shall have been exercised only in part, then, unless this
Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Warrantholder a new Warrant representing the right to purchase the number of shares with respect to which this Warrant shall not
then have been exercised. As used herein, “business day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business. Each exercise hereof shall constitute the
re-affirmation by the Warrantholder that the representations and warranties contained in Section 5 of the Purchase Agreement (as defined below) are true and correct in all material respects with respect to the Warrantholder as of the time of
such exercise. 
 Section 4. Compliance with the Securities Act of 1933. Except as provided in the Purchase Agreement (as defined
below), the Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant, and a similar legend on any security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the
opinion as to any such security that such legend is unnecessary. 
 Section 5. Payment of Taxes. The Company will pay any
documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the Warrantholder in respect of which such shares are issued, and in such case, the Company shall not be required to issue or deliver
any certificate for Warrant Shares or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company’s reasonable satisfaction that such tax has been paid. The Warrantholder
shall be responsible for income taxes due under federal, state or other law, if any such tax is due. 
  

 -2- 

 Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost,
stolen, or destroyed, the Company shall issue in exchange and substitution of and upon surrender and cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for
the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable
indemnity or bond with respect thereto, if requested by the Company. 
 Section 7. Reservation of Ordinary Shares. The Company
hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 7, out of the authorized and unissued capital stock,
sufficient Ordinary Shares to provide for the exercise of the rights of purchase represented by this Warrant. The Company agrees that all Warrant Shares issued upon due exercise of the Warrant shall be, at the time of delivery of the certificates
for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable Ordinary Shares of the Company. 
 Section 8.
Adjustments. Subject and pursuant to the provisions of this Section 8, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter. 
 (a) If the Company shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its
Ordinary Shares in Ordinary Shares, subdivide its outstanding Ordinary Shares into a greater number of shares or combine its outstanding Ordinary Shares into a smaller number of shares or issue by reclassification of its outstanding Ordinary Shares
any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon exercise of the Warrant and the
Warrant Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of Ordinary
Shares or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event upon payment of a Warrant Price that has been adjusted to reflect a fair allocation of the economics of such
event to the Warrantholder. Such adjustments shall be made successively whenever any event listed above shall occur. 
 (b) If
any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or
substantially all of the Company’s assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall
be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the
Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately 

  

 -3- 

 
theretofore issuable upon exercise of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not
taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Warrant Price)
shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring
such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Warrantholder, at the last address of the Warrantholder appearing on the books of the Company, such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Warrantholder may be entitled to purchase, and the other obligations under this Warrant. The provisions of this paragraph (b) shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions. 
 (c) In case the Company shall fix a payment date for the
making of a distribution to all holders of Ordinary Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 8(a)), or subscription rights or warrants, the Warrant Price to be in effect after such payment date
shall be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of Ordinary Shares outstanding multiplied by the Market Price (as defined below)
per Ordinary Share immediately prior to such payment date, less the fair market value (as determined by the Company’s Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights
or warrants, and the denominator of which shall be the total number of Ordinary Shares outstanding multiplied by such Market Price per Ordinary Share immediately prior to such payment date. “Market Price” as of a particular date (the
“Valuation Date”) shall mean the following: (a) if the Ordinary Shares are then listed on a national stock exchange, the closing sale price of one Ordinary Shares on such exchange on the last trading day prior to the Valuation Date;
(b) if the Ordinary Shares are then quoted on The Nasdaq Stock Market, Inc. (“Nasdaq”), the National Association of Securities Dealers, Inc. OTC Bulletin Board (the “Bulletin Board”) or such similar quotation system or
association, the closing sale price of one Ordinary Share on Nasdaq, the Bulletin Board or such other quotation system or association on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of
the high bid and the low asked price quoted thereon on the last trading day prior to the Valuation Date; or (c) if the Ordinary Shares are not then listed on a national stock exchange or quoted on Nasdaq, the Bulletin Board or such other
quotation system or association, the fair market value of one Ordinary Share as of the Valuation Date, as determined in good faith by the Board of Directors of the Company and the Warrantholder. If the Ordinary Shares are not then listed on a
national securities exchange, the Bulletin Board or such other quotation system or association, the Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Warrantholder prior to the exercise hereunder as to the
fair market value of an 

  

 -4- 

 
Ordinary Shares as determined by the Board of Directors of the Company. In the event that the Board of Directors of the Company and the Warrantholder are
unable to agree upon the fair market value in respect of subpart (c) of this paragraph, the Company and the Warrantholder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and
conclusive, and the cost of such appraiser shall be borne equally by the Company and the Warrantholder. Such adjustment shall be made successively whenever such a payment date is fixed. 
 (d) An adjustment to the Warrant Price shall become effective immediately after the payment date in the case of each dividend or
distribution and immediately after the effective date of each other event which requires an adjustment. 
 (e) In the event
that, as a result of an adjustment made pursuant to this Section 8, the Warrantholder shall become entitled to receive any shares of capital stock of the Company other than Ordinary Shares, the number of such other shares so receivable upon
exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant. 
 Section 9. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of this Warrant. If
any fraction of an Ordinary Shares would, except for the provisions of the first sentence of this Section 9, be deliverable upon such exercise, the Company, in lieu of delivering such fractional share, shall pay to the exercising Warrantholder
an amount in cash equal to the Market Price of such fractional Ordinary Share on the date of exercise. 
 Section 10. Extension of
Expiration Date. If the Company fails to cause any Registration Statement covering Registrable Securities (unless otherwise defined herein, capitalized terms are as defined in the Registration Rights Agreement relating to the Warrant Shares (the
“Registration Rights Agreement”)) to be declared effective prior to the applicable dates set forth therein, or if any of the events specified in Section 2(c)(ii) of the Registration Rights Agreement occurs, and the Blackout Period
(whether alone, or in combination with any other Blackout Period) continues for more than 60 days in any 12 month period, or for more than a total of 90 days, then the Expiration Date of this Warrant shall be extended one day for each day beyond the
60-day or 90-day limits, as the case may be, that the Blackout Period continues. 
 Section 11. Benefits. Nothing in this Warrant
shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and
the Warrantholder. 
 Section 12. Notices to Warrantholder. Upon the happening of any event requiring an adjustment of the
Warrant Price, the Company shall promptly give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event
and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is 

  

 -5- 

 
based. Failure to give such notice to the Warrantholder or any defect therein shall not affect the legality or validity of the subject adjustment.

 Section 13. Identity of Transfer Agent. The Transfer Agent for the Ordinary Shares is American Stock Transfer & Trust
Company. Upon the appointment of any subsequent transfer agent for the Ordinary Shares or other shares of the Company’s capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will mail to the
Warrantholder a statement setting forth the name and address of such transfer agent. 
 Section 14. Notices. Unless otherwise
provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery,
(ii) if given by telex or facsimile, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such
notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business
day after delivery to such carrier. All notices shall be addressed as follows: if to the Warrantholder, at its address as set forth in the Company’s books and records and, if to the Company, at the address as follows, or at such other address
as the Warrantholder or the Company may designate by ten days’ advance written notice to the other: 
 If to the Company:

 ViryaNet Ltd. 
 8 HaMarpe Street 
 Har Hotzvim 
 P.O. Box 45041 
 Jerusalem 91450 
 Israel 
 Attention: Albert A. Gabrielli, Chief Financial Officer 
 Fax: 011-508-490-8666 
 With a copy to: 
 Meitar Liquornik Geva & Leshem Brandwein 
 16 Abba Hillel Silver Rd. 
 Ramat Gan 52506, Israel 
 Attention: Raanan Lerner, Adv. 
 Fax: 011-9723-610-3111 
 Section 15. Registration Rights. The initial Warrantholder is entitled to the benefit of certain registration rights with respect to the Ordinary Shares issuable upon the exercise of this Warrant as provided in the Registration
Rights Agreement, and any subsequent Warrantholder may be entitled to such rights. 
  

 -6- 

 Section 16. Successors. All the covenants and provisions hereof by or for the benefit of the
Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder. 
 Section 17. Governing Law;
Consent to Jurisdiction; Waiver of Jury Trial. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof. The Company and, by
accepting this Warrant, the Warrantholder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the
purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto
anywhere in the world by the same methods as are specified for the giving of notices under this Warrant. The Company and, by accepting this Warrant, the Warrantholder, each irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. The Company and, by accepting this Warrant, the Warrantholder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT TO REQUEST
A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. 
 Section 18. Cashless Exercise. Notwithstanding any other provision contained herein to the contrary, from and after the first anniversary of the Closing Date (as defined in the Purchase Agreement) and so long as the Company is
required under the Registration Rights Agreement to have effected the registration of the Warrant Shares for resale to the public pursuant to a Registration Statement (as such term is defined in the Registration Rights Agreement), if the Warrant
Shares may not be freely sold to the public for any reason (including, but not limited to, the failure of the Company to have effected the registration of the Warrant Shares or to have a current prospectus available for delivery or otherwise, but
excluding the period of any Allowed Delay (as defined in the Registration Rights Agreement), the Warrantholder may elect to receive, without the payment by the Warrantholder of the aggregate Warrant Price in respect of the Ordinary Shares to be
acquired, Ordinary Shares of equal value to the value of this Warrant, or any specified portion hereof, by the surrender of this Warrant (or such portion of this Warrant being so exercised) together with a Net Issue Election Notice, in the form
annexed hereto as Appendix B, duly executed, to the Company. Thereupon, the Company shall issue to the Warrantholder such number of fully paid, validly issued and nonassessable Ordinary Shares as is computed using the following formula: 

X = Y (A - B) 
 A 
  

	where	

 X = the number of Ordinary Shares to
which the Warrantholder is entitled upon such cashless exercise; 
  

 -7- 

 Y = the total number of Ordinary Shares covered by this Warrant for which the
Warrantholder has surrendered purchase rights at such time for cashless exercise (including both shares to be issued to the Warrantholder and shares as to which the purchase rights are to be canceled as payment therefor); 
 A = the “Market Price” of one Ordinary Share as at the date the net issue election is made; and 
 B = the Warrant Price in effect under this Warrant at the time the net issue election is made. 
 Section 19. Limitations on Exercise. 
 (a) Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Warrantholder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited
to the extent necessary to insure that, following such exercise (or other issuance), the total number of Ordinary Shares then beneficially owned by such Warrantholder and its Affiliates (as such term is defined in the Purchase Agreement) and any
other Persons (as such term is defined in the Purchase Agreement) whose beneficial ownership of Ordinary Shares would be aggregated with the Warrantholder’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), does not exceed 4.999% of the total number of issued and outstanding Ordinary Shares (including for such purpose the Ordinary Shares issuable upon such exercise). For such purposes, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. This provision shall not restrict the number of Ordinary Shares which a Warrantholder may receive or beneficially own in order
to determine the amount of securities or other consideration that such Holder may receive in the event of a transaction contemplated by Section 8 of this Warrant. By written notice to the Company, the Warrantholder may waive the provisions of
this Section 19(a), but any such waiver will not be effective until the 61st day after delivery of such notice, nor will any such waiver effect any other Warrantholder. 
 (b) Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Warrantholder upon
any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of Ordinary Shares then beneficially owned by such Warrantholder and
its Affiliates and any other Persons whose beneficial ownership of Ordinary Shares would be aggregated with the Warrantholder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 9.999% of the total number of issued and
outstanding Ordinary Shares (including for such purpose the Ordinary Shares issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. This provision shall not 

  

 -8- 

 
restrict the number of Ordinary Shares which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration
that such Holder may receive in the event of a transaction contemplated by Section 8 of this Warrant. This restriction may not be waived. 
 Section 20. No Rights as Stockholder. Prior to the exercise of this Warrant, the Warrantholder shall not have or exercise any rights as a stockholder of the Company by virtue of its ownership of this Warrant. 
 Section 21. Amendment; Waiver. This Warrant is one of a series of Warrants of like tenor issued by the Company pursuant to the Purchase
Agreement and initially covering an aggregate of 116,666 Ordinary Shares (collectively, the “Company Warrants”). Any term of this Warrant may be amended or waived (including the adjustment provisions included in Section 8 of
this Warrant) upon the written consent of the Company and the holders of Company Warrants representing at least 50% of the number of Ordinary Shares then subject to all outstanding Company Warrants (the “Majority Holders”);
provided, that (x) any such amendment or waiver must apply to all Company Warrants; and (y) the number of Warrant Shares subject to this Warrant, the Warrant Price and the Expiration Date may not be amended, and the right to
exercise this Warrant may not be altered or waived, without the written consent of the Warrantholder. 
 Section 22. Section
Headings. The section headings in this Warrant are for the convenience of the Company and the Warrantholder and in no way alter, modify, amend, limit or restrict the provisions hereof. 
  

 -9- 

 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as of the 5th day of August,
2005. 
  

			
	 VIRYANET LTD.

		
	By:	 	  
	 Name:
	 	
	 Title:
	 	

  

 -10- 

 APPENDIX A 
 VIRYANET LTD. 
 WARRANT EXERCISE FORM 
 To ViryaNet Ltd.: 
 The
undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant (“Warrant”) for, and to purchase thereunder by the payment of the Warrant Price and surrender of the Warrant,
                     Ordinary Shares (“Warrant Shares”) provided for therein, and requests that certificates for the Warrant Shares
be issued as follows: 
                                       
                                        
                            
 Name 
                                       
                                        
                            
 Address 
                                       
                                        
                            
                                       
                                        
                            
 Federal Tax ID or Social Security No. 
 and delivered by (certified mail to the above address, or (electronically (provide DWAC Instructions:
                            ), or (other (specify):
                                        ).

 and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in the name of the undersigned Warrantholder or the undersigned’s Assignee as below indicated and delivered to the address stated below. 
 Dated:
                            ,          
  

					
	 Note: The signature must correspond with
      Signature:                                
                             
	 		 	
	the name of the Warrantholder as written on the first page of the Warrant in every particular, without alteration or enlargement or any change whatever, unless the Warrant has been
assigned.	 		 	   
	 		 	 Name (please print)

		 		 	  
		 		 	  
		 		 	 Address

		 		 	  
		 		 	 Federal Identification or

		 		 	 Social Security No.

			
		 		 	 Assignee:

			
		 		 	  
		 		 	  
		 		 	  

  

 -11- 

 APPENDIX B 
 VIRYANET LTD. 
 NET ISSUE ELECTION NOTICE 
 To: ViryaNet Ltd. 
 Date:[                                    ]

 The undersigned hereby elects under Section 18 of this Warrant to surrender the right to purchase
[                    ] Ordinary Shares pursuant to this Warrant and hereby requests the issuance of
[                    ] Ordinary Shares. The certificate(s) for the shares issuable upon such net issue election shall be issued in the name of
the undersigned or as otherwise indicated below. 
                                       
                                        
                                     
 Signature 
                                       
                                        
                                     
 Name for Registration 
                                       
                                        
                                     
 Mailing Address 
  

 -12- 

 REGISTRATION RIGHTS AGREEMENT 
 This Registration Rights Agreement (the “Agreement”) is made and entered into as of this 5th day of August, 2005 by and among ViryaNet Ltd., an Israeli corporation (the “Company”), and the “Investors” named in that certain Note
Purchase Agreement by and among the Company and the Investors (the “Purchase Agreement”). 
 The parties hereby agree as follows:

 1. Certain Definitions. 
 As used in this Agreement, the following terms shall have the following meanings: 
 “Affiliate” means, with
respect to any person, any other person which directly or indirectly controls, is controlled by, or is under common control with, such person. 
 “Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business. 
 “Conversion Shares” means the Ordinary Shares issuable upon the conversion of the Notes. 
 “Investors” shall mean the Investors identified in the Purchase Agreement and any Affiliate or permitted transferee of any Investor who is a subsequent holder of any Notes or Registrable Securities. 
 “Notes” means, the Company’s convertible notes issued to the Investors pursuant to the Purchase Agreement, the form of which is
attached to the Purchase Agreement as Exhibit A, including the Restated Notes (as defined in the Purchase Agreement). 
 “Ordinary
Shares” shall mean the Ordinary Shares, par value NIS 1.0 per share, of the Company and any securities into which such shares may hereinafter be reclassified. 
 “Payment Shares” means Ordinary Shares issued as payment pursuant to Section 7 of the Notes. 
 “Prospectus” shall mean the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material
incorporated by reference in such prospectus. 
 “Register,” “registered” and
“registration” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such
Registration Statement or document. 
 “Registrable Securities” shall mean (i) the Shares, (ii) the Warrant
Shares, (iii) the Conversion Shares, (iv) the Payment Shares, and (v) any other securities issued or issuable with respect to or in exchange for Registrable Securities; provided, that, a security shall cease to be a Registrable
Security upon (A) sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale by the Investors pursuant to Rule 144(k). 

 “Registration Statement” shall mean any registration statement of the Company filed
under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all
material incorporated by reference in such Registration Statement. 
 “Required Investors” means the Investors holding a
majority of the Registrable Securities. 
 “SEC” means the U.S. Securities and Exchange Commission. 
 “Shares” means the Ordinary Shares purchased by the Investors pursuant to the Purchase Agreement. 
 “Warrants” means, the Warrants issued to the Investors pursuant to the Purchase Agreement, the form of which is attached to the Purchase
Agreement as Exhibit B. 
 “Warrant Shares” means the Ordinary Shares issuable upon the exercise of the Warrants.

 “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 2. Registration. 
 (a) Registration Statements. 
 (i) Promptly following the Closing Date (as defined in
the Purchase Agreement) but no later than thirty (30) days after the Closing Date (the “Filing Deadline”), the Company shall prepare and file with the SEC one Registration Statement on Form F-3 (or, if Form F-3 is not then available
to the Company, on such form of registration statement as is then available to effect a registration for resale of the Registrable Securities, subject to the Required Investors’ consent), covering the resale of the Registrable Securities. Such
Registration Statement shall include the plan of distribution attached hereto as Exhibit A. Such Registration Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416),
such indeterminate number of additional Ordinary Shares resulting from stock splits, stock dividends or similar transactions with respect to the Initial Registrable Securities. The Company shall use its reasonable best efforts to obtain from each
person who now has piggyback registration rights a waiver of those rights with respect to the Registration Statement. The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided in accordance with Section 3(c) to the Investors and their counsel prior to its filing or other submission. If a Registration Statement covering the Registrable Securities is not filed with the SEC on or prior to the Filing
Deadline, the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.0% of the aggregate amount invested by such Investor pursuant to the Purchase Agreement for each 30-day period or
pro rata for any portion thereof following the date by which such Registration Statement should 

  

 -2- 

 
have been filed for which no Registration Statement is filed with respect to the Registrable Securities. Such payments shall be in partial compensation to
the Investors, and shall not constitute the Investors’ exclusive remedy for such events. Such payments shall be made to each Investor in cash. For the avoidance of doubt and as an example only, in the event that the Company files a Registration
Statement three days after the Filing Deadline, the Company would be liable for liquidated damages in the amount of US$1,200.00. 
 (ii) Additional Registrable Securities. Upon the written demand of any Investor, upon any change in the Warrant Price (as defined in the Warrants) or the Conversion Price (as defined in the Notes) such that additional Ordinary Shares
become issuable upon the exercise of the Warrants or the conversion of the Notes, and upon any increase in the number of Payment Shares to be issued under the Notes beyond those covered by the Registration Statement, the Company shall prepare and
file with the SEC one or more Registration Statements on Form F-3 or amend the Registration Statement filed pursuant to clause (i) above, if such Registration Statement has not previously been declared effective (or, if Form F-3 is not then
available to the Company, on such form of registration statement as is then available to effect a registration for resale of such additional Ordinary Shares (the “Additional Shares”), subject to the Required Investors’ consent)
covering the resale of the Additional Shares, but only to the extent the Additional Shares are not at the time covered by an effective Registration Statement. Such Registration Statement also shall cover, to the extent allowable under the 1933 Act
and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional Ordinary Shares resulting from stock splits, stock dividends or similar transactions with respect to the Additional Shares. The Company shall use its
reasonable best efforts to obtain from each person who now has piggyback registration rights a waiver of those rights with respect to such Registration Statement. The Registration Statement (and each amendment or supplement thereto, and each request
for acceleration of effectiveness thereof) shall be provided in accordance with Section 3(c) to the Investors and their counsel prior to its filing or other submission. If a Registration Statement covering the Additional Shares is required to
be filed under this Section 2(a)(ii) and is not filed with the SEC within five Business Days of the request of any Investor or upon the occurrence of any of the events specified in this Section 2(a)(ii), the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.0% of the aggregate amount invested by such Investor for each 30-day period or pro rata for any portion thereof following the date by which such
Registration Statement should have been filed for which no Registration Statement is filed with respect to the Additional Shares. Such payments shall be in partial compensation to the Investors, and shall not constitute the Investors’ exclusive
remedy for such events. Such payments shall be made to each Investor in cash. For the avoidance of doubt and as an example only, in the event that a Registration Statement covering US$100,000 of Ordinary Shares was filed three days late, the Company
would be liable for liquidated damages in the amount of US$100.00. 
 (b) Expenses. The Company will pay all expenses
associated with each registration, including filing and printing fees, the Company’s counsel and accounting fees and expenses, costs associated with clearing the Registrable Securities for sale under applicable state securities laws, listing
fees, fees and expenses of one counsel to the Investors and the Investors’ reasonable expenses in connection with the registration, but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals with respect to the Registrable Securities being sold. 
  

 -3- 

 (c) Effectiveness. 
 (i) The Company shall use commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable.
The Company shall notify the Investors by facsimile or e-mail as promptly as practicable, and in any event, within twenty-four (24) hours, after any Registration Statement is declared effective and shall simultaneously provide the Investors
with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby. If (A)(x) a Registration Statement covering the Initial Registrable Securities is not declared effective by the SEC
within ninety (90) days after Closing Date, or (y) a Registration Statement covering Additional Shares is not declared effective by the SEC within ninety (90) days following the time such Registration Statement was required to be
filed pursuant to Section 2(a)(ii), or (B) after a Registration Statement has been declared effective by the SEC, sales cannot be made pursuant to such Registration Statement for any reason (including without limitation by reason of a stop
order, or the Company’s failure to update the Registration Statement), but excluding the inability of any Investor to sell the Registrable Securities covered thereby due to market conditions and except as excused pursuant to subparagraph
(ii) below, then the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.0% of the aggregate amount invested by such Investor for each 30- day period or pro rata for any
portion thereof following the date by which such Registration Statement should have been effective (the “Blackout Period”). Such payments shall be in partial compensation to the Investors, and shall not constitute the Investors’
exclusive remedy for such events. For the avoidance of doubt and as an example only, in the event that a Registration Statement covering US$100,000 of Ordinary Shares is declared effective three days after a deadline imposed in this
Section 2(c)(i), the Company would be liable for liquidated damages in the amount of US$100.00. The amounts payable as liquidated damages pursuant to this paragraph shall be paid monthly within three (3) Business Days of the last day of
each month following the commencement of the Blackout Period until the termination of the Blackout Period. Such payments shall be made to each Investor in cash. 
 (ii) For not more than twenty (20) consecutive days or for a total of not more than forty-five (45) days in any twelve
(12) month period, the Company may delay the disclosure of material non-public information concerning the Company, by suspending the use of any Prospectus included in any registration contemplated by this Section containing such information,
the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company (an “Allowed Delay”); provided, that the Company shall promptly (a) notify the Investors in writing of the
existence of (but in no event, without the prior written consent of an Investor, shall the Company disclose to such Investor any of the facts or circumstances regarding) material non-public information giving rise to an Allowed Delay,
(b) advise the Investors in writing to cease all sales under the Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable. 
  

 -4- 

 3. Company Obligations. The Company will use commercially reasonable efforts to effect the
registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible: 
 (a) use commercially reasonable efforts to cause such Registration Statement to become effective and to remain continuously effective for a period that will terminate upon the earlier of (i) the date on which all
Registrable Securities covered by such Registration Statement as amended from time to time, have been sold, and (ii) the date on which all Registrable Securities covered by such Registration Statement may be sold pursuant to Rule 144(k) (the
“Effectiveness Period”) and advise the Investors in writing when the Effectiveness Period has expired; 
 (b)
prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the period specified in Section 3(a) and to comply
with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby; 
 (c) provide copies to and permit counsel designated by the Investors to review each Registration Statement and all amendments and supplements thereto no fewer than three (3) Business Days prior to their filing
with the SEC and not file any document to which such counsel reasonably objects; 
 (d) furnish to the Investors and their
legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company (but not later than two (2) Business Days after the filing date, receipt date or sending date, as the case may
be) one (1) copy of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the
SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential
treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor that are covered by the related Registration Statement; 
 (e) use
commercially reasonable efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment; 
 (f) prior to any public offering of Registrable Securities, use commercially reasonable efforts to register or qualify or cooperate with
the Investors and their counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions requested by the Investors and do any and all other
commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(f), (ii) subject itself to 

  

 -5- 

 
general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 3(f), or (iii) file a general consent to
service of process in any such jurisdiction; 
 (g) use commercially reasonable efforts to cause all Registrable Securities
covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed; 
 (h) immediately notify the Investors, at any time when a Prospectus relating to Registrable Securities is required to be delivered under
the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and at the request of any such holder, promptly prepare and furnish to such holder a reasonable number of copies of
a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; and 
 (i) otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, take such other actions as may be reasonably necessary to
facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period
of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the
purpose of this subsection 3(i), “Availability Date” means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last
quarter of the Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal quarter). 
 (j) With a view to making available to the Investors the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC that may at any time permit the Investors to sell Ordinary Shares to
the public without registration, the Company covenants and agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) six months after such date as all of the
Registrable Securities may be resold pursuant to Rule 144(k) or any other rule of similar effect or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act; and (iii) furnish to each Investor upon request, as long as such Investor owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting
requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual Report on Form 20-F or Report of Foreign Issuer on Form 6-K, and (C) such other information as may be reasonably requested in order to avail such Investor of
any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration. 
  

 -6- 

 4. Due Diligence Review; Information. The Company shall make available, during normal business
hours, for inspection and review by the Investors, advisors to and representatives of the Investors (who may or may not be affiliated with the Investors and who are reasonably acceptable to the Company), all financial and other records, all SEC
Filings (as defined in the Purchase Agreement) and other filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, and cause the Company’s officers,
directors and employees, within a reasonable time period, to supply all such information reasonably requested by the Investors or any such representative, advisor or underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of the Registration Statement for the sole purpose of enabling the Investors
and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of such Registration Statement. 
 The Company shall not disclose material nonpublic information to the Investors, or to advisors to or representatives of the Investors, unless prior to
disclosure of such information the Company identifies such information as being material nonpublic information and provides the Investors, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic
information for review and any Investor wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto. 
 5. Obligations of the Investors. 
 (a) Each Investor shall furnish in writing to the
Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least five (5) Business Days prior to the first anticipated filing date of any Registration Statement, the Company shall
notify each Investor of the information the Company requires from such Investor if such Investor elects to have any of the Registrable Securities included in the Registration Statement. An Investor shall provide such information to the Company at
least two (2) Business Days prior to the first anticipated filing date of such Registration Statement if such Investor elects to have any of the Registrable Securities included in the Registration Statement. 
 (b) Each Investor, by its acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Investor has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.

 (c) Each Investor agrees that, upon receipt of any notice from the Company of either (i) the commencement of an
Allowed Delay pursuant to Section 2(c)(ii) or (ii) the happening of an event pursuant to Section 3(h) hereof, such Investor will immediately 

  

 -7- 

 
discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Investor’s
receipt of the copies of the supplemented or amended prospectus filed with the SEC and until any related post-effective amendment is declared effective and, if so directed by the Company, the Investor shall deliver to the Company (at the expense of
the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in the Investor’s possession of the Prospectus covering the Registrable Securities current at the time of receipt of such notice. 
 6. Indemnification. 
 (a) Indemnification by the Company. The Company will indemnify and hold harmless each Investor and its officers, directors, members, employees and agents, successors and assigns, and each other person, if any, who controls such
Investor within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order
to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a “Blue Sky Application”); (iii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (iv) any violation by the Company or its agents of any rule or regulation promulgated under the 1933 Act applicable to the
Company or its agents and relating to action or inaction required of the Company in connection with such registration; or (v) any failure to register or qualify the Registrable Securities included in any such Registration in any state where the
Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on an Investor’s behalf and will reimburse such Investor, and each such officer, director or member and
each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be
liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information
furnished by such Investor or any such controlling person in writing specifically for use in such Registration Statement or Prospectus. 
 (b) Indemnification by the Investors. Each Investor agrees, severally but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees,
stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any untrue statement of a material fact or
any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the
extent that such untrue statement or omission is contained in any information furnished in writing by such 

  

 -8- 

 
Investor to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto. In no event shall the
liability of an Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor in connection with any claim relating to this Section 6 and the amount of any damages such Investor has otherwise
been required to pay by reason of such untrue statement or omission) received by such Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation. 
 (c) Conduct of Indemnification Proceedings. Any person entitled to indemnification hereunder shall (i) give prompt notice to
the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that
any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of
any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such
person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure
of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the
defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for
all such indemnified parties. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. 
 (d)
Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the
indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of
such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim
relating to this Section 6 and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable
Securities giving rise to such contribution obligation. 
  

 -9- 

 7. Miscellaneous. 
 (a) Amendments and Waivers. This Agreement may be amended only by a writing signed by the Company and the Required Investors. The
Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Required Investors.

 (b) Notices. All notices and other communications provided for or permitted hereunder shall be made as set forth in
Section 9.4 of the Purchase Agreement. 
 (c) Assignments and Transfers by Investors. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Investors and their respective successors and assigns. An Investor may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in
connection with the transfer of Registrable Securities by such Investor to such person, provided that such Investor complies with all laws applicable thereto and provides written notice of assignment to the Company promptly after such assignment is
effected. 
 (d) Assignments and Transfers by the Company. This Agreement may not be assigned by the Company (whether
by operation of law or otherwise) without the prior written consent of the Required Investors, provided, however, that the Company may assign its rights and delegate its duties hereunder to any surviving or successor corporation in connection with a
merger or consolidation of the Company with another corporation, or a sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation, without the prior written consent of the Required Investors,
after notice duly given by the Company to each Investor. 
 (e) Benefits of the Agreement. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 
 (f) Counterparts; Faxes. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original. 
 (g) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 
 (h) Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted 

  

 -10- 

 
by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect. 
 (i) Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained. 
 (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 
 (k) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of New York without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT
TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. 
  

 -11- 

 IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to
execute this Agreement as of the date first above written. 
  

									
	 The Company:
	 		 	 VIRYANET LTD.

				
		 		 	 By:
	 	  
		 		 		 	 Name:
	 	
		 		 		 	 Title:
	 	

  

 -12- 

									
	 The Investors:
	 		 	 LIBERTYVIEW SPECIAL OPPORTUNITIES FUND, LP

				
		 		 	 By:
	 	  
		 		 		 	 Name: Steven S. Rogers

		 		 		 	 Title: Authorized Person

  

 -13- 

 Exhibit A 
 Plan of Distribution 
 The selling shareholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling Ordinary shares or interests in Ordinary shares received after the date of this prospectus from a selling shareholder as a gift, pledge, partnership distribution or other transfer, may, from time
to time, sell, transfer or otherwise dispose of any or all of their Ordinary shares or interests therein on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed
prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. 
 The selling shareholders may use any one or more of the following methods when disposing of shares or interests therein: 
  

	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; 

  

	 	•	 	block trades in which the broker-dealer will attempt to sell the Ordinary shares as agent, but may position and resell a portion of the block as principal to facilitate the
transaction; 

  

	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its account; 

  

	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange; 

  

	 	•	 	privately negotiated transactions; 

  

	 	•	 	short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC; 

  

	 	•	 	through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; 

  

	 	•	 	broker-dealers may agree with the selling shareholders to sell a specified number of such Ordinary shares at a stipulated price per share; and 

  

	 	•	 	a combination of any such methods of sale. 

 The selling
shareholders may, from time to time, pledge or grant a security interest in some or all of the Ordinary shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the
Ordinary shares, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling shareholders to include the pledgee, transferee
or other successors in interest as selling shareholders under this prospectus. The selling shareholders also may transfer the Ordinary 

  

 -14- 

 
shares in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of
this prospectus. 
 In connection with the sale of our Ordinary shares or interests therein, the selling shareholders may enter into hedging
transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Ordinary shares in the course of hedging the positions they assume. The selling shareholders may also sell Ordinary shares short and
deliver these securities to close out their short positions, or loan or pledge Ordinary shares to broker-dealers that in turn may sell these securities. The selling shareholders may also enter into option or other transactions with broker-dealers or
other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of Ordinary shares offered by this prospectus, which Ordinary shares such broker-dealer
or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). 
 The
aggregate proceeds to the selling shareholders from the sale of the Ordinary shares offered by them will be the purchase price of the Ordinary shares less discounts or commissions, if any. Each of the selling shareholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of Ordinary shares to be made directly or through agents. We will not receive any of the proceeds from this offering. 
 The selling shareholders also may resell all or a portion of the Ordinary shares in open market transactions in reliance upon Rule 144 under the
Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule. 
 The selling shareholders and
any underwriters, broker-dealers or agents that participate in the sale of Ordinary shares or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions
or profit they earn on any resale of Ordinary shares may be underwriting discounts and commissions under the Securities Act. Selling shareholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be
subject to the prospectus delivery requirements of the Securities Act. 
 To the extent required, the Ordinary shares to be sold, the names
of the selling shareholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying
prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus. 
 In order
to comply with the securities laws of some states, if applicable, the Ordinary shares may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the Ordinary shares may not be sold unless
they have been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with. 
  

 -15- 

 We have advised the selling shareholders that the anti-manipulation rules of Regulation M under the
Exchange Act may apply to sales of Ordinary shares in the market and to the activities of the selling shareholders and their affiliates. In addition, we will make copies of this prospectus (as it may be supplemented or amended from time to time)
available to the selling shareholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling shareholders may indemnify any broker-dealer that participates in transactions involving the sale of the
Ordinary shares against certain liabilities, including liabilities arising under the Securities Act. 
 We have agreed to indemnify the
selling shareholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the Ordinary shares offered by this prospectus. 
 We have agreed with the selling shareholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier
of (1) such time as all of the Ordinary shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or (2) the date on which such Ordinary shares may be sold pursuant to Rule 144(k)
of the Securities Act. 
  

 -16-SUBSCRIPTION AGREEMENT

 Exhibit 4(A)(22) 
 SUBSCRIPTION AGREEMENT 
 THIS SUBSCRIPTION AGREEMENT (this “Agreement”),
dated as of September         , 2005, by and among Viryanet Ltd., a corporation organized under the laws of the State of Israel (the “Company”), and the subscribers identified on the
signature page hereto (each a “Subscriber” and collectively “Subscribers”). 
 WHEREAS, the Company
and the Subscribers are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”); and 
 WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers, in the aggregate, shall purchase (i) Five Hundred Thousand Dollars ($500,000) of principal amount of promissory notes of the Company (each a “Note”), which Notes are
convertible into the Company’s ordinary shares, NIS 1.00 par value (the “Ordinary Shares”) at a per share conversion price set forth in the Note (the “Conversion Price”), a form of which is annexed hereto as
Exhibit A; (ii) 238,095 Ordinary Shares at a per share purchase price of $2.10 for an aggregate purchase price of $500,000 (“Initial Shares”); and (iii) share purchase warrants (the “Warrants”) to
purchase up to 162,699 Ordinary Shares (the “Warrant Shares”). The Notes, Initial Shares, Ordinary Shares issuable upon conversion of the Notes (the “Note Shares”), the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities”. The purchase price to be paid for the Notes and Initial Shares is collectively referred to as the “Purchase Price”. 
 WHEREAS, the aggregate proceeds of the sale of the Notes, Initial Shares and the Warrants contemplated hereby shall be held in escrow pursuant to
the terms of a Funds Escrow Agreement to be executed by the parties substantially in the form attached hereto as Exhibit B (the “Escrow Agreement”). 
 NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement the Company and the Subscribers hereby
agree as follows: 
  

	1.	Conditions to Closing. 

 Subject to the satisfaction
or waiver of the terms and conditions of this Agreement, at the Closing, each Subscriber shall purchase and the Company shall sell to each Subscriber (i) a Note in the principal amount designated on the signature page hereto, (ii) the
Initial Shares and (iii) a Warrant as described in Section 3 below for the amount of Ordinary Shares set forth on the signature page hereto. 
  

					
	 (Subscription Agreement)
	  	1	  	

	2.	Closing; Closing Deliveries. 

 The consummation of
the transactions contemplated herein (the “Closing”) shall take place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, promptly following receipt thereby of all of the
Company Documents and the Subscriber Deliverables (as such terms are defined in the Escrow Agreement) (“Closing Date”). 
  

	3.	Warrants. 

 On the Closing Date, the Company will
issue and deliver Warrants to the Subscribers for the amounts of Ordinary Shares set forth on the signature page. A form of Warrant is annexed hereto as Exhibit C. 
  

	4.	Subscriber’s Representations and Warranties. 

 Each Subscriber hereby represents and warrants to and agrees with the Company only as to such Subscriber that: 
  

	 	(a)	Organization and Standing of the Subscribers. If the Subscriber is an entity, such Subscriber is a corporation, partnership or other entity duly incorporated or organized,
validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. 

  

	 	(b)	Authorization and Power. Each Subscriber has the requisite power and authority to enter into and perform this Agreement and to purchase the Notes, Initial Shares and Warrants
being sold to it hereunder. The execution, delivery and performance of this Agreement by such Subscriber and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or
partnership action, and no further consent or authorization of such Subscriber or its Board of Directors, stockholders, partners or members, as the case may be, is required. This Agreement has been, and each other document to be signed by the
Subscriber hereunder has been or will be, duly authorized, executed and delivered by Subscriber and constitutes a valid and binding obligation of the Subscriber, enforceable against the Subscriber in accordance with the terms thereof.

  

	 	(c)	 No Conflicts. The execution, delivery and performance of this Agreement and the consummation by Subscriber of the transactions contemplated hereby or
relating hereto do not and will not (i) result in a violation of such Subscriber’s charter documents or bylaws or other organizational documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of
time 

  

					
	 (Subscription Agreement)
	  	2	  	

	 	 
or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Subscriber is a party or by which its properties or assets are bound, or (iii) result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except, with respect to clauses (ii) and (iii), for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such Subscriber).
Such Subscriber is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver and perform any of its obligations under this Agreement
or to purchase the Notes, Initial Shares and the Warrants in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, such Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein. 

  

	 	(d)	Information on Company. The Subscriber has been furnished with or has had access at the EDGAR Website of the Commission to the Company’s Form 20-F for the year ended
December 31, 2004 and all amendments thereto as filed with the Commission, together with all subsequently submitted Forms 6-K and other filings made with the Commission available at the EDGAR website (hereinafter referred to collectively as the
“Reports”). The Subscriber has had an opportunity to ask questions and receive answers from representatives of the Company. In addition, the Subscriber has received in writing from the Company such other information concerning its
operations, financial condition and other matters as the Subscriber has requested in writing (such other information is referred to collectively as the “Other Written Information”), and considered all factors the Subscriber deems
material in deciding on the advisability of investing in the Securities. 

  

	 	(e)	 Information on Subscriber. The Subscriber is, and will be at the time of the conversion of the Notes and exercise of the Warrants, an “accredited
investor”, as such term is defined in Regulation D promulgated by the Commission under the 1933 Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Subscriber to utilize the information made available by
the Company to evaluate the merits and risks of and to make an 

  

					
	 (Subscription Agreement)
	  	3	  	

	 	 
informed investment decision with respect to the proposed purchase, which represents a speculative investment. The Subscriber has the authority and is duly
and legally qualified to purchase and own the Securities. The Subscriber is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof. The information set forth on the signature page hereto regarding the
Subscriber is accurate. The Subscriber is not required to be registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the Subscriber is not a broker-dealer.

  

	 	(f)	Purchase of Notes, Initial Shares, and Warrants. On the Closing Date, the Subscriber will purchase the Notes, Initial Shares and Warrants as principal for its own account for
investment only and not with a view toward, or for resale in connection with, the public sale or any distribution thereof. 

  

	 	(g)	Compliance with Securities Act. The Subscriber understands and agrees that the Securities have not been registered under the 1933 Act or any applicable state securities laws,
by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of Subscriber contained herein), and that such Securities must be held
indefinitely unless a subsequent disposition is registered under the 1933 Act or any applicable state securities laws or is exempt from such registration. 

  

	 	(h)	Shares Legend. The Note Shares, Initial Shares and Warrant Shares shall bear the following or similar legend: 

 “THE ORDINARY SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE ORDINARY SHARES MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIRYANET LTD. THAT SUCH
REGISTRATION IS NOT REQUIRED.” 
  

	 	(i)	Warrants Legend. The Warrants shall bear the following or similar legend: 

 “THIS WARRANT AND THE ORDINARY SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS 

  

					
	 (Subscription Agreement)
	  	4	  	

 
AMENDED. THIS WARRANT AND THE ORDINARY SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIRYANET LTD. THAT SUCH REGISTRATION IS NOT REQUIRED.” 
  

	 	(j)	Note Legend. The Note shall bear the following legend: 

 “THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIRYANET LTD. THAT SUCH REGISTRATION IS NOT REQUIRED.”

  

	 	(k)	Communication of Offer. The offer to sell the Securities was directly communicated to the Subscriber by the Company. At no time was the Subscriber presented with or solicited
by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated
offer. 

  

	 	(l)	Authority; Enforceability. This Agreement and other agreements delivered together with this Agreement or in connection herewith have been duly authorized, executed and
delivered by the Subscriber and are valid and binding agreements enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or
affecting creditors’ rights generally and to general principles of equity; and Subscriber has full corporate or other applicable power and authority necessary to enter into this Agreement and such other agreements and to perform its obligations
hereunder and under all other agreements entered into by the Subscriber relating hereto. 

  

					
	 (Subscription Agreement)
	  	5	  	

	 	(m)	Restricted Securities. Subscriber understands that the Securities have not been registered under the 1933 Act and such Subscriber will not sell, offer to sell, assign,
pledge, hypothecate or otherwise transfer any of the Securities unless pursuant to an effective registration statement under the 1933 Act, or unless an exemption from registration is available. Notwithstanding anything to the contrary contained in
this Agreement, such Subscriber may transfer (without restriction and without the need for an opinion of counsel) the Securities to its Affiliates (as defined below) provided that each such Affiliate is an “accredited investor” under
Regulation D and such Affiliate agrees in writing (with a copy to the Company) to be bound by the terms and conditions of this Agreement. For the purposes of this Agreement, an “Affiliate” of any person or entity means any other
person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity (including each Subsidiary (as defined in Section 5(a) of such person). For purposes of this definition,
“control” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. 

  

	 	(n)	No Governmental Review. Each Subscriber understands that no United States federal or state agency or any other governmental or state agency has passed on or made
recommendations or endorsement of the Securities or the suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities. 

  

	 	(o)	Correctness of Representations. Each Subscriber represents as to such Subscriber that the foregoing representations and warranties are true and correct as of the date hereof
and, unless a Subscriber otherwise notifies the Company prior to the Closing Date shall be true and correct as of the Closing Date. 

  

	 	(p)	Survival. The foregoing representations and warranties shall survive the Closing Date for a period of two years. 

  

	5.	Company Representations and Warranties. 

 The
Company represents and warrants to and agrees with each Subscriber that: 
  

	 	(a)	 Due Incorporation. The Company and each of its Subsidiaries is a corporation or other entity duly incorporated or organized, validly existing and in good
standing (where such concept exists) under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate power to own its properties and to carry 

  

					
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	  	6	  	

	 	 
on its business as presently conducted. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which such qualification is not required or where the failure to so qualify would
not have a Material Adverse Effect. For purposes of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect on the financial condition, results of operations, properties or business of the Company and its
Subsidiaries taken as a whole. For purposes of this Agreement, “Subsidiary” means, with respect to any entity at any date, any corporation, limited or general partnership, limited liability company, trust, estate,
association, joint venture or other business entity of which more than 50% of (i) the outstanding capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing
body of such entity, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint
venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such entity. All the
Company’s Subsidiaries as of the Closing Date are set forth on Schedule 5(a) hereto. 

  

	 	(b)	Outstanding Stock. All issued and outstanding shares of capital stock of the Company has been duly authorized and validly issued and are fully paid and nonassessable.

  

	 	(c)	Authority; Enforceability. This Agreement, the Note, the Warrants and any other agreements delivered together with this Agreement or in connection herewith (collectively,
“Transaction Documents”) have been or will be, as the case may be, duly authorized, executed and delivered by the Company and are valid and binding agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity. The Company has full corporate power and authority
necessary to enter into and deliver the Transaction Documents and to perform its obligations thereunder. 

  

					
	 (Subscription Agreement)
	  	7	  	

	 	(d)	Additional Issuances. There are no outstanding agreements or preemptive or similar rights affecting the Company’s Ordinary Shares or equity and no outstanding rights,
warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any Ordinary Shares or equity of the Company or other equity interest in any of the
Subsidiaries of the Company, except as described on Schedule 5(d). 

  

	 	(e)	Consents. No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, or any of its Affiliates,
the Nasdaq SmallCap Market (“SmallCap”), Office of the Chief Scientist of the Ministry of Industry and Trade of the Government of Israel (“OCS”), the Israeli Investment Center nor the Company’s shareholders is
required for the execution by the Company of the Transaction Documents and compliance by the Company with, and performance by the Company of, its obligations under the Transaction Documents, including, without limitation, the issuance and sale of
the Securities, except for such consents that shall be obtained by the Company prior to Closing. 

  

	 	(f)	No Violation or Conflict. Assuming the representations and warranties of the Subscribers in Section 4 are true and correct, neither the issuance and sale of the
Securities nor the performance of the Company’s obligations under this Agreement and all other agreements entered into by the Company relating thereto by the Company will: 

  

	 	(i)	 violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the articles or certificate of incorporation or association, charter or bylaws of the Company, (B) to the Company’s knowledge, any decree, judgment, order, law, treaty, rule, regulation or
determination applicable to the Company of any court, governmental agency or body, or arbitrator having jurisdiction over the Company or over the properties or assets of the Company or any of its Affiliates, (C) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company or 

  

					
	 (Subscription Agreement)
	  	8	  	

	 	 
any of its Affiliates is a party, by which the Company or any of its Affiliates is bound, or to which any of the properties of the Company or any of its
Affiliates is subject, or (D) the terms of any “lock-up” or similar provision of any underwriting or similar agreement to which the Company, or any of its Affiliates is a party (except, with respect to clauses (B), (C) and
(D) above, the violation, conflict, breach, or default of which would not have a Material Adverse Effect); or 

  

	 	(ii)	result in the creation or imposition of any Lien (as defined below) upon the Securities or any of the assets of the Company or any of its Affiliates except as described herein; or

  

	 	(iii)	result in the activation of any anti-dilution rights or a reset or repricing of any debt or security instrument of any other creditor or equity holder of the Company, nor result in
the acceleration of the due date of any obligation of the Company; or 

  

	 	(iv)	result in the activation of any piggy-back registration rights of any person or entity holding securities of the Company or having the right to receive securities of the Company.

  

	 	(g)	The Securities. The Securities upon issuance: 

  

	 	(i)	are, or will be, free and clear of any Liens, subject to restrictions upon transfer under the 1933 Act and any applicable state securities laws; 

  

	 	(ii)	have been, or will be, duly and validly authorized and on the date of issuance of the Initial Shares and upon conversion of the Notes and exercise of the Warrants, the Initial
Shares, Note Shares and Warrant Shares, respectively, will be duly and validly issued, fully paid and nonassessable and, if registered pursuant to the 1933 Act and resold pursuant to an effective registration statement, will be freely tradable and
unrestricted; 

  

					
	 (Subscription Agreement)
	  	9	  	

	 	(iii)	will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company; 

  

	 	(iv)	will not subject the holders thereof to personal liability by reason of being such holders; and 

  

	 	(v)	assuming the representations and warranties of the Subscribers as set forth in Section 4 hereof are true and correct, will not result in a violation of Section 5 under the
1933 Act. 

  

	 	(h)	Litigation. There is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body,
or arbitrator having jurisdiction over the Company, or any of its Affiliates that would affect the execution by the Company or the performance by the Company of its obligations under the Transaction Documents. Except as disclosed in the Reports and
schedules hereto, there is no pending or, to the best knowledge of the Company, basis for or threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or
any of its Affiliates which litigation if adversely determined would have a Material Adverse Effect. 

  

	 	(i)	Reporting Company. The Company is a publicly-held company subject to reporting obligations pursuant to Section 13 of the 1934 Act and has a class of Ordinary Shares
registered pursuant to Section 12(g) of the 1934 Act. Pursuant to the provisions of the 1934 Act, the Company has timely filed all reports and other materials required to be filed thereunder with the Commission pursuant to the 1934 Act during
the preceding twelve months. 

  

	 	(j)	No Market Manipulation. The Company and its Affiliates have not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably be expected
to, cause or result in stabilization or manipulation of the price of the Ordinary Shares to facilitate the sale or resale of the Securities or affect the price at which the Securities may be issued or resold. 

  

					
	 (Subscription Agreement)
	  	10	  	

	 	(k)	Information Concerning Company. The Reports contain all material information relating to the Company and its operations and financial condition as of their respective dates
which information is required to be disclosed therein. Since the date of the financial statements included in the Reports, and except as modified in the Other Written Information or in the Schedules hereto, there has been no Material Adverse Event
relating to the Company’s business, financial condition or affairs not disclosed in the Reports. The Reports do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances when made. 

  

	 	(l)	Stop Transfer. The Company will not issue any stop transfer order or other order impeding the sale, resale or delivery of any of the Securities, except as may be required by
any applicable federal or state securities laws and unless contemporaneous notice of such instruction is given to the Subscriber. 

  

	 	(m)	Defaults. The Company is not in violation of its articles of association. Except as described on Schedule 5(q), the Company is (i) not in default under or in
violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a Material Adverse Effect, (ii) not in default with respect to
any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint
of trade, unfair competition or similar matters, or (iii) to the Company’s knowledge not in violation of any statute, rule or regulation of any governmental authority which violation would have a Material Adverse Effect.

  

	 	(n)	 No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offer of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act
or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of the SmallCap. Nor will the Company or any of its Affiliates take any action or steps that would cause the offer or issuance of the
Securities to be integrated with other offerings. The Company will not conduct any offering other than the transactions contemplated 

  

					
	 (Subscription Agreement)
	  	11	  	

	 	 
hereby that will be integrated with the offer or issuance of the Securities which offering would impair the exemption relied upon in this Offering (as
defined in Section 8(b)). 

  

	 	(o)	No General Solicitation. Neither the Company, nor any of its Affiliates, nor to its knowledge, any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Securities. 

  

	 	(p)	Listing. The Ordinary Shares are listed on the SmallCap. The Company has not received any oral or written notice that the Ordinary Shares are not eligible nor will become
ineligible for quotation and listing on the SmallCap nor that the Ordinary Shares do not meet all requirements for the continuation of such listing and the Company satisfies all the requirements for the continued listing of the Ordinary Shares on
the SmallCap. 

  

	 	(q)	No Undisclosed Liabilities. The Company has no liabilities or obligations which are material, individually or in the aggregate, which are not disclosed in the Reports and
Other Written Information, other than those incurred in the ordinary course of the Company’s businesses since December 31, 2004 and which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect,
except as disclosed on Schedule 5(q). 

  

	 	(r)	No Undisclosed Events or Circumstances. Since December 31, 2004, no event or circumstance has occurred or exists with respect to the Company or its businesses,
properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the
Reports. 

  

	 	(s)	Capitalization. As of the date hereof, the authorized share capital of the Company consists of 11,000,000 Ordinary Shares, par value NIS 1.00 per share, and the Company
has outstanding 7,258,048 Ordinary Shares. All of the outstanding Ordinary Shares of the Company have been duly and validly authorized and issued and are fully paid and nonassessable. 

  

	 	(t)	 Dilution. The Company’s executive officers and directors understand the nature of the Securities being sold hereby and recognize that the issuance of
the Securities will have a potential dilutive effect on the equity holdings of other holders of the 

  

					
	 (Subscription Agreement)
	  	12	  	

	 	 
Company’s equity or rights to receive equity of the Company. The board of directors of the Company has concluded, in its good faith business judgment
that the issuance of the Securities is in the best interests of the Company. The Company specifically acknowledges that its obligation to issue the Shares upon conversion of the Notes, and the Warrant Shares upon exercise of the Warrants is binding
upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company or parties entitled to receive equity of the Company. 

  

	 	(u)	No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the
Company and the accountants and lawyers formerly or presently employed by the Company, including but not limited to disputes or conflicts over payment owed to such accountants and lawyers. 

  

	 	(v)	DTC Status. The Company’s transfer agent is a participant in and the Ordinary Shares are eligible for transfer pursuant to the Depository Trust Company Automated
Securities Transfer Program. 

  

	 	(w)	Investment Company. Neither the Company nor any Affiliate is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

  

	 	(x)	Subsidiary Representations. The Company makes each of the representations contained in Sections 5(a), (b), (d), (f), (h), (k), (m), (q) through (s), (u) and
(w) of this Agreement, as same relate to each Subsidiary of the Company. 

  

	 	(y)	Company Predecessor. All representations made by or relating to the Company of a historical or prospective nature and all undertaking described in Sections 9(g) and 9(h)
shall relate and refer to the Company, its predecessors, if any, and the Subsidiaries. 

  

	 	(z)	Correctness of Representations. The Company represents that the foregoing representations and warranties are true and correct as of the date hereof in all material respects,
and, unless the Company otherwise notifies the Subscribers prior to the Closing Date, shall be true and correct in all material respects as of the Closing Date. 

  

					
	 (Subscription Agreement)
	  	13	  	

	 	(aa)	Non-Public Information. Neither the Company nor any other person acting on its behalf has provided any Subscriber or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless prior thereto such Subscriber has agreed in writing to receive such information. The Company understands and confirms that each Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the Company. 

  

	 	(bb)	Survival. The foregoing representations and warranties shall survive the Closing Date for a period of two years. 

  

	6.	Regulation D Offering. 

 The offer and issuance of
the Securities to the Subscribers is being made pursuant to the exemption from the registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. [On
the Closing Date, the Company will provide an opinion reasonably acceptable to Subscriber from the Company’s legal counsel opining on the availability of an exemption from registration under the 1933 Act as it relates to the offer and issuance
of the Securities and other matters reasonably requested by Subscribers]. A form of the legal opinion is annexed hereto as Exhibit D. The Company will provide, at the Company’s expense, such other legal opinions in the future as are
reasonably necessary for the issuance and/or resale of the Initial Shares, the and the Ordinary Shares issuable upon conversion of the Notes and exercise of the Warrants pursuant to an effective registration statement. 
  

	7.	Conversion of Note. 

  

	 	(a)	Conversion of Note. 

  

	 	(i)	 Upon the conversion of a Note or part thereof, the Company shall, at its own cost and expense, take all necessary action, including executing and delivering to the
Company’s transfer agent written instructions to issue stock certificates in the name of Subscriber (or its nominee) or such other persons as designated by Subscriber (provided that each such other person provides to the Company in writing the
representations set forth in Section 4 hereof) and in such denominations to be specified at conversion representing the number of Ordinary Shares issuable upon such conversion. The Company warrants that no 

  

					
	 (Subscription Agreement)
	  	14	  	

	 	 
instructions other than these instructions have been or will be given to the transfer agent of the Company’s Ordinary Shares (other than instructions
that may be given to the Company’s transfer agent pursuant to orders issued by the Commission, any state securities commission or any other regulatory authority) and that, unless waived by the Subscriber, the Note Shares will be free-trading,
and freely transferable, and will not contain a legend restricting the resale or transferability of the Note Shares provided that the Note Shares are being sold pursuant to an effective registration statement covering the Note Shares or are
otherwise exempt from registration. 

  

	 	(ii)	 Subscriber will give notice of its decision to exercise its right to convert the Note, interest, any sum due to the Subscriber under the Transaction Documents or
part thereof by telecopying an executed and completed Notice of Conversion (a form of which is annexed as Exhibit A to the Note) to the Company via confirmed telecopier transmission or otherwise pursuant to Section 10(e) of this
Agreement. The Subscriber will not be required to surrender the Note until the Note has been fully converted or satisfied (but until such surrender the Note will be convertible only with respect to any portion thereof not already converted). Each
date on which a Notice of Conversion is telecopied to the Company in accordance with the provisions hereof shall be deemed a Conversion Date. The Company will immediately notify its transfer agent to transmit the Company’s Ordinary Share
certificates representing the Note Shares issuable upon conversion of the Note to the Subscriber via express courier for receipt by such Subscriber within five (5) business days after receipt by the Company of the Notice of Conversion (such
third day being the “Delivery Date”). In the event the Note 

  

					
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Shares are electronically transferable, then delivery of the Shares must be made by electronic transfer provided request for such electronic transfer
has been made by the Subscriber and the Subscriber has complied with all applicable securities laws in connection with the sale of the Ordinary Shares, including, without limitation, the prospectus delivery requirements. A Note representing the
balance of the Note not so converted will be provided by the Company to the Subscriber if requested by Subscriber, provided the Subscriber delivers the original Note to the Company. In the event that a Subscriber elects not to surrender a Note for
reissuance upon partial payment or conversion, the Subscriber hereby indemnifies the Company against any and all loss or damage attributable to a third-party claim in an amount in excess of the actual amount then due under the Note.

  

	 	(iii)	 The Company understands that a delay in the delivery of the Note Shares in the form required pursuant to Section 7 hereof, after the Delivery Date could result
in economic loss to the Subscriber. As compensation to the Subscriber for such loss, the Company agrees to pay (as liquidated damages and not as a penalty) to the Subscriber for late issuance of Note Shares in the form required pursuant to
Section 7 hereof upon Conversion of the Note in the amount of $100 per business day after the Delivery Date for each $10,000 of Note principal amount being converted for which the corresponding Note Shares are not timely delivered. The Company
shall pay any payments incurred under this Section in immediately available funds upon demand. Furthermore, in addition to any other remedies which may be available to the Subscriber, in the event that the Company fails for any reason to effect
delivery of Note Shares by the Delivery Date, the Subscriber will be entitled to revoke all or 

  

					
	 (Subscription Agreement)
	  	16	  	

	 	 
part of the relevant Notice of Conversion by delivery of a notice to such effect to the Company whereupon the Company and the Subscriber shall each be
restored to their respective positions immediately prior to the delivery of such notice, except that the liquidated damages described above shall be payable through the date notice of revocation or rescission is given to the Company.

  

	 	(iv)	Nothing contained herein or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other
charges in excess of the maximum permitted by applicable law. In the event that the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall
be credited against amounts owed by the Company to the Subscriber and thus refunded to the Company. 

  

	 	(b)	Acceleration of Repayment of the Note. In the event the Company is prohibited from issuing Note Shares, or fails to timely deliver Note Shares on a Delivery Date, or upon the
occurrence of any other Event of Default (as defined in the Note or in this Agreement) that is not cured during any applicable cure period and an additional ten days thereafter, then at the Subscriber’s election, the Company must pay to the
Subscriber ten business days after request by the Subscriber, at the Subscriber’s election, a sum of money determined by multiplying up to the outstanding principal amount of the Note designated by the Subscriber by 115% together with accrued
but unpaid interest thereon and any other sums arising and outstanding under the Transaction Documents (“Mandatory Repayment”). The Mandatory Repayment must be received by the Subscriber on the same date as the Note Shares otherwise
deliverable or within ten (10) business days after request, whichever is sooner (“Mandatory Repayment Date”). Upon receipt of the Mandatory Repayment, the corresponding Note principal and interest will be deemed paid and no
longer outstanding. 

  

					
	 (Subscription Agreement)
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	 	(c)	Maximum Conversion. Except pursuant to a Mandatory Conversion by the Company pursuant to Section 2.4 of the Note, the Subscriber shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of Ordinary Shares which would be in excess of the sum of (i) the number of Ordinary Shares beneficially owned by the Subscriber and its Affiliates on a Conversion Date,
plus (ii) the number of Ordinary Shares issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, will not result in beneficial ownership by each Subscriber and its
Affiliates of more than 4.99% of the outstanding Ordinary Shares of the Company on such Conversion Date. Beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act, and Regulation 13d-3 thereunder. Subject to the
foregoing, the Subscriber shall not be limited to aggregate conversions of only 4.99% and aggregate conversions by the Subscriber may exceed 4.99%. The Subscriber may waive the conversion limitation described in this Section 7(c), in whole or
in part, or increase the permitted beneficial ownership amount upon and effective after 61 days prior written notice to the Company. The Subscriber may allocate which of the equity of the Company deemed beneficially owned by the Subscriber shall be
included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%. 

  

	 	(d)	Injunction Posting of Bond. In the event a Subscriber shall elect to convert a Note or part thereof or exercise the Warrant in whole or in part, the Company may not refuse
conversion or exercise based on any claim that such Subscriber or any Affiliate of such Subscriber has been engaged in any violation of law, or for any other reason, unless, an injunction from a court, on notice, restraining and or enjoining
conversion of all or part of such Note or exercise of all or part of such Warrant shall have been sought and obtained by the Company and the Company has posted a surety bond for the benefit of such Subscriber in the amount of 120% of the amount of
the Note, or aggregate purchase price of the Warrant Shares which are sought to be subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Subscriber to the extent Subscriber obtains judgment therefor. 

  

	 	(e)	 Buy-In. In addition to any other rights available to the Subscriber, if the Company fails to deliver to the Subscriber Note Shares issuable upon conversion
of a Note by the Delivery Date and if after seven (7) business days after the Delivery Date the Subscriber purchases (in an open market transaction or otherwise) Ordinary Shares to deliver in satisfaction of a sale by such Subscriber of the

  

					
	 (Subscription Agreement)
	  	18	  	

	 	 
Note Shares which the Subscriber was entitled to receive upon such conversion (a “Buy-In”), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to the Subscriber) the amount by which (A) the Subscriber’s total purchase price (including brokerage commissions, if any) for the Ordinary Shares so purchased exceeds (B) the
aggregate principal and/or interest amount of the Note for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a penalty). For example, if the Subscriber purchases Ordinary Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of Note
principal and/or interest, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written evidence with respect to the amounts payable to the Subscriber in respect of the Buy-In.

  

	 	(f)	Adjustments. The Conversion Price, Warrant exercise price and amount of Note Shares or Warrant Shares issuable upon conversion of the Notes and exercise of the Warrants shall
be equitably adjusted and as otherwise described in this Agreement, the Notes and Warrants. 

  

	 	(g)	Redemption. The Note and Warrants shall not be callable or redeemable. 

  

	8.	Finder/Legal Fees. 

  

	 	(a)	Finder’s Fee. The Company on the one hand, and each Subscriber (for himself only) on the other hand, agree to indemnify the other against and hold the other harmless
from any and all liabilities incurred by the other to any persons claiming brokerage commissions or finder’s fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or
the transactions contemplated hereby and arising out of such party’s actions. The Company represents that there are no parties entitled to receive fees, commissions, or similar payments in connection with the Offering except as described on
Schedule 8 hereto. 

  

	 	(b)	 Legal Fees. The Company shall pay to Grushko & Mittman, P.C., a fee of $20,000 (“Legal Fees”) (of which $5,000 has already been
paid) as reimbursement for services rendered to the Subscribers in connection with this Agreement and the purchase and sale of the Notes, Initial Shares and Warrants (the “Offering”) and acting as 

  

					
	 (Subscription Agreement)
	  	19	  	

	 	 
Escrow Agent for the Offering. The Legal Fees will be payable out of funds held pursuant to the Escrow Agreement. 

  

	9.	Covenants of the Company. 

 The Company covenants
and agrees with the Subscribers as follows: 
  

	 	(a)	Stop Orders. The Company will advise the Subscribers, promptly after it receives notice of issuance by the Commission, any state securities commission or any other regulatory
authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the Ordinary Shares for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose. 

  

	 	(b)	Listing. The Company shall promptly secure the listing of the Initial Shares, Note Shares and the Warrant Shares upon each national securities exchange, or electronic or
automated quotation system upon which they are or become eligible for listing and shall maintain such listing so long as any Notes or Warrants are outstanding. The Company will use its best efforts to maintain the listing of its Ordinary Shares on
the American Stock Exchange, SmallCap, Nasdaq National Market System, OTC Bulletin Board, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Ordinary Shares (the “Principal
Market”)), and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market, as applicable. The Company will provide the Subscribers copies of all notices it
receives notifying the Company of the threatened and actual delisting of the Ordinary Shares from any Principal Market. As of the date of this Agreement and the Closing Date, the SmallCap is and will be the Principal Market.

  

	 	(c)	Market Regulations. The Company shall notify the Commission, the Principal Market and applicable state authorities, in accordance with their requirements and as required
under their requirements or under applicable law, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Securities to the Subscribers and promptly provide copies thereof to Subscriber. 

  

					
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	 	(d)	Filing Requirements. From the date of this Agreement and until the sooner of (i) three (3) years after the Closing Date, or (ii) until all the Note Shares,
Initial Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to any Registration Statement or pursuant to Rule 144, without regard to volume limitation, the Company will comply in all respects with its reporting
and filing obligations under the 1934 Act, comply in all respects with its reporting and filing obligations, comply with all reporting requirements that are applicable to an issuer with a class of shares registered pursuant to Section 12(b) or
12(g) of the 1934 Act, as applicable, and comply with all filing requirements related to any registration statement filed pursuant to this Agreement. The Company will use its best efforts not to take any action or file any document (whether or not
permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said acts until three (3) years after the Closing Date. Until the
earlier of the resale of the Note Shares, Initial Shares and Warrant Shares by each Subscriber or until three (3) years after the Warrants have been exercised, the Company will use its best efforts to continue the listing or quotation of the
Ordinary Shares on a Principal Market and to comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market. The Company agrees to timely file a Form D with respect to the
Securities if required under Regulation D and to provide a copy thereof to each Subscriber promptly after such filing. Each Subscriber shall provide to the Company any information required to be include din such Form D with respect to such
Subscriber, promptly after receipt of written request therefore from the Company. 

  

	 	(e)	Use of Proceeds. The proceeds of the Offering will be used for expenses of the Offering and general working capital. 

  

	 	(f)	 Reservation. Prior to the Closing Date, the Company undertakes to reserve, pro rata, on behalf of each holder of a Note or Warrant, from its
authorized but unissued Ordinary Shares, a number of Ordinary Shares equal to 100% of the amount of Ordinary Shares necessary to allow each holder of a Note to be able to convert the principal of all such outstanding Notes and reserve the amount of
Warrant Shares issuable upon exercise of the Warrants. By December 31, 2005, the authorized share capital of the Company shall be increased and the Company will reserve a number of Ordinary Shares equal to 130% of the amount of
(i) Ordinary Shares necessary to allow each holder of a Note to be able to convert the principal of all such outstanding Notes and interest and (ii) Warrant Shares issuable upon exercise of the Warrants. Failure to have sufficient shares
reserved pursuant to this Section 9(f) for 

  

					
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	  	21	  	

	 	 
three (3) consecutive business days or ten (10) days in the aggregate following the applicable dates shall be a material default of the
Company’s obligations under this Agreement and an Event of Default under the Note. 

  

	 	(g)	Books and Records. From the date of this Agreement and until the sooner of (i) three (3) years after the Closing Date, or (ii) until all the Note Shares,
Initial Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company will keep true records and books of account in
which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with generally accepted accounting principles applied on a consistent basis. 

  

	 	(h)	Governmental Authorities. From the date of this Agreement and until the sooner of (i) three (3) years after the Closing Date, or (ii) until all the Note
Shares, Initial Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company shall duly observe and conform in all
material respects to all valid requirements of governmental authorities relating to the conduct of its business or to its properties or assets. 

  

	 	(i)	Blackout. The Company undertakes and covenants that until the sooner of (i) the Registration Statement shall have been current and available for use in connection with
the resale of the Registrable Securities (as defined in Section 11(i)) for a period of 120 days, or (ii) until all the Shares, Initial Shares, and Warrant Shares have been resold or transferred by the Subscribers pursuant to the
Registration Statement or Rule 144, without regard to volume limitations (“Exclusion Period”), the Company will not enter into any acquisition, merger, exchange or sale or other transaction that would be reasonably expected to have
the effect of delaying the effectiveness of any pending registration statement or causing an already effective registration statement to no longer be effective or current for a period twenty (20) consecutive days nor more than forty-five
(45) or more days during any 365 day period. 

  

	 	(j)	 Negative Pledge. So long as any amounts are outstanding under the Notes, the Company shall not, and shall cause each of its Subsidiaries not to, create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, security title, mortgage, security 

  

					
	 (Subscription Agreement)
	  	22	  	

	 	 
deed or deed of trust, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction) (each, a “Lien”) upon any of its property, whether now owned or hereafter acquired other than (i) Liens securing all amounts due to Bank Hapoalim under
the Loan Agreement, dated July 14, 2003, the Factoring Agreement, dated June 25, 2002, the Credit Line and the Overdraft Facility made available to the Company, (ii) (a) Liens imposed by law for taxes that are not yet due or are
being contested in good faith and for which adequate reserves have been established in accordance with generally accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and
other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith and by appropriate proceedings; (c) pledges and deposits
made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) Liens created with respect to the financing of the purchase of new property in the ordinary
course of the Company’s business up to the amount of the purchase price of such property, or (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of
business that do not secure any monetary obligations and do not materially detract from the value of the affected property (each of (a) through (f), a “Permitted Lien”) and (iii) indebtedness for borrowed money which is
subordinated in right of payment to the Notes on terms reasonably satisfactory to the Subscriber. The repayment by the Company of the amounts underlying the Notes shall be pari passu with the repayment by the Company of loans extended to the Company
by LibertyView Special Opportunities Fund, L.P. (“LibertyView”) pursuant to a convertible note dated as of July 27, 2005 issued by the Company to LibertyView (“LibertyView Note”). Anything to the contrary in any
Transaction Document notwithstanding, there shall be no restriction on the Subscriber’s right to convert into equity any amount due under the 

  

					
	 (Subscription Agreement)
	  	23	  	

	 	 
Note or described in Section 12(b) of this Agreement, nor to collect any sums due from the Company prior to receipt of notice that LibertyView has
declared a default under the LibertyView Note, and such default has not been cured. 

  

	 	(k)	Non-Public Information. The Company covenants and agrees that neither it nor any other person acting on its behalf will provide any Subscriber or its agents or counsel with
any information that the Company believes constitutes material non-public information, unless prior thereto such Subscriber shall have agreed in writing to receive such information. The Company understands and confirms that each Subscriber shall be
relying on the foregoing representations in effecting transactions in securities of the Company. 

  

	10.	Covenants of the Company and Subscriber Regarding Indemnification. 

  

	 	(a)	The Company agrees to indemnify, hold harmless, reimburse and defend the Subscribers, the Subscribers’ officers, directors, agents, Affiliates, control persons, and principal
shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Subscriber or any such person which results, arises out of or is based upon
(i) any material misrepresentation by the Company or material breach of any warranty by the Company in this Agreement or in any Exhibits or Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance by the Company of any covenant or undertaking to be performed by the Company hereunder, or any other agreement entered into by the Company and Subscriber relating hereto.

  

	 	(b)	Each Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company and each of the Company’s officers, directors, agents, Affiliates, control persons , and
principal shareholders against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Company or any such person which results, arises out of or is based upon
(i) any material misrepresentation by such Subscriber in this Agreement or in any Exhibits or Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any breach or
default in performance by such Subscriber of any covenant or undertaking to be performed by such Subscriber hereunder, or any other agreement entered into by the Company and Subscribers, relating hereto. 

  

					
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	  	24	  	

	 	(c)	In no event shall the liability of any Subscriber or any permitted successor thereof hereunder or under any Transaction Document or other agreement delivered in connection herewith
be greater in amount than the dollar amount of the net proceeds actually received by such Subscriber upon the sale of Registrable Securities (as defined herein). 

  

	 	(d)	The procedures set forth in Section 11.6 shall apply to the indemnification set forth in Sections 10(a) and 10(b) above. 

  

	11.1	Registration Rights. The Company hereby grants the following registration rights to holders of the Securities. 

 (i) On one occasion, during the period commencing thirty (30) days after the Closing Date, but not later than two (2) years after the Closing
Date (“Request Date”), upon a written request therefor from any record holder or holders of more than 50% of the Initial Shares, Note Shares issued and issuable upon conversion of the Notes and Warrant Shares actually issued upon
exercise of the Warrants, the Company shall prepare and file with the Commission a registration statement under the 1933 Act registering the Initial Shares, Note Shares issuable upon conversion of all sums due under the Notes and Warrant Shares
issuable upon exercise of the Warrants (collectively “Registrable Securities”) which are the subject of such request for unrestricted public resale by the holder thereof. For purposes of Sections 11.1(i) and 11.1(ii), Registrable
Securities shall not include Securities (A) which are registered for resale in an effective registration statement, (B) included for registration in a pending registration statement, or (C) which have been issued without further
transfer restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act. Upon the receipt of such request, the Company shall promptly give written notice to all other record holders of the Registrable Securities that such registration
statement is to be filed and shall include in such registration statement Registrable Securities for which it has received written requests within ten (10) days after the Company gives such written notice. Such other requesting record holders
shall be deemed to have exercised their demand registration right under this Section 11.1(i). 
 (ii) If the Company at any time proposes
to register any of its securities under the 1933 Act for sale to the public, whether for its own account or for the account of other security holders or both, except with respect to registration statements on Forms S-4, S-8 or another form not
available for registering the Registrable Securities 

  

					
	 (Subscription Agreement)
	  	25	  	

 
for sale to the public, provided the Registrable Securities are not otherwise registered for resale by the Subscribers or Holder pursuant to an effective
registration statement, each such time it will give at least fifteen (15) days’ prior written notice to the record holder of the Registrable Securities of its intention so to do. Upon the written request of the holder, received by the
Company within ten (10) days after the giving of any such notice by the Company, to register any of the Registrable Securities not previously registered, the Company will cause such Registrable Securities as to which registration shall have
been so requested to be included with the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent required to permit the sale or other disposition of the Registrable Securities so registered by
the holder of such Registrable Securities (the “Seller” or “Sellers”). In the event that any registration pursuant to this Section 11.1(ii) shall be, in whole or in part, an underwritten public offering of
Ordinary Shares of the Company, the number of shares of Registrable Securities to be included in such an underwriting may be reduced by the managing underwriter if and to the extent that the Company and the underwriter shall reasonably be of the
opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein; provided, however, that the Company shall notify the Seller in writing of any such reduction. Notwithstanding the foregoing
provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer a delay of any registration statement referred to in this Section 11.1(ii) without thereby incurring any liability to the Seller. 
 (iii) If, at the time any written request for registration is received by the Company pursuant to Section 11.1(i), the Company has determined to
proceed with the actual preparation and filing of a registration statement under the 1933 Act in connection with the proposed offer and sale for cash of any of its securities for the Company’s own account and the Company actually does file such
other registration statement, such written request shall be deemed to have been given pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of the holders of Registrable Securities covered by such written request shall
be governed by Section 11.1(ii). 
 (iv) The Company shall file with the Commission a Form F-3 registration statement (the
“Registration Statement”) (or such other form that it is eligible to use) in order to register the Registrable Securities for resale and distribution under the 1933 Act) not later than five (5) days after the Closing Date (the
“Filing 

  

					
	 (Subscription Agreement)
	  	26	  	

 
Date”), and cause it to be declared effective not later than one hundred and twenty (120) days after the Closing Date (the
“Effective Date”). The Company will register not less than a number of Ordinary Shares in the aforedescribed registration statement that is equal to 100% of the Note Shares issuable upon conversion of the Notes and all of the
Initial Shares and Warrant Shares issuable upon exercise of the Warrants. The Registrable Securities shall be reserved and set aside exclusively for the benefit of each Subscriber and Warrant holder, pro rata, and not issued, employed
or reserved for anyone other than each such Subscriber and Warrant holder. The Registration Statement will be amended or additional registration statements will be immediately filed by the Company as necessary to register additional Ordinary Shares
to allow the public resale of all Ordinary Shares included in and issuable by virtue of the Registrable Securities. Without the written consent of the Subscriber, no securities of the Company other than the Registrable Securities will be included in
the Registration Statement except as described on Schedule 11.1. It shall be deemed a Non-Registration Event if at any time after the date the Registration Statement is declared effective by the Commission (“Actual Effective
Date”) the Company has registered for unrestricted resale on behalf of a Subscriber fewer than 100% of the amount of Ordinary Shares issuable upon full conversion of all sums due under the Notes and 100% of the Initial Shares and Warrant
Shares issuable upon exercise of the Warrants. It shall be deemed a Non-Registration Event if at any time after three hundred and thirty-five days after the Closing Date the Company has registered for unrestricted resale on behalf of a Subscriber
fewer than 100% of the amount of Ordinary Shares issuable upon full conversion of all principal and interest under the Notes and 100% of the Initial Shares and Warrant Shares issuable upon exercise of the Warrants. 
  

	11.2. 	Registration Procedures. If and whenever the Company is required by the provisions of Section 11.1(i), 11.1(ii), or 11.1(iv) to effect the registration of any
Registrable Securities under the 1933 Act, the Company will, as expeditiously as possible: 

 (a) subject to the timelines
provided in this Agreement, prepare and file with the Commission a registration statement required by Section 11, with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for
the period of the distribution contemplated thereby (determined as herein provided), promptly provide to the holders of the Registrable Securities copies of all filings and Commission letters of comment and notify Subscribers (by telecopier and by
e-mail addresses provided by Subscribers) and Grushko & Mittman, P.C. 

  

					
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	  	27	  	

 
(by telecopier and by email to Counslers@aol.com) on or before 3:00 PM EST on the sooner of (i) the third Business Day after the day that the Company
receives notice that the Commission has no comments or no further comments on the Registration Statement, or that the registration statement has been declared effective, or (ii) the same Business Day that any other holder of securities
registered in the Registration Statement is notified of the foregoing. Failure to timely provide notice as required by this Section 11.2(a) shall be a material breach of the Company’s obligation and an Event of Default as defined in the
Notes and a Non-Registration Event as defined in Section 11.4 of this Agreement; 
 (b) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until such registration statement has been effective for a period of two
(2) years, and comply with the provisions of the 1933 Act with respect to the disposition of all of the Registrable Securities covered by such registration statement in accordance with the Sellers’ intended method of disposition set forth
in such registration statement for such period; 
 (c) furnish to the Sellers, at the Company’s expense, such number of copies of the
registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or their disposition of the securities covered by such registration
statement; 
 (d) use its commercially reasonable best efforts to register or qualify the Registrable Securities covered by such registration
statement under the securities or “blue sky” laws of New York and such jurisdictions as the Sellers shall request in writing, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; 
 (e) if applicable, list the Registrable Securities covered by such registration statement with any securities exchange on which the Ordinary Shares of the Company are then listed; 
 (f) notify the Subscribers within two hours of the Company’s becoming aware that a prospectus relating thereto is required to be delivered under the
1933 Act, of the happening of any event of which the Company has knowledge as a result of which the 

  

					
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	  	28	  	

 
prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing or which becomes subject to a Commission, state or other governmental order suspending the effectiveness of the
registration statement covering any of the Shares; and 
 (g) provided same would not be in violation of the provision of Regulation FD under
the 1934 Act, make available for inspection by the Sellers, and any attorney, accountant or other agent retained by the Seller or underwriter, all publicly available, non-confidential financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company’s officers, directors and employees to supply all publicly available, non-confidential information reasonably requested by the Seller, attorney, accountant or agent in connection with such
registration statement. 
  

	11.3. 	Provision of Documents. In connection with each registration described in this Section 11, each Seller will furnish to the Company in writing such information and
representation letters with respect to itself and the proposed distribution by it as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws. 

  

	11.4. 	 Non-Registration Events. The Company and the Subscribers agree that the Sellers will suffer damages if the Registration Statement is not filed by the Filing
Date and not declared effective by the Commission by the Effective Date, and any registration statement required under Section 11.1(i) or 11.1(ii) is not filed within 60 days after written request and declared effective by the Commission within
120 days after such request, and maintained in the manner and within the time periods contemplated by Section 11 hereof, and it would not be feasible to ascertain the extent of such damages with precision. Accordingly, if (A) the
Registration Statement is not filed on or before the Filing Date, (B) the Registration Statement is not declared effective on or before the Effective Date, (C) the Registration Statement is not declared effective within three
(3) business days after receipt by the Company or its attorneys of a written or oral communication from the Commission that the Registration Statement will not be reviewed or that the Commission has no further comments, (D) the
registration statement described in Sections 11.1(i) or 11.1(ii) is not filed within 60 days after such written request, or is not declared effective within 120 days after such written request, or (E) any registration statement described in
Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective but shall thereafter cease to be effective for a period of time which shall exceed 20 consecutive days or more than 45 days in the aggregate per year (defined as a period of 365
days commencing on the date the Registration Statement is declared effective) (each such event referred to in clauses (A) through (E) of this Section 11.4 is referred to herein as a “Non-Registration Event”), then the
Company shall deliver to the holder of Registrable Securities, as liquidated damages, an amount equal to one percent 

  

					
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	  	29	  	

	 	 
(1%) for each thirty (30) days (or a pro rata portion thereof), thereafter of the Purchase Price of the Initial Shares and Note Shares remaining
unconverted and purchase price of Note Shares issued upon conversion of the Notes owned of record by such holder which are subject to such Non-Registration Event. The Company must pay the liquidated damages in cash. The liquidated damages must be
paid within ten (10) days after the end of each thirty (30) day period or shorter part thereof for which liquidated damages are payable. In the event a Registration Statement is filed by the Filing Date but is withdrawn prior to being
declared effective by the Commission, then such Registration Statement will be deemed to have not been filed. All oral or written comments received from the Commission relating to the Registration Statement must be satisfactorily responded to within
ten (10) business days after receipt of comments from the Commission. Failure to timely respond to Commission comments is a Non-Registration Event for which liquidated damages shall accrue and be payable by the Company to the holders of
Registrable Securities at the same rate set forth above. Notwithstanding the foregoing, the Company shall not be liable to the Subscriber under this Section 11.4 for any events or delays occurring as a consequence of the acts or omissions of
the Subscribers contrary to the obligations undertaken by Subscribers in this Agreement. Liquidated damages will not accrue nor be payable pursuant to this Section 11.4 nor will a Non-Registration Event be deemed to have occurred for times
during which Registrable Securities are transferable by the holder of Registrable Securities pursuant to Rule 144(k) under the 1933 Act. 

  

	11.5. 	Expenses. All expenses incurred by the Company in complying with Section 11, including, without limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel and independent public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of insurance and reasonable fee of one counsel for all Sellers are called “Registration Expenses.” All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities, including any fees and disbursements of all counsels to the Seller except the one counsel referred to in the immediately preceding sentence, are called “Selling
Expenses.” The Company will pay all Registration Expenses in connection with the registration statement under Section 11. Selling Expenses in connection with each registration statement under Section 11 shall be borne by the
Seller and may be apportioned among the Sellers in proportion to the number of shares sold by the Seller relative to the number of shares sold under such registration statement or as all Sellers thereunder may agree. 

  

	11.6. 	Indemnification and Contribution. 

 (a) In the event
of a registration of any Registrable Securities under the 1933 Act pursuant to Section 11, the Company will, to the extent permitted by law, indemnify and hold harmless the Seller, each officer of the Seller, each director of the Seller, each
underwriter of such Registrable Securities thereunder and each other person, if any, who controls such Seller or underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which the
Seller, 

  

					
	 (Subscription Agreement)
	  	30	  	

 
or such underwriter or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Securities were registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in light of the circumstances when made, and will, subject to the provisions of Section 11.6(c), reimburse the Seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable to the Seller to the extent
that any such damages arise out of or are based upon an untrue statement or omission made in any preliminary prospectus if (i) the Seller failed to send or deliver a copy of the final prospectus delivered by the Company to the Seller with or
prior to the delivery of written confirmation of the sale by the Seller to the person asserting the claim from which such damages arise, (ii) the final prospectus would have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission, or (iii) to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with
information furnished by any such Seller, or any such controlling person in writing specifically for use in such registration statement or prospectus. 
 (b) In the event of a registration of any of the Registrable Securities under the 1933 Act pursuant to Section 11, each Seller severally but not jointly will, to the extent permitted by law, indemnify and hold
harmless the Company, and each person, if any, who controls the Company within the meaning of the 1933 Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls
any underwriter within the meaning of the 1933 Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under
which such Registrable Securities were registered under the 1933 Act pursuant to Section 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of 

  

					
	 (Subscription Agreement)
	  	31	  	

 
or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim,
damage, liability or action, provided, however, that the Seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such Seller, as such, furnished in writing to the Company by such Seller specifically for use in such registration statement or
prospectus, and provided, further, however, that the liability of the Seller hereunder shall be limited to the net proceeds actually received by the Seller from the sale of Registrable Securities covered by such registration statement. 

(c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such
indemnified party other than under this Section 11.6(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 11.6(c), except and only if and to the extent the indemnifying party is
prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent
it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof,
the indemnifying party shall not be liable to such indemnified party under this Section 11.6(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there
may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties, as a group, shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense 

  

					
	 (Subscription Agreement)
	  	32	  	

 
of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred. 
 (d) In order to provide for just and equitable contribution in the event of joint liability under the 1933
Act in any case in which either (i) a Seller, or any controlling person of a Seller, makes a claim for indemnification pursuant to this Section 11.6 but it is judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 11.6 provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part of the Seller or controlling person of the Seller in circumstances for which indemnification is not provided under this Section 11.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, provided, however, that, in any such
case, (y) the Seller will not be required to contribute any amount in excess of the public offering price of all such securities sold by it pursuant to such registration statement; and (z) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 
  

	11.7. 	Delivery of Unlegended Shares. 

 (a) Within five
(5) business days (such fifth business day being the “Unlegended Shares Delivery Date”) after the business day on which the Company has received (i) a notice that Note Shares, Initial Shares or Warrant Shares have been
sold pursuant to the Registration Statement or Rule 144 under the 1933 Act, (ii) a representation that the prospectus delivery requirements, or the requirements of Rule 144, as applicable and if required, have been satisfied, (iii) the
original share certificates representing the Ordinary Shares that have been sold, and (iv) in the case of sales under Rule 144, customary representation letters of the Subscriber and/or Subscriber’s broker regarding compliance with the
requirements of Rule 144, the Company at its expense, (y) shall deliver, and shall cause legal counsel selected by the Company to deliver to its transfer agent (with copies to Subscriber) an appropriate instruction and opinion of such counsel,
directing the delivery of Ordinary Shares without any legends including the legend set forth in Section 4(h) above, reissuable pursuant to 

  

					
	 (Subscription Agreement)
	  	33	  	

 
any effective and current Registration Statement described in Section 11 of this Agreement or pursuant to Rule 144 under the 1933 Act (the
“Unlegended Shares”); and (z) cause the transmission of the certificates representing the Unlegended Shares together with a legended certificate representing the balance of the submitted certificates, if any, to the Subscriber
at the address specified in the notice of sale, via express courier, by electronic transfer or otherwise on or before the Unlegended Shares Delivery Date. Transfer fees shall be the responsibility of the Seller. 
 (b) In lieu of delivering physical certificates representing the Unlegended Shares, if the Company’s transfer agent is participating in the
Depository Trust Company (“DTC”) Fast Automated Securities Transfer program, upon request of a Subscriber, so long as the certificates therefor do not bear a legend and the Subscriber is not obligated to return such certificate for
the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the Unlegended Shares by crediting the account of Subscriber’s prime Broker with DTC through its Deposit Withdrawal Agent Commission
system. Such delivery must be made on or before the Unlegended Shares Delivery Date. 
 (c) The Company understands that a delay in the
delivery of the Unlegended Shares pursuant to Section 11 hereof later than the Unlegended Shares Delivery Date could result in economic loss to a Subscriber. As compensation to a Subscriber for such loss, the Company agrees to pay late payment
fees (as liquidated damages and not as a penalty) to the Subscriber for late delivery of Unlegended Shares in the amount of $100 per business day after the Delivery Date for each $10,000 of purchase price of the Unlegended Shares subject to the
delivery default. Failure to timely deliver unlegended Shares for an aggregate thirty (30) days shall be an Event of Default under the Note. 
 (d) In addition to any other rights available to a Subscriber, if the Company fails to deliver to a Subscriber Unlegended Shares as required pursuant to this Agreement, within seven (7) business days after the Unlegended Shares
Delivery Date and the Subscriber purchases (in an open market transaction or otherwise) Ordinary Shares to deliver in satisfaction of a sale by such Subscriber of the Ordinary Shares which the Subscriber was entitled to receive from the Company (a
“Buy-In”), then the Company shall pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber’s total purchase price (including brokerage
commissions, if any) for the Ordinary Shares so purchased exceeds (B) the aggregate purchase price of the Ordinary Shares delivered to the Company for reissuance as Unlegended Shares together with interest thereon at a rate of 15% per
annum, accruing until such 

  

					
	 (Subscription Agreement)
	  	34	  	

 
amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if a Subscriber
purchases Ordinary Shares having a total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase price of Ordinary Shares delivered to the Company for reissuance as Unlegended Shares, the Company shall be required to pay the
Subscriber $1,000, plus interest. The Subscriber shall provide the Company written evidence of the amounts payable to the Subscriber in respect of the Buy-In. 
 (e) In the event a Subscriber shall request delivery of Unlegended Shares as described in Section 11.7 and the Company is required to deliver such Unlegended Shares pursuant to Section 11.7, the Company may
not refuse to deliver Unlegended Shares based on any claim that such Subscriber or any one associated or affiliated with such Subscriber has been engaged in any violation of law, or for any other reason, unless, an injunction or temporary
restraining order from a court, on notice, restraining and or enjoining delivery of such Unlegended Shares or exercise of all or part of said Warrant shall have been sought and obtained and the Company has posted a surety bond for the benefit of
such Subscriber in the amount of 120% of the amount of the aggregate purchase price of the Initial Shares, Ordinary Shares and Warrant Shares which are subject to the injunction or temporary restraining order, which bond shall remain in effect until
the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s favor. 
  

	12.	 (a) Right of First Refusal. Until the Actual Effective Date, the Subscribers shall be given not less than seven (7) business days prior written
notice of any proposed sale by the Company of its Ordinary Shares or other securities or debt obligations, except in connection with (i) full or partial consideration in connection with a strategic merger, acquisition, consolidation or purchase
of substantially all of the securities or assets of a corporation or other entity which holders of such securities or debt are not granted registration rights, (ii) the Company’s issuance of securities in connection with strategic license
agreements and other partnering arrangements so long as such issuances are not for the purpose of raising capital which holders of such securities or debt are not granted registration rights, (iii) the Company’s issuance of Ordinary Shares
or the issuances or grants of options to purchase Ordinary Shares pursuant to stock option plans described on Schedule 5(d) hereto, (iv) the Company’s issuance of Ordinary Shares or the issuances or grants of options to purchase Ordinary
Shares pursuant to employee stock purchase or compensation plans, provided such Ordinary Shares are not included in a registration statement for so long as any Notes are outstanding, (v) as a result of the exercise of Warrants or conversion of
Notes which are granted or issued pursuant to this Agreement or warrants, options or notes which are outstanding as of the date hereof and 

  

					
	 (Subscription Agreement)
	  	35	  	

 
described in the Reports, all on the precise terms and conditions in effect on the Closing Date, (vi) the payment of any interest on the Notes and
liquidated damages, (vii) as otherwise described in the Reports, or Other Written Information filed with the Commission or delivered to the Subscribers prior to the Closing Date, and (vii) as described on Schedule 11.1 (collectively the
foregoing are “Excepted Issuances”). The Subscribers who exercise their rights pursuant to this Section 12(a) shall have the right during the seven (7) business days following receipt of the notice to agree to purchase
such offered common stock, debt or other securities in accordance with the terms and conditions set forth in the notice of sale in the same proportion to each other as their purchase of Notes in the Offering. In the event such terms and conditions
are modified during the notice period, the Subscribers shall be given prompt notice of such modification and shall have the right during the seven (7) business days following the notice of modification to exercise the rights described in this
Section 12(a). Each Subscriber may tender Initial Shares valued at the purchase price of such Initial Shares as payment for such other securities or debt of the Company as may be acquired pursuant to this Section 12(a). 
 (b) Paid In Kind. The Subscriber may demand that some or all of the sums payable to the Subscriber pursuant to Sections 7.1(c), 7.2, 7.5, 11.4,
11.7(c), 11.7(d) and 11.7(e) that are not paid within ten business days of the required payment date be paid in Ordinary Shares valued at the Conversion Price in effect at the time Subscriber makes such demand, provided that at such time there will
be authorized and unissued Ordinary Shares in an amount sufficient for such issuance and other issuances to which the Company may be obligated at such time. In addition to any other rights granted to the Subscriber herein, the Subscriber is also
granted the registration rights set forth in Section 11(ii) hereof in relation to such Ordinary Shares and the Ordinary Shares issuable pursuant to this Section 12(b). For purposes only of determining any liquidated damages pursuant to the
Transaction Documents, the entire Purchase Price shall be allocated to the Notes and Initial Shares and none to the Warrants. The Warrant Shares shall be valued at the actual exercise price thereof. 
 (c) Maximum Exercise of Rights. In the event the exercise of the rights described in Section 12(b) would result in the issuance of an amount
of Ordinary Shares of the Company that, together with other Ordinary Shares issued to the Subscriber prior to the exercise of such rights, would exceed the maximum amount that may be issued to a Subscriber calculated in the manner described in
Section 7(c) of this Agreement, then the issuance of such additional Ordinary Shares of the Company to such Subscriber will be deferred in whole or in part until such time as such Subscriber is able to beneficially own such Ordinary Shares
without exceeding the maximum amount set forth calculated in the manner described in Section 7(c) of this 

  

					
	 (Subscription Agreement)
	  	36	  	

 
Agreement. The determination of when such Ordinary Shares may be issued shall be made by each Subscriber as to only such Subscriber. 
  

	13.	Miscellaneous. 

  

	 	(e)	Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified
herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by
hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to the Company, to: Viryanet Ltd.,
8 HaMarpe St., Science Based Industries Campus, Har Hotzvim, Jerusalem, 91450, Israel, Attn: Paul V. Brooks, President and CEO, telecopier number: 011-972-2-581-5507, with an additional copy by telecopier only to: Ra’anan Lerner, Meitar
Liquornik Geva & Leshem Brandwein, 16 Abba Hillel Road, Ramat Gan 52506, telecopier number: 011-972-3-61-3111, and (ii) if to the Subscribers, to the one or more addresses and telecopier numbers indicated on the signature pages hereto,
with an additional copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575. 

  

	 	(f)	Entire Agreement; Assignment. This Agreement and other documents delivered in connection herewith represent the entire agreement between the parties hereto with respect to
the subject matter hereof and may be amended only by a writing executed by both parties. Neither the Company nor the Subscribers have relied on any representations not contained or referred to in this Agreement and the documents delivered herewith.
No right or obligation of the Company shall be assigned without prior notice to and the written consent of the Subscribers. 

  

					
	 (Subscription Agreement)
	  	37	  	

	 	(g)	Counterparts/Execution. This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. This Agreement may be executed by facsimile signature and delivered by facsimile transmission. 

  

	 	(h)	Law Governing this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws
principles that would result in the application of the substantive laws of another jurisdiction. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state
courts of New York or in the federal courts located in the state of New York. The parties and the individuals executing this Agreement and other agreements referred to herein or delivered in connection herewith on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any
other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. 

  

	 	(i)	 Specific Enforcement, Consent to Jurisdiction. The Company and Subscriber acknowledge and agree that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to one or more preliminary and final injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. Subject to Section 13(d) hereof, each of
the Company, Subscriber and any signatory hereto in his personal capacity hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction in New York of such court, that
the suit, action or 

  

					
	 (Subscription Agreement)
	  	38	  	

	 	 
proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law. 

  

	 	(j)	Independent Nature of Subscribers. The Company acknowledges that the obligations of each Subscriber under the Transaction Documents are several and not joint with the
obligations of any other Subscriber, and no Subscriber shall be responsible in any way for the performance of the obligations of any other Subscriber under the Transaction Documents. The Company acknowledges that each Subscriber has represented that
the decision of each Subscriber to purchase Securities has been made by such Subscriber independently of any other Subscriber and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets,
properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company which may have been made or given by any other Subscriber or by any agent or employee of any other Subscriber, and no Subscriber or any of
its agents or employees shall have any liability to any Subscriber (or any other person) relating to or arising from any such information, materials, statements or opinions. The Company acknowledges that nothing contained in any Transaction
Document, and no action taken by any Subscriber pursuant hereto or thereto (including, but not limited to, the (i) inclusion of a Subscriber in the Registration Statement and (ii) review by, and consent to, such Registration Statement by a
Subscriber) shall be deemed to constitute the Subscribers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Subscribers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. The Company acknowledges that each Subscriber shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out
of the Transaction Documents, and it shall not be necessary for any other Subscriber to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that it has elected to provide all Subscribers with
the same terms and Transaction Documents for the convenience of the Company and not because Company was required or requested to do so by the Subscribers. The Company acknowledges that such procedure with respect to the Transaction Documents in
no way creates a presumption that the Subscribers are in any way acting in concert or as a group with respect to the Transaction Documents or the transactions contemplated thereby. 

  

					
	 (Subscription Agreement)
	  	39	  	

 [THIS SPACE INTENTIONALLY LEFT BLANK] 
  

					
	 (Subscription Agreement)
	  	40	  	

 SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A) 
 Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us. 
  

			
	 VIRYANET LTD.
 a State of Israel corporation

		
	By:	 	  
		 	 Name: Paul V. Brooks

		 	 Title: President & CEO

	
	 Dated: September     , 2005

  

								
	 SUBSCRIBER
	  	NOTE
PRINCIPAL	  	INITIAL
SHARES	  	WARRANTS
	 ALPHA CAPITAL AKTIENGESELLSCHAFT
 Pradafant 7
 9490 Furstentums
 Vaduz, Lichtenstein
 Fax: 011-42-32323196
	  	$	200,000.00	  	95,238	  	65,079

	
	
	   
	 (Signature)

	 By:

 SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B) 
 Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us. 
  

			
	 VIRYANET LTD.
 a State of Israel corporation

		
	By:	 	  
		 	 Name: Paul V. Brooks

		 	 Title: President & CEO

	
	 Dated: September     , 2005

  

								
	 SUBSCRIBER
	  	NOTE
PRINCIPAL	  	INITIAL
SHARES	  	WARRANTS
	 ELLIS INTERNATIONAL LTD.
 53rd Street Urbanizacion Obarrio
 Swiss Tower, 16th Floor, Panama
 Republic
of Panama
 Fax: (516) 887-8990
	  	$	125,000.00	  	59,524	  	40,675

	
	
	   
	 (Signature)

	 By:

 SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C) 
 Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us. 
  

			
	 VIRYANET LTD.
 a State of Israel corporation

		
	By:	 	  
		 	 Name: Paul V. Brooks

		 	 Title: President & CEO

	
	 Dated: September     , 2005

  

								
	 SUBSCRIBER
	  	NOTE
PRINCIPAL	  	INITIAL
SHARES	  	WARRANTS
	 GLOBIS CAPITAL PARTNERS LP
 60 Broad Street, 38th Floor
 New York, NY 10004
 Fax: (212) 847-4433
	  	$	75,000.00	  	35,714	  	24,405

	
	
	   
	 (Signature)

	 By:

 SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D) 
 Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us. 
  

			
	 VIRYANET LTD.
 a State of Israel corporation

		
	By:	 	  
		 	 Name: Paul V. Brooks

		 	 Title: President & CEO

	
	 Dated: September     , 2005

  

								
	 SUBSCRIBER
	  	NOTE
PRINCIPAL	  	INITIAL
SHARES	  	WARRANTS
	 OMEGA CAPITAL SMALLCAP FUND, LTD.
 1403 44th Street, Suite 214
 Brooklyn, New York 11219
 Fax: (718) 228-9570
	  	$	50,000.00	  	23,810	  	16,270

	
	
	   
	 (Signature)

	 By:

 SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (E) 
 Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us. 
  

			
	 VIRYANET LTD.
 a State of Israel corporation

		
	By:	 	  
		 	 Name: Paul V. Brooks

		 	 Title: President & CEO

	
	 Dated: September     , 2005

  

								
	 SUBSCRIBER
	  	NOTE
PRINCIPAL	  	INITIAL
SHARES	  	WARRANTS
	 IROQUOUIS MASTER FUND LTD.
 641 Lexington Avenue, 26th Floor
 New York, NY 10022
 Fax: (212) 207-3452
	  	$	50,000.00	  	23,810	  	16,270

	
	
	   
	 (Signature)

	 By:

 LIST OF EXHIBITS AND SCHEDULES 
  

			
	 Exhibit A
	  	Form of Note
		
	 Exhibit B
	  	Escrow Agreement
		
	 Exhibit C
	  	Form of Warrant
		
	 Schedule 5(a)
	  	Subsidiaries
		
	 Schedule 5(d)
	  	Additional Issuances / Capitalization
		
	 Schedule 5(h)
	  	Litigation
		
	 Schedule 5(q)
	  	Undisclosed Liabilities
		
	 Schedule 8
	  	Broker

 SCHEDULE 8 
 FINDER 
 The Company will pay the amount of 7% of the total investment made by the Subscribers hereunder as a
finder’s fee to Ellis International Ltd. 

 THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIRYANET LTD. THAT SUCH REGISTRATION IS NOT REQUIRED. 
  

			
	 Note Principal: $200,000.00
	 	Issue Date: September         , 2005

 CONVERTIBLE NOTE 
 FOR VALUE RECEIVED, VIRYANET LTD., a State of Israel corporation (hereinafter called “Borrower”), hereby promises to pay to ALPHA CAPITAL
AKTIENGESELLSCHAFT, Pradafant 7, 9490 Furstentums, Vaduz, Lichtenstein, Fax: 011-42-32323196 (the “Holder”) or order, without demand, the sum of Two Hundred Thousand Dollars ($200,000.00), with interest accruing on September
        , 2006 (the “Maturity Date”), or sooner as described herein. 
 This Note
has been entered into pursuant to the terms of a subscription agreement between the Borrower and the Holder, dated of even date herewith (the “Subscription Agreement”), and shall be governed by the terms of such Subscription Agreement.
Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set forth in the Subscription Agreement. The following terms shall apply to this Note: 
 ARTICLE I 
 GENERAL PROVISIONS

 1.1 Interest Rate. Subject to Section 4.6 hereof, interest payable on this Note shall accrue at a rate per annum (the
“Interest Rate”) equal to seven and one-half percent (7.5%) per year. Interest on the Principal Amount shall be payable on each Conversion Date and on the Maturity Date, whether by acceleration or otherwise. Interest shall compound
annually. 
 1.2 Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect
immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. The Note shall be payable in full on the Maturity Date, unless previously converted into Ordinary Shares in accordance with
Article II hereof; provided, that if an Event of Default has occurred, the Borrower may not pay this Note, without the consent of the Holder, until up to one year after the later of the date the Event of Default has been cured or one year after the
Maturity Date. Upon conversion of Note principal and interest, the Borrower will have no further payment obligations with regard to such converted principal and interest. 
 1.3 Default Interest Rate. A default interest rate of fifteen percent (15%) per annum shall apply to amounts owed hereunder which are not paid on their respective due dates. 

 THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIRYANET LTD. THAT SUCH REGISTRATION IS NOT REQUIRED. 
  

			
	 Note Principal: $125,000.00
	 	Issue Date: September         , 2005

 CONVERTIBLE NOTE 
 FOR VALUE RECEIVED, VIRYANET LTD., a State of Israel corporation (hereinafter called “Borrower”), hereby promises to pay to ELLIS INTERNATIONAL
LTD., 53rd Street Urbanizacion Obarrio, Swiss Tower, 16th Floor, Panama, Republic of Panama, Fax: (516) 887-8990 (the “Holder”) or order, without demand, the sum of One Hundred and Twenty-Five Thousand
Dollars ($125,000.00), with interest accruing on September         , 2006 (the “Maturity Date”), or sooner as described herein. 
 This Note has been entered into pursuant to the terms of a subscription agreement between the Borrower and the Holder, dated of even date herewith (the
“Subscription Agreement”), and shall be governed by the terms of such Subscription Agreement. Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set forth in the
Subscription Agreement. The following terms shall apply to this Note: 
 ARTICLE I 
 GENERAL PROVISIONS 
 1.1 Interest
Rate. Subject to Section 4.6 hereof, interest payable on this Note shall accrue at a rate per annum (the “Interest Rate”) equal to seven and one-half percent (7.5%) per year. Interest on the Principal Amount shall be payable
on each Conversion Date and on the Maturity Date, whether by acceleration or otherwise. Interest shall compound annually. 
 1.2
Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. The Note
shall be payable in full on the Maturity Date, unless previously converted into Ordinary Shares in accordance with Article II hereof; provided, that if an Event of Default has occurred, the Borrower may not pay this Note, without the consent of the
Holder, until up to one year after the later of the date the Event of Default has been cured or one year after the Maturity Date. Upon conversion of Note principal and interest, the Borrower will have no further payment obligations with regard to
such converted principal and interest. 
 1.3 Default Interest Rate. A default interest rate of fifteen percent (15%) per annum
shall apply to amounts owed hereunder which are not paid on their respective due dates. 

 THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIRYANET LTD. THAT SUCH REGISTRATION IS NOT REQUIRED. 
  

			
	 Note Principal: $75,000.00
	 	Issue Date: September         , 2005

 CONVERTIBLE NOTE 
 FOR VALUE RECEIVED, VIRYANET LTD., a State of Israel corporation (hereinafter called “Borrower”), hereby promises to pay to GLOBIS CAPITAL
PARTNERS LP, 60 Broad Street, 38th Floor, New York, NY 10004, Fax: (212) 847-44336 (the “Holder”) or
order, without demand, the sum of Seventy-Five Thousand Dollars ($75,000.00), with interest accruing on September         , 2006 (the “Maturity Date”), or sooner as described herein.

 This Note has been entered into pursuant to the terms of a subscription agreement between the Borrower and the Holder, dated of even date
herewith (the “Subscription Agreement”), and shall be governed by the terms of such Subscription Agreement. Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set forth in
the Subscription Agreement. The following terms shall apply to this Note: 
 ARTICLE I 
 GENERAL PROVISIONS 
 1.1 Interest
Rate. Subject to Section 4.6 hereof, interest payable on this Note shall accrue at a rate per annum (the “Interest Rate”) equal to seven and one-half percent (7.5%) per year. Interest on the Principal Amount shall be payable
on each Conversion Date and on the Maturity Date, whether by acceleration or otherwise. Interest shall compound annually. 
 1.2
Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. The Note
shall be payable in full on the Maturity Date, unless previously converted into Ordinary Shares in accordance with Article II hereof; provided, that if an Event of Default has occurred, the Borrower may not pay this Note, without the consent of the
Holder, until up to one year after the later of the date the Event of Default has been cured or one year after the Maturity Date. Upon conversion of Note principal and interest, the Borrower will have no further payment obligations with regard to
such converted principal and interest. 
 1.3 Default Interest Rate. A default interest rate of fifteen percent (15%) per annum
shall apply to amounts owed hereunder which are not paid on their respective due dates. 

 THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIRYANET LTD. THAT SUCH REGISTRATION IS NOT REQUIRED. 
  

			
	 Note Principal: $50,000.00
	 	Issue Date: September         , 2005

 CONVERTIBLE NOTE 
 FOR VALUE RECEIVED, VIRYANET LTD., a State of Israel corporation (hereinafter called “Borrower”), hereby promises to pay to OMEGA CAPITAL
SMALLCAP FUND, LTD., 1403 44th Street, Suite 214, Brooklyn, New York 11219, Fax: (718) 228-9570 (the
“Holder”) or order, without demand, the sum of Fifty Thousand Dollars ($50,000.00), with interest accruing on September         , 2006 (the “Maturity Date”), or sooner as described
herein. 
 This Note has been entered into pursuant to the terms of a subscription agreement between the Borrower and the Holder, dated of
even date herewith (the “Subscription Agreement”), and shall be governed by the terms of such Subscription Agreement. Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set
forth in the Subscription Agreement. The following terms shall apply to this Note: 
 ARTICLE I 
 GENERAL PROVISIONS 
 1.1 Interest
Rate. Subject to Section 4.6 hereof, interest payable on this Note shall accrue at a rate per annum (the “Interest Rate”) equal to seven and one-half percent (7.5%) per year. Interest on the Principal Amount shall be payable
on each Conversion Date and on the Maturity Date, whether by acceleration or otherwise. Interest shall compound annually. 
 1.2
Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. The Note
shall be payable in full on the Maturity Date, unless previously converted into Ordinary Shares in accordance with Article II hereof; provided, that if an Event of Default has occurred, the Borrower may not pay this Note, without the consent of the
Holder, until up to one year after the later of the date the Event of Default has been cured or one year after the Maturity Date. Upon conversion of Note principal and interest, the Borrower will have no further payment obligations with regard to
such converted principal and interest. 
 1.3 Default Interest Rate. A default interest rate of fifteen percent (15%) per annum
shall apply to amounts owed hereunder which are not paid on their respective due dates. 

 THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIRYANET LTD. THAT SUCH REGISTRATION IS NOT REQUIRED. 
  

			
	 Note Principal: $50,000.00
	 	Issue Date: September         , 2005

 CONVERTIBLE NOTE 
 FOR VALUE RECEIVED, VIRYANET LTD., a State of Israel corporation (hereinafter called “Borrower”), hereby promises to pay to IROQUOUIS MASTER
FUND LTD., 641 Lexington Avenue, 26th Floor, New York, NY 10022, Fax: (212) 207-3452 (the “Holder”)
or order, without demand, the sum of Fifty Thousand Dollars ($50,000.00), with interest accruing on September         , 2006 (the “Maturity Date”), or sooner as described herein. 

This Note has been entered into pursuant to the terms of a subscription agreement between the Borrower and the Holder, dated of even date herewith
(the “Subscription Agreement”), and shall be governed by the terms of such Subscription Agreement. Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set forth in the
Subscription Agreement. The following terms shall apply to this Note: 
 ARTICLE I 
 GENERAL PROVISIONS 
 1.1 Interest
Rate. Subject to Section 4.6 hereof, interest payable on this Note shall accrue at a rate per annum (the “Interest Rate”) equal to seven and one-half percent (7.5%) per year. Interest on the Principal Amount shall be payable
on each Conversion Date and on the Maturity Date, whether by acceleration or otherwise. Interest shall compound annually. 
 1.2
Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. The Note
shall be payable in full on the Maturity Date, unless previously converted into Ordinary Shares in accordance with Article II hereof; provided, that if an Event of Default has occurred, the Borrower may not pay this Note, without the consent of the
Holder, until up to one year after the later of the date the Event of Default has been cured or one year after the Maturity Date. Upon conversion of Note principal and interest, the Borrower will have no further payment obligations with regard to
such converted principal and interest. 
 1.3 Default Interest Rate. A default interest rate of fifteen percent (15%) per annum
shall apply to amounts owed hereunder which are not paid on their respective due dates. 

 1.4 The repayment by the Borrower of the amounts underlying this Note shall be pari passu with the
repayment by the Borrower of loans extended to the Company by LibertyView Special Opportunities Fund, L.P. (“LibertyView”) pursuant to a convertible note dated as of July 27, 2005 issued by the Borrower to LibertyView
(“LibertyView Note”). Anything to the contrary in any Transaction Document notwithstanding, there shall be no restriction on the Holder’s right to convert into equity any amount due under this Note or described in Section 12(b)
of the Subscription Agreement, nor to collect any sums due from the Borrower prior to receipt of notice that LibertyView has declared a default under the LibertyView Note, and such default has not been cured. 
 ARTICLE II 
 CONVERSION RIGHTS

 The Holder shall have the right to convert the principal and interest due under this Note into Shares of the Borrower’s Ordinary
Shares, NIS 1.00 par value per share (“Ordinary Shares”) as set forth below. 
 2.1. Conversion into the Borrower’s
Ordinary Shares. 
 (a) The Holder shall have the right from and after the date of the issuance of this Note and then at
any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, and accrued interest, at the election of the Holder (the date of giving of such notice of conversion being a “Conversion Date”)
into fully paid and nonassessable Ordinary Shares as such stock exists on the date of issuance of this Note, or any shares of capital stock of Borrower into which such Ordinary Shares shall hereafter be changed or reclassified, at the conversion
price as defined in Section 2.1(b) hereof (the “Conversion Price”), determined as provided herein. Upon delivery to the Borrower of a completed Notice of Conversion, a form of which is annexed hereto, Borrower shall issue and deliver
to the Holder within five (5) business days after the Conversion Date (such third day being the “Delivery Date”) that number of Ordinary Shares for the portion of the Note converted in accordance with the foregoing. At the election of
the Holder, the Borrower will deliver accrued but unpaid interest on the Note through the Conversion Date directly to the Holder on or before the Delivery Date. The number of Ordinary Shares to be issued upon each conversion of this Note shall be
determined by dividing that portion of the principal of the Note and interest to be converted, by the Conversion Price. No fractional Shares shall be issued upon any conversion of this Note into Ordinary Shares. If any fractional share of Ordinary
Shares would, except for the provisions of the immediately preceding sentence, be delivered upon such conversion, the Borrower, in lieu of delivering such fractional share, shall pay to the Holder an amount in cash equal to the Market Price (as
defined herein) of such fractional share of Ordinary Shares. 
 (b) Subject to adjustment as provided in Section 2.1(c)
hereof, the Conversion Price per Ordinary Share shall be $2.205. 
 (c) The Conversion Price and number and kind of shares or
other securities to be issued upon conversion determined pursuant to Section 2.1(a), shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows: 

A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially
all its assets to any other corporation, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property
as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with 

 
respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing
provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance. 
 B. Reclassification, etc. If the Borrower
at any time shall, by reclassification or otherwise, change the Ordinary Shares into the same or a different number of securities of any class or classes that may be issued or outstanding, this Note, as to the unpaid principal portion thereof and
accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Ordinary Shares
immediately prior to such reclassification or other change. 
 C. Stock Splits, Combinations and Dividends. If the Ordinary
Shares are subdivided or combined into a greater or smaller number of Ordinary Shares, or if a dividend is paid on the Ordinary Shares in Ordinary Shares, the Conversion Price shall be proportionately reduced in case of subdivision of shares or
stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of Ordinary Shares outstanding immediately before such event bears to the total number of Ordinary Shares
outstanding immediately after to such event. 
 (d) Whenever the Conversion Price is adjusted pursuant to Section 2.1(c)
above, the Borrower shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a statement of the facts requiring such adjustment. 
 (e) As of the Issue Date, the Borrower will reserve from its authorized and unissued Ordinary Shares not less than 100.0% of the number of
Ordinary Shares issuable upon the full conversion of the principal amount of this Note. From and after but not later than the sooner of December 31, 2005, or the date Borrower’s shareholders approve an increase in the authorized capital
stock of Borrower, the Borrower will reserve from its authorized and unissued Ordinary Shares not less than 130% of the number of Ordinary Shares issuable upon full conversion of this Note. Borrower represents that upon issuance, such shares will be
duly and validly issued, fully paid and non-assessable. Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for Ordinary Shares upon the conversion of this Note. 
 2.2 Method of
Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof and the Subscription Agreement. Upon partial conversion of this Note and surrender thereof to the Borrower, a new Note containing
the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid. 
 2.3 Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of
Ordinary Shares which would be in excess of the sum of (i) the number of Ordinary Shares beneficially owned by the Holder and its affiliates on a Conversion Date, (ii) any Ordinary Shares issuable in connection with the unconverted portion
of the Note, and (iii) the number of Ordinary Shares issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding Ordinary Shares of the Borrower on such Conversion Date. For the purposes of this Section 2.3, beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, 

 
as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate conversions of only 4.99% and aggregate
conversion by the Holder may exceed 4.99%. The Holder shall have the authority and obligation to determine whether the restriction contained in this Section 2.3 will limit any conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section 2.3 applies, the determination of which portion of the Notes are convertible shall be the responsibility and obligation of the Holder. The Holder may waive the conversion limitation described in
this Section 2.3, in whole or in part, upon and effective after 61 days prior written notice to the Borrower. The Holder may allocate which of the equity of the Borrower deemed beneficially owned by the Holder shall be included in the 4.99%
amount described above and which shall be allocated to the excess above 4.99%. 
 2.4. Mandatory Conversion. Provided an Event of
Default (or an event that with the passage of time or the giving of notice could become an Event of Default) did not occur, then from the twentieth fifth through the twentieth Business Day before the Maturity Date, the Borrower will have the option
by written notice to the Holder (“Notice of Mandatory Conversion”) of compelling the Holder to convert the outstanding and unpaid principal of this Note and any or all interest accrued thereon into Ordinary Shares at a per share Conversion
Price equal to the lesser of the Conversion Price set forth in Section 2.1(a) hereof (as same may be adjusted), or the VWAP as reported by Bloomberg, L.P. for the twenty trading days preceding the Maturity Date (“Mandatory
Conversion”). The Notice of Mandatory Conversion must be given, if at all, between the twentieth fifth through the twentieth Business Day preceding the Maturity Date. The date the Notice of Mandatory Conversion is given is the “Mandatory
Conversion Date.” The Notice of Mandatory Conversion shall specify the aggregate principal amount of this Note which is subject to Mandatory Conversion. Mandatory Conversion Notices must be given proportionately to all Holders of Notes who
received Notes similar in terms and tenure as this Note. A Notice of Mandatory Conversion may not be given or affected unless the Registration Statement (as defined in the Subscription Agreement) has been effective for the unrestricted public resale
of the Registrable Securities (as defined in the Subscription Agreement) and the Ordinary Shares to be delivered upon Mandatory Conversion, for each of the thirty Business Days preceding the Mandatory Conversion Date and through the date the
conversion shares are delivered to the Holder. The Maturity Date shall be a deemed Conversion Date and the Borrower will be required to deliver the Ordinary Shares issuable pursuant to a Mandatory Conversion Notice in the same manner and time
periods as described in Section 2.1 above. 
 ARTICLE III 
 EVENT OF DEFAULT 
 The occurrence of any of the following events of default
(“Event of Default”) shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demand, without presentment, or
grace period, all of which hereby are expressly waived, except as set forth below: 
 3.1 Failure to Pay Principal or Interest. The
Borrower fails to pay any installment of principal, interest or other sum due under this Note when due and such failure continues for a period of ten (10) business days after the due date. 
 3.2 Breach of Covenant. The Borrower breaches any material covenant or other term or condition of the Subscription Agreement or this Note in any
material respect and such breach, if subject to cure, continues for a period of ten (10) business days after written notice to the Borrower from the Holder. 

 3.3 Breach of Representations and Warranties. Any material representation or warranty of the
Borrower made herein, in the Subscription Agreement, or in any agreement, statement or certificate given in writing pursuant hereto or in connection therewith shall be false or misleading in any material respect as of the date made and the Closing
Date. 
 3.4 Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed without the consent of the Borrower and is not dismissed within sixty (60) days of
appointment. 
 3.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of
its property or other assets for more than $250,000, and shall remain unvacated, unbonded or unstayed for a period of sixty (60) days. 
 3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors
shall be instituted by or against the Borrower and if instituted against Borrower are not dismissed within sixty (60) days of initiation. 
 3.7 Delisting. Delisting of the Ordinary Shares from any Principal Market without relisting on another Principal Market within five days of such delisting; failure to comply with the requirements for continued listing on any
Principal Market for a period of five consecutive trading days; or notification from any Principal Market that the Borrower is not in compliance with the conditions for such continued listing on such Principal Market and Borrower’s failure to
be in compliance with such conditions within the time period provided by such Principal Market for such compliance. 
 3.8
Non-Payment. A payment default by the Borrower under any one or more obligations in an aggregate monetary amount in excess of $250,000 for more than ten days after the due date, unless the Borrower is contesting the validity of such
obligation in good faith. 
 3.9 Stop Trade. An SEC or judicial stop trade order or Principal Market trading suspension that lasts for
five or more consecutive trading days. 
 3.10 Failure to Deliver Ordinary Shares or Replacement Note. Borrower’s failure to
timely deliver Ordinary Shares to the Holder pursuant to and in the form required by this Note and Sections 7 and 11 of the Subscription Agreement, or, if required, a replacement Note. 
 3.11 Non-Registration Event. The occurrence of a Non-Registration Event as described in Section 11.4 of the Subscription Agreement.

 3.12 Reservation Default. Failure by the Borrower to have reserved for issuance upon conversion of the Note the amount of Ordinary
Shares as set forth in this Note and the Subscription Agreement. 
 3.13 Cross Default. A default by the Borrower of a material term,
covenant, warranty or undertaking of any other agreement to which the Borrower and Holder are parties, or the occurrence of a material event of default under any such other agreement which is not cured after any required notice and/or cure period.

 ARTICLE IV 
 MISCELLANEOUS 
 4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of
Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 
 4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be
(i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery,
telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective
(a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to the Borrower to: Viryanet Ltd., 8
HaMarpe St., Science Based Industries Campus, Har Hotzvim, Jerusalem, 91450, Israel, Attn: Paul V. Brooks, President and CEO, telecopier number: 011-972-2-581-5507, with an additional copy by telecopier only to: Ra’anan Lerner, Meitar Liquornik
Geva & Leshem Brandwein, 16 Abba Hillel Road, Ramat Gan 52506, telecopier number: 011-972-3-61-3111, and (ii) if to the Holder, to the name, address and telecopy number set forth on the front page of this Note, with a copy by
telecopier only to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575. 
 4.3 Amendment Provision. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented. 
 4.4 Assignability. The obligations of Borrower under this Note are not assignable without the consent
of the Holder. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and the permitted assigns of the Note. 
 4.5 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. Any action brought by either
party against the other concerning the transactions contemplated by this Agreement shall be brought only in the civil or state courts of New York or in the federal courts located in the State and county of New York. Each of the Borrower, Holder and
any signator hereto in his personal capacity hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction in New York of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. 

 4.6 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment
of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of
such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 
 4.7 Shareholder
Status. The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of this Note. However, the Holder will have all the rights of a shareholder of the Borrower with respect to the Ordinary Shares to be
received by Holder after delivery by the Holder of a Conversion Notice to the Borrower. 
 IN WITNESS WHEREOF, Borrower has caused
this Note to be signed in its name by an authorized officer as of the          day of September, 2005. 
  

			
	 VIRYANET LTD.

		
	By:	 	  
		 	 Name:

		 	 Title:

  

	
	 WITNESS:

	
	   

 NOTICE OF CONVERSION 
 (To be executed by the Registered Holder in order to convert the Note) 
 The undersigned hereby elects to convert $             of the principal and
$             of the interest due on the Note issued by Viryanet Ltd. on September         , 2005 into Ordinary Shares of Viryanet Ltd.
(the “Borrower”) according to the conditions set forth in such Note, as of the date written below. 
 Date of
Conversion:                                      
                                        
                                        
                                        
                                        
                     
 Conversion
Price:                                       
                                        
                                        
                                        
                                        
                         
 Shares To Be
Delivered:                                      
                                        
                                        
                                        
                                        
             
 Signature:                                     
                                        
                                        
                                        
                                        
                                        

 Print
Name:                                       
                                        
                                        
                                        
                                        
                                    
 Address:                                     
                                        
                                        
                                        
                                        
                                        
    
                                       
                                        
                                        
                                        
                                        
                                        
                    

 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN
REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY
BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. 
 SUBJECT TO THE
PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON SEPTEMBER [__], 2010 (THE “EXPIRATION DATE”). 
 No. 1 
 VIRYANET LTD. 
 WARRANT TO PURCHASE 65,079 ORDINARY SHARES, 
 PAR VALUE 1.0 NIS PER SHARE

 For VALUE RECEIVED, ALPHA CAPITAL AKTIENGESELLSCHAFT (“Warrantholder”), is entitled to purchase, subject to the provisions
of this Warrant, from ViryaNet Ltd., an Israeli corporation (“Company”), at any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an exercise price per share equal to US$2.10 (the exercise price in
effect being herein called the “Warrant Price”), 65,079 Ordinary Shares (“Warrant Shares”) of the Company’s Ordinary Shares, par value 1.0 NIS per share (“Ordinary Shares”). The number of Warrant Shares purchasable
upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. 
 Section 1.
Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. 
 Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for
that purpose, upon surrender hereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of
its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee
and the surrendered Warrant shall be canceled by the Company. 

 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN
REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY
BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. 
 SUBJECT TO THE
PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON SEPTEMBER [__], 2010 (THE “EXPIRATION DATE”). 
 No. 2 
 VIRYANET LTD. 
 WARRANT TO PURCHASE 40,675 ORDINARY SHARES, 
 PAR VALUE 1.0 NIS PER SHARE

 For VALUE RECEIVED, ELLIS INTERNATIONA LTD. (“Warrantholder”), is entitled to purchase, subject to the provisions of this
Warrant, from ViryaNet Ltd., an Israeli corporation (“Company”), at any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an exercise price per share equal to US$2.10 (the exercise price in effect
being herein called the “Warrant Price”), 40,675 Ordinary Shares (“Warrant Shares”) of the Company’s Ordinary Shares, par value 1.0 NIS per share (“Ordinary Shares”). The number of Warrant Shares purchasable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. 
 Section 1.
Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. 
 Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for
that purpose, upon surrender hereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of
its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee
and the surrendered Warrant shall be canceled by the Company. 

 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN
REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY
BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. 
 SUBJECT TO THE
PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON SEPTEMBER [__], 2010 (THE “EXPIRATION DATE”). 
 No. 3 
 VIRYANET LTD. 
 WARRANT TO PURCHASE 24,405 ORDINARY SHARES, 
 PAR VALUE 1.0 NIS PER SHARE

 For VALUE RECEIVED, GLOBIS CAPITAL PARTNERS LP (“Warrantholder”), is entitled to purchase, subject to the provisions of this
Warrant, from ViryaNet Ltd., an Israeli corporation (“Company”), at any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an exercise price per share equal to US$2.10 (the exercise price in effect
being herein called the “Warrant Price”), 24,405 Ordinary Shares (“Warrant Shares”) of the Company’s Ordinary Shares, par value 1.0 NIS per share (“Ordinary Shares”). The number of Warrant Shares purchasable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. 
 Section 1.
Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. 
 Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for
that purpose, upon surrender hereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of
its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee
and the surrendered Warrant shall be canceled by the Company. 

 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN
REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY
BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. 
 SUBJECT TO THE
PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON SEPTEMBER [__], 2010 (THE “EXPIRATION DATE”). 
 No. 4 
 VIRYANET LTD. 
 WARRANT TO PURCHASE 16,270 ORDINARY SHARES, 
 PAR VALUE 1.0 NIS PER SHARE

 For VALUE RECEIVED, OMEGA CAPITAL SMALLCAP FUND, LTD. (“Warrantholder”), is entitled to purchase, subject to the provisions
of this Warrant, from ViryaNet Ltd., an Israeli corporation (“Company”), at any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an exercise price per share equal to US$2.10 (the exercise price in
effect being herein called the “Warrant Price”), 16,270 Ordinary Shares (“Warrant Shares”) of the Company’s Ordinary Shares, par value 1.0 NIS per share (“Ordinary Shares”). The number of Warrant Shares purchasable
upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. 
 Section 1.
Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. 
 Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for
that purpose, upon surrender hereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of
its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee
and the surrendered Warrant shall be canceled by the Company. 

 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN
REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY
BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. 
 SUBJECT TO THE
PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON SEPTEMBER [__], 2010 (THE “EXPIRATION DATE”). 
 No. 4 
 VIRYANET LTD. 
 WARRANT TO PURCHASE 16,270 ORDINARY SHARES, 
 PAR VALUE 1.0 NIS PER SHARE

 For VALUE RECEIVED, IROQUOUIS MASTER FUND LTD. (“Warrantholder”), is entitled to purchase, subject to the provisions of this
Warrant, from ViryaNet Ltd., an Israeli corporation (“Company”), at any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an exercise price per share equal to US$2.10 (the exercise price in effect
being herein called the “Warrant Price”), 16,270 Ordinary Shares (“Warrant Shares”) of the Company’s Ordinary Shares, par value 1.0 NIS per share (“Ordinary Shares”). The number of Warrant Shares purchasable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. 
 Section 1.
Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. 
 Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for
that purpose, upon surrender hereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of
its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee
and the surrendered Warrant shall be canceled by the Company. 

 Section 3. Exercise of Warrant. Subject to the provisions hereof, the Warrantholder may
exercise this Warrant, in whole or in part, at any time prior to its expiration upon surrender of the Warrant, together with delivery of a duly executed Warrant exercise form, in the form attached hereto as Appendix A (the “Exercise
Agreement”) and payment by cash, certified check or wire transfer of funds (or by cashless exercise as provided below) of the aggregate Warrant Price for that number of Warrant Shares then being purchased, to the Company during normal
business hours on any business day at the Company’s principal executive offices (or such other office or agency of the Company as it may designate by notice to the Warrantholder). The Warrant Shares so purchased shall be deemed to be issued to
the Warrantholder or the Warrantholder’s designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered (or the date evidence of loss, theft or destruction thereof and
security or indemnity satisfactory to the Company has been provided to the Company), the Warrant Price shall have been paid and the completed Exercise Agreement shall have been delivered. Certificates for the Warrant Shares so purchased shall be
delivered to the Warrantholder within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the
Warrantholder and shall be registered in the name of the Warrantholder or such other name as shall be designated by the Warrantholder, as specified in the Exercise Agreement. If this Warrant shall have been exercised only in part, then, unless this
Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Warrantholder a new Warrant representing the right to purchase the number of shares with respect to which this Warrant shall not
then have been exercised. As used herein, “business day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business. Each exercise hereof shall constitute the
re-affirmation by the Warrantholder that the representations and warranties contained in Section 5 of the Purchase Agreement (as defined below) are true and correct in all material respects with respect to the Warrantholder as of the time of
such exercise. 
 Section 4. Compliance with the Securities Act of 1933. Except as provided in the Purchase Agreement, the
Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant, and a similar legend on any security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the opinion as to
any such security that such legend is unnecessary. 
 Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates for Warrant Shares in a name other than that of the Warrantholder in respect of which such shares are issued, and in such case, the Company shall not be required to issue or deliver any certificate for
Warrant Shares or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company’s reasonable satisfaction that such tax has been paid. The Warrantholder shall be responsible
for income taxes due under federal, state or other law, if any such tax is due. 

 Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost,
stolen, or destroyed, the Company shall issue in exchange and substitution of and upon surrender and cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for
the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable
indemnity or bond with respect thereto, if requested by the Company. 
 Section 7. Reservation of Ordinary Shares. The Company
hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 7, out of the authorized and unissued capital stock,
sufficient Ordinary Shares to provide for the exercise of the rights of purchase represented by this Warrant. The Company agrees that all Warrant Shares issued upon due exercise of the Warrant shall be, at the time of delivery of the certificates
for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable Ordinary Shares of the Company. 
 Section 8.
Adjustments. Subject and pursuant to the provisions of this Section 8, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter. 
 (a) If the Company shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its
Ordinary Shares in Ordinary Shares, subdivide its outstanding Ordinary Shares into a greater number of shares or combine its outstanding Ordinary Shares into a smaller number of shares or issue by reclassification of its outstanding Ordinary Shares
any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon exercise of the Warrant and the
Warrant Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of Ordinary
Shares or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event upon payment of a Warrant Price that has been adjusted to reflect a fair allocation of the economics of such
event to the Warrantholder. Such adjustments shall be made successively whenever any event listed above shall occur. 
 (b) If
any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or
substantially all of the Company’s assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall
be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the
Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately 

 
theretofore issuable upon exercise of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not
taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Warrant Price)
shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring
such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Warrantholder, at the last address of the Warrantholder appearing on the books of the Company, such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Warrantholder may be entitled to purchase, and the other obligations under this Warrant. The provisions of this paragraph (b) shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions. 
 (c) In case the Company shall fix a payment date for the
making of a distribution to all holders of Ordinary Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 8(a)), or subscription rights or warrants, the Warrant Price to be in effect after such payment date
shall be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of Ordinary Shares outstanding multiplied by the Market Price (as defined below)
per Ordinary Share immediately prior to such payment date, less the fair market value (as determined by the Company’s Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights
or warrants, and the denominator of which shall be the total number of Ordinary Shares outstanding multiplied by such Market Price per Ordinary Share immediately prior to such payment date. “Market Price” as of a particular date (the
“Valuation Date”) shall mean the following: (a) if the Ordinary Shares are then listed on a national stock exchange, the closing sale price of one Ordinary Share on such exchange on the last trading day prior to the Valuation Date;
(b) if the Ordinary Shares are then quoted on The Nasdaq Stock Market, Inc. (“Nasdaq”), the National Association of Securities Dealers, Inc. OTC Bulletin Board (the “Bulletin Board”) or such similar quotation system or
association, the closing sale price of one Ordinary Share on Nasdaq, the Bulletin Board or such other quotation system or association on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of
the high bid and the low asked price quoted thereon on the last trading day prior to the Valuation Date; or (c) if the Ordinary Shares are not then listed on a national stock exchange or quoted on Nasdaq, the Bulletin Board or such other
quotation system or association, the fair market value of one Ordinary Share as of the Valuation Date, as determined in good faith by the Board of Directors of the Company and the Warrantholder. If the Ordinary Shares are not then listed on a
national securities exchange, the Bulletin Board or such other quotation system or association, the Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Warrantholder prior to the exercise hereunder as to the
fair market value of an 

 
Ordinary Shares as determined by the Board of Directors of the Company. In the event that the Board of Directors of the Company and the Warrantholder are
unable to agree upon the fair market value in respect of subpart (c) of this paragraph, the Company and the Warrantholder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and
conclusive, and the cost of such appraiser shall be borne equally by the Company and the Warrantholder. Such adjustment shall be made successively whenever such a payment date is fixed. 
 (d) An adjustment to the Warrant Price shall become effective immediately after the payment date in the case of each dividend or
distribution and immediately after the effective date of each other event which requires an adjustment. 
 (e) In the event
that, as a result of an adjustment made pursuant to this Section 8, the Warrantholder shall become entitled to receive any shares of capital stock of the Company other than Ordinary Shares, the number of such other shares so receivable upon
exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant. 
 Section 9. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of this Warrant. If
any fraction of an Ordinary Shares would, except for the provisions of the first sentence of this Section 9, be deliverable upon such exercise, the Company, in lieu of delivering such fractional share, shall pay to the exercising Warrantholder
an amount in cash equal to the Market Price of such fractional Ordinary Share on the date of exercise. 
 Section 10. Extension of
Expiration Date. If the Company fails to cause any Registration Statement covering Registrable Securities (unless otherwise defined herein, capitalized terms are as defined in the Subscription Agreement dated as of September __, 2005 relating
to, among other things, the Warrant Shares (the “Purchase Agreement”)) to be declared effective on or prior to the applicable dates set forth therein, or if any of the Non-Registration Events specified in Section 11.4 of the Purchase
Agreement occurs, and the Non-Registration Event (whether alone, or in combination with any other Non-Registration Event) continues for more than 60 days in any 12 month period, or for more than a total of 90 days, then the Expiration Date of this
Warrant shall be extended one day for each day beyond the 60-day or 90-day limits, as the case may be, that the Non-Registration Event continues. 
 Section 11. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this
Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder. 
 Section 12. Notices to
Warrantholder. Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall promptly give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted
Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting 

 
forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Failure to give such notice to the Warrantholder or
any defect therein shall not affect the legality or validity of the subject adjustment. 
 Section 13. Identity of Transfer
Agent. The Transfer Agent for the Ordinary Shares is American Stock Transfer & Trust Company. Upon the appointment of any subsequent transfer agent for the Ordinary Shares or other shares of the Company’s capital stock issuable
upon the exercise of the rights of purchase represented by the Warrant, the Company will mail to the Warrantholder a statement setting forth the name and address of such transfer agent. 
 Section 14. Notices. Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be
deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or facsimile, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier. All notices shall be addressed as follows: if to the
Warrantholder, at its address as set forth in the Company’s books and records and, if to the Company, at the address as follows, or at such other address as the Warrantholder or the Company may designate by ten days’ advance written notice
to the other: 
 If to the Company: 
 ViryaNet Ltd. 
 8 HaMarpe Street 
 Har Hotzvim 
 P.O. Box 45041 
 Jerusalem 91450 
 Israel 
 Attention: Albert A. Gabrielli, Chief Financial Officer 
 Fax: 011-508-490-8666 
 With a copy to: 
 Meitar Liquornik Geva & Leshem Brandwein 
 16 Abba Hillel Silver Rd. 
 Ramat Gan 52506, Israel 
 Attention: Raanan Lerner, Adv. 
 Fax: 011-9723-610-3111 
 Section 15. Registration Rights. The initial Warrantholder is entitled to the benefit of certain registration rights with respect to the Ordinary Shares issuable upon the exercise of this Warrant as provided in the Purchase
Agreement, and any subsequent Warrantholder shall be entitled to such rights. 

 Section 16. Successors. All the covenants and provisions hereof by or for the benefit of the
Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder. 
 Section 17. Governing Law;
Consent to Jurisdiction; Waiver of Jury Trial. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof. The Company and, by
accepting this Warrant, the Warrantholder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the
purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto
anywhere in the world by the same methods as are specified for the giving of notices under this Warrant. The Company and, by accepting this Warrant, the Warrantholder, each irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. The Company and, by accepting this Warrant, the Warrantholder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT TO REQUEST
A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. 
 Section 18. Cashless Exercise. Notwithstanding any other provision contained herein to the contrary, from and after the first anniversary of the Closing Date (as defined in the Purchase Agreement) and so long as the Company is
required under the Subscription Agreement to have effected the registration of the Warrant Shares for resale to the public pursuant to a Registration Statement (as such term is defined in the Subscription Agreement), if the Warrant Shares may not be
freely sold to the public for any reason (including, but not limited to, the failure of the Company to have effected the registration of the Warrant Shares or to have a current prospectus available for delivery or otherwise, but excluding any period
during which the Company is not required to have registration statement effective, the Warrantholder may elect to receive, without the payment by the Warrantholder of the aggregate Warrant Price in respect of the Ordinary Shares to be acquired,
Ordinary Shares of equal value to the value of this Warrant, or any specified portion hereof, by the surrender of this Warrant (or such portion of this Warrant being so exercised) together with a Net Issue Election Notice, in the form annexed hereto
as Appendix B, duly executed, to the Company. Thereupon, the Company shall issue to the Warrantholder such number of fully paid, validly issued and nonassessable Ordinary Shares as is computed using the following formula: 
 X = Y (A - B) 
         A 

	where	

 X = the number of Ordinary Shares to
which the Warrantholder is entitled upon such cashless exercise; 
 Y = the total number of Ordinary Shares covered by
this Warrant for which the Warrantholder has surrendered purchase rights at such time for cashless exercise (including both shares to be issued to the Warrantholder and shares as to which the purchase rights are to be canceled as payment therefor);

 A = the “Market Price” of one Ordinary Share as at the date the net issue election is made; and 

B = the Warrant Price in effect under this Warrant at the time the net issue election is made. 
 Section 19. Limitations on Exercise. Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be
acquired by the Warrantholder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of Ordinary Shares then
beneficially owned by such Warrantholder and its Affiliates (as such term is defined in the Subscription Agreement) and any other person or entity whose beneficial ownership of Ordinary Shares would be aggregated with the Warrantholder’s for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), does not exceed 4.999% of the total number of issued and outstanding Ordinary Shares (including for such purpose the Ordinary Shares
issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. This provision shall not restrict the number of
Ordinary Shares which a Warrantholder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a transaction contemplated by Section 8 of this Warrant. By
written notice to the Company, the Warrantholder may waive the provisions of this Section 19, but any such waiver will not be effective until the 61st day after delivery of such notice, nor will any such waiver effect any other Warrantholder.

 20. No Rights as Stockholder. Prior to the exercise of this Warrant, the Warrantholder shall not have or exercise any rights as a
stockholder of the Company by virtue of its ownership of this Warrant. 
 Section 21. Section Headings. The section headings in
this Warrant are for the convenience of the Company and the Warrantholder and in no way alter, modify, amend, limit or restrict the provisions hereof. 

 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as of the
[    ]th day of September, 2005. 
  

			
	 VIRYANET LTD.

		
	By:	 	  
		 	 Name:

		 	 Title:

 APPENDIX A 
 VIRYANET LTD. 
 WARRANT EXERCISE FORM 
 To ViryaNet Ltd.: 
 The
undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant (“Warrant”) for, and to purchase thereunder by the payment of the Warrant Price and surrender of the Warrant,
         Ordinary Shares (“Warrant Shares”) provided for therein, and requests that certificates for the Warrant Shares be issued as follows: 
                                       
                                       
                            
 Name 
                                       
                                        
                            
 Address 
                                       
                                        
                            
                                       
                                        
                            
 Federal Tax ID or Social Security No. 
 and
delivered by (certified mail to the above address, or )electronically (provide DWAC Instructions:
                        ), or (other (specify):
                    ). 
 and, if the number of
Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares purchasable upon exercise of this Warrant be registered in the name of the undersigned
Warrantholder or the undersigned’s Assignee as below indicated and delivered to the address stated below. 
 Dated:
                    ,      
 Note: The signature must correspond with the name of the Warrantholder as written on the first page of the Warrant in every particular, without alteration or enlargement or any change whatever, unless the Warrant has been assigned.

  

	
	
	   
	 Name (please print)

	 Signature:                                     
                                        
      

	                                       
                                        
                         

	                                       
                                        
                         

	 Address

	
	                                       
                                        
                         

	 Federal Identification or Social Security No.

	
	 Assignee:

	
	                                       
                                        
                         

	
	                                       
                                        
                         

	
	                                       
                                        
                         

 APPENDIX B 
 VIRYANET LTD. 
 NET ISSUE ELECTION NOTICE 
 To: ViryaNet Ltd. 
 Date:[                                ] 
 The undersigned hereby elects under Section 18 of this Warrant to surrender the right to purchase
[                    ] Ordinary Shares pursuant to this Warrant and hereby requests the issuance of
[                    ] Ordinary Shares. The certificate(s) for the shares issuable upon such net issue election shall be issued in the name of
the undersigned or as otherwise indicated below. 
                                       
                                        
                                     
 Signature 
                                       
                                        
                                     
 Name for Registration 
                                       
                                        
                                     
 Mailing Address

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