Document:

exv10w1

 

Exhibit 10.1

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

VERAZ NETWORKS, INC.

WARRANT TO PURCHASE SERIES C PREFERRED STOCK

	 	 	 
	No. PCW-1

	 	December 31, 2002

Void After December 31, 2007

     This Certifies That, for value received, Comdisco Ventures, Inc., a Delaware
corporation (the “Holder”), is entitled to subscribe for and purchase at the Exercise Price
(defined below) from Veraz Networks, Inc., a Delaware corporation, with its principal
office at 926 Rock Ave., San Jose, CA 95131 (the “Company”) up to One Hundred Sixty Two Thousand
Five Hundred (162,500) shares of the Series C Preferred Stock of the Company, (the “Preferred
Stock”).

     Immediately prior to the closing of the Company’s initial public offering, this warrant shall
become exercisable for that number of shares of Common Stock of the Company into which the shares
of Preferred Stock issuable under this warrant would then be convertible, so long as such shares,
if this warrant has been exercised prior to such offering, would have been converted into shares of
the Company’s Common Stock pursuant to the automatic conversion provisions (or otherwise) of the
Company’s Certificate of Incorporation.

     1. Definitions. As used herein, the following terms shall have the following
respective meanings:

          (a) “Exercise Period” shall mean the period commencing with the date hereof and ending five
(5) years later, unless sooner terminated as provided below.

          (b) “Exercise Price” shall mean $0.1716 per share, subject to adjustment pursuant to Section 5
below.

          (c) “Exercise Shares” shall mean the shares of the Preferred Stock issuable upon exercise of
this Warrant, subject to adjustment pursuant to the terms herein, including but not limited to
adjustment pursuant to Section 5 below.

     2. Exercise of Warrant. The rights represented by this Warrant may be exercised in
whole or in part at any time during the Exercise Period, by delivery of the following to the
Company at its address set forth above (or at such other address as it may designate by notice in
writing to the Holder):

          (a) An executed Notice of Exercise in the form attached hereto;

1.

 

          (b) Payment of the Exercise Price either (i) in cash or by check, or (ii) by cancellation of
indebtedness; and

          (c) This Warrant.

     Upon the exercise of the rights represented by this Warrant, a certificate or certificates for
the Exercise Shares so purchased, registered in the name of the Holder or persons affiliated with
the Holder, if the Holder so designates, shall be issued and delivered to the Holder within a
reasonable time after the rights represented by this Warrant shall have been so exercised.

     The person in whose name any certificate or certificates for Exercise Shares are to be issued
upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on
the date on which this Warrant was surrendered and payment of the Exercise Price was made,
irrespective of the date of delivery of such certificate or certificates, except that, if the date
of such surrender and payment is a date when the stock transfer books of the Company are closed,
such person shall be deemed to have become the holder of such shares at the close of business on
the next succeeding date on which the stock transfer books are open.

          2.1 Net Exercise. Notwithstanding any provisions herein to the contrary, if the fair market
value of one share of the Company’s Preferred Stock is greater than the Exercise Price (at the date
of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the
Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Notice of Exercise in which event the Company shall issue to
the Holder a number of shares of Preferred Stock computed using the following formula:

	 	 	 	 	 
	X =

	 	Y (A-B)
	 	 
	 

	 	 	 	 
	 

	 	A	 	 

	 	 	 
	Where X =   

	 	the number of shares of Preferred Stock to be issued to the Holder
	 
	 	 
	Y =   

	 	the number of shares of Preferred Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being canceled (at the date of such calculation)
	 
	 	 
	A =   

	 	the fair market value of one share of the Preferred Stock (at
the date of such calculation)
	 
	 	 
	B =   

	 	Exercise Price (as adjusted to the date of such calculation)

     For purposes of the above calculation, the fair market value of one share of Preferred Stock
shall be determined by the Company’s Board of Directors in good faith; provided, however, that in
the event that this Warrant is exercised pursuant to this Section 2.1 in connection with the
Company’s initial public offering of its Common Stock, the fair market value per share shall be the
product of (i) the per share offering price to the public of the Company’s initial public offering,
and (ii) the number of shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise.

2.

 

     3. Covenants of the Company.

          3.1 Covenants as to Exercise Shares. The Company covenants and agrees that all Exercise
Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issuance thereof. The Company further covenants and agrees
that the Company will at all times during the Exercise Period, have authorized and reserved, free
from preemptive rights, a sufficient number of shares of its capital stock to provide for the
exercise of the rights represented by this Warrant. If at any time during the Exercise Period the
number of authorized but unissued shares of capital stock shall not be sufficient to permit
exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of capital stock to such
number of shares as shall be sufficient for such purposes.

          3.2 No Impairment. Except and to the extent as waived or consented to by the Holder, the
Company will not, by amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such action as may be
necessary or appropriate in order to protect the exercise rights of the Holder against impairment.

          3.3 Notices of Record Date. In the event of any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, the Company shall mail to the Holder, at least
ten (10) days prior to the date specified herein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.

     4. Representations of Holder.

          4.1 Acquisition of Warrant for Personal Account. The Holder represents and warrants that it
is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with
a view to or for sale or distribution of said Warrant or Exercise Shares or any part thereof. The
Holder also represents that the entire legal and beneficial interests of the Warrant and Exercise
Shares the Holder is acquiring is being acquired for, and will be held for, its account only.

          4.2 Securities Are Not Registered.

               (a) The Holder understands that the Warrant and the Exercise Shares have not been registered
under the Securities Act of 1933, as amended (the “Act”) on the basis that no distribution or
public offering of the stock of the Company is to be effected. The Holder realizes that the basis
for the exemption may not be present if, notwithstanding its representations, the Holder has a
present intention of acquiring the securities for a fixed or determinable period in the future,
selling (in connection with a distribution or otherwise),

3.

 

granting any participation in, or otherwise distributing the securities. The Holder has no
such present intention.

          (b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely
unless they are subsequently registered under the Act or an exemption from such registration is
available. The Holder recognizes that the Company has no obligation to register the Warrant or the
Exercise Shares of the Company, or to comply with any exemption from such registration.

          (c) The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant
to Rule 144 adopted under the Act unless certain conditions are met, including, among other things,
the existence of a public market for the shares, the availability of certain current public
information about the Company, the resale following the required holding period under Rule 144 and
the number of shares being sold during any three month period not exceeding specified limitations.
Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and
that the Company presently has no plans to satisfy these conditions in the foreseeable future.

          4.3 Disposition of Warrant and Exercise Shares.

               (a) The Holder further agrees not to make any disposition of all or any part of the Warrant or
Exercise Shares in any event unless and until:

                    (i) The Company shall have received a letter secured by the Holder from the Securities and
Exchange Commission stating that no action will be recommended to the Commission with respect to
the proposed disposition;

                    (ii) There is then in effect a registration statement under the Act covering such proposed
disposition and such disposition is made in accordance with said registration statement; or

                    (iii) The Holder shall have notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances surrounding the proposed
disposition, and if reasonably requested by the Company, the Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the
effect that such disposition will not require registration of such Warrant or Exercise Shares under
the Act or any applicable state securities laws.

               (b) Notwithstanding the provisions of subsection (a) above, no such restriction shall apply to
a transfer by a Holder that is (A) a partnership transferring to its partners or former partners in
accordance with partnership interests, (B) a corporation transferring to a wholly-owned subsidiary,
a parent corporation that owns all of the capital stock of the Holder or a corporation affiliated
with the Holder by common control with or by such Holder, provided that such affiliated corporation
is not reasonably deemed to be a competitor of the Company, or (C) a limited liability company
transferring to its members or former members in accordance with their interest in the limited
liability company; provided that in each case the

4.

 

transferee will agree in writing to be subject to the terms of this Warrant to the same extent
as if it were an original Holder hereunder.

               (c) The Holder understands and agrees that all certificates evidencing the shares to be issued
to the Holder may bear the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.

     5. Adjustment of Exercise Price and Effect of Organic Changes.

               (a) Adjustment of Exercise Price and Exercise Shares. In the event of changes in the
outstanding Preferred Stock of the Company by reason of stock dividends, splits, recapitalizations,
reclassifications, conversion to Common Stock pursuant to the Company’s Certificate of
Incorporation, combinations or exchanges of shares, separations, reorganizations, liquidations, or
the like, the number and class of shares available under the Warrant in the aggregate and the
Exercise Price shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for
the same aggregate Exercise Price, the total number, class, and kind of shares as the Holder would
have owned had the Warrant been exercised prior to the event and had the Holder continued to hold
such shares until after the event requiring adjustment. The form of this Warrant need not be
changed because of any adjustment in the number or class of Exercise Shares subject to this
Warrant.

               (b) Reorganization, Reclassification, Consolidation, Merger or Sale. If any recapitalization,
reclassification or reorganization of the capital stock of the Company, or any consolidation or
merger of the Company with another corporation, or the sale of all or substantially all of its
assets or other transaction shall be effected in such a way that holders of the Company’s Preferred
Stock shall be entitled to receive stock, securities, or other assets or property (an “Organic
Change”), then, as a condition of such Organic Change, lawful and adequate provisions shall be made
by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive
(in lieu of the shares of the Preferred Stock of the Company immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby) such shares of stock, securities
or other assets or property as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Preferred Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the rights represented
hereby. In the event of any Organic Change, appropriate provision shall be made by the Company with
respect to the rights and interests of the Holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the
number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be
applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon
the exercise hereof. The Company will not effect any such consolidation, merger or sale unless,
prior to the

5.

 

consummation thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by written instrument
this Warrant, executed and mailed or delivered to the registered Holder hereof at the last address
of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such
shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder
may be entitled to purchase.

               (c) Certain Events. If any change in the outstanding Preferred Stock of the Company or any
other event occurs as to which the other provisions of this Section 5 are not strictly applicable
or if strictly applicable would not fairly protect the purchase rights of the Holder of the Warrant
in accordance with such provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the Exercise Price or the
application of such provisions, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as to give the Holder of the Warrant upon exercise for the same aggregate Exercise
Price the total number, class and kind of shares as he would have owned had the Warrant been
exercised prior to the event and had he continued to hold such shares until after the event
requiring adjustment.

     6. Fractional Shares. No fractional shares shall be issued upon the exercise of this
Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including
fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining
whether the exercise would result in the issuance of any fractional share. If, after aggregation,
the exercise would result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash
equal to the product resulting from multiplying the then current fair market value of an Exercise
Share by such fraction.

     7. Early Termination. In the event of, at any time during the Exercise Period, an
initial public offering of securities of the Company registered under the Act, the Company shall
provide to the Holder fifteen (15) days advance written notice of such public offering and this
Warrant shall terminate unless exercised immediately prior to the closing of such public offering.

     8. Market Stand-Off Agreement. Holder shall not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging or similar
transaction with the same economic effect as a sale, any Common Stock (or other securities) of the
Company held by Holder, for a period of time specified by the managing underwriter(s) (not to
exceed one hundred eighty (180) days) following the effective date of a registration statement of
the Company filed under the Act. Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company and/or the managing underwriter(s) which are consistent with
the foregoing or which are necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with respect to such Common
Stock (or other securities) until the end of such period. The underwriters of the Company’s stock
are intended third party beneficiaries of this Section 8 and shall have the right, power and
authority to enforce the provisions hereof as though they were a party hereto.

     9. No Stockholder Rights. This Warrant in and of itself shall not entitle the Holder
to any voting rights or other rights as a stockholder of the Company.

6.

 

     10. Transfer of Warrant. Subject to applicable laws and the restriction on transfer
set forth on the first page of this Warrant and in Section 4 of this Warrant, this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized attorney, upon
delivery of this Warrant and the form of assignment attached hereto to any transferee designated by
Holder. The transferee shall sign an investment letter in form and substance satisfactory to the
Company.

     11. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen,
mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may
reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof),
issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or
destroyed. Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.

     12. Notices, etc. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b)
when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Company at the address listed on the signature
page and to Holder at the address listed on the first paragraph of this Warrant or at such other
address as the Company or Holder may designate by ten (10) days advance written notice to the other
parties hereto.

     13. Acceptance. Receipt of this Warrant by the Holder shall constitute acceptance of
and agreement to all of the terms and conditions contained herein.

     14. Governing Law. This Warrant and all rights, obligations and liabilities
hereunder shall be governed by the laws of the State of California.

7.

 

In Witness Whereof, the Company has caused this Warrant to be executed by its duly
authorized officer as of December 31, 2002.

	 	 	 	 	 	 	 
	 	 	Veraz Networks, Inc. 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Amit
Chawla
	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	Amit Chawla	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	926 Rock Ave.	 	 
	 

	 	 	 	San Jose, CA 95131	 	 

8.

 

NOTICE OF EXERCISE

TO: Veraz Networks, Inc.

     (1)  ̈ The undersigned hereby elects to purchase                     shares of the Series C
Preferred Stock of Veraz Networks, Inc. (the “Company”) pursuant to the terms of the attached
Warrant, and tenders herewith payment of the exercise price in full, together with all applicable
transfer taxes, if any.

           ̈ The undersigned hereby elects to purchase                     shares of the Series C Preferred
Stock of Veraz Networks, Inc. (the “Company”) pursuant to the terms of the net exercise provisions
set forth in Section 2.1 of the attached Warrant, and shall tender payment of all applicable
transfer taxes, if any.

     (2) Please issue a certificate or certificates representing said shares of Series C Preferred
Stock in the name of the undersigned or in such other name as is specified below:

 

(Name)

 

 

(Address)

     (3) The undersigned represents that (i) the aforesaid shares of Series C Preferred Stock are
being acquired for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has no present
intention of distributing or reselling such shares; (ii) the undersigned is aware of the Company’s
business affairs and financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the
undersigned is experienced in making investments of this type and has such knowledge and background
in financial and business matters that the undersigned is capable of evaluating the merits and
risks of this investment and protecting the undersigned’s own interests; (iv) the undersigned
understands that the shares of Series C Preferred Stock issuable upon exercise of this Warrant have
not been registered under the Securities Act of 1933, as amended (the “Securities Act”), by reason
of a specific exemption from the registration provisions of the Securities Act, which exemption
depends upon, among other things, the bona fide nature of the investment intent as expressed
herein, and, because such securities have not been registered under the Securities Act, they must
be held indefinitely unless subsequently registered under the Securities Act or an exemption from
such registration is available; (v) the undersigned is aware that the aforesaid shares of Series C
Preferred Stock may not be sold pursuant to Rule 144 adopted under the Securities Act unless
certain conditions are met and until the undersigned has held the shares for the number of years
prescribed by Rule 144, that among the conditions for use of the Rule is the availability of
current information to the public about the Company and the Company has not made such information
available and has no present plans to do so; and (vi) the undersigned agrees not to make any
disposition of all or any part of the aforesaid shares of Series C Preferred Stock unless and until
there is then in effect a registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance

 

 

with said registration statement, or the undersigned has provided the Company with an opinion
of counsel satisfactory to the Company, stating that such registration is not required.

	 	 	 	 	 
	 

	 	 	 	 
	 

	 	(Signature)
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	(Date)

	 	(Print name)	 	 

 

 

ASSIGNMENT FORM

(To assign the foregoing Warrant, execute this form
and supply required information. Do not use this
form to purchase shares.)

     For Value Received, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to

	 	 	 
	Name:
	 	 
	 

	 	 
	 

	 	(Please Print)
	 
	 	 
	Address:
	 	 
	 

	 	 
	 

	 	(Please Print)

Dated:                                         , 20                    

Holder’s

Signature:                                                                                

Holder’s

Address:                                                                                

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.exv10w2

 

Exhibit 10.2

U.S. SEPARATION AND ASSET PURCHASE AGREEMENT

BETWEEN

ECI TELECOM-NGTS INC.

AND

VERAZ NETWORKS INTERNATIONAL, INC.

December 31, 2002

 

 

INDEX TO SCHEDULES

	 	 	 
	Schedule 2.1.1:

	 	Veraz U.S. Business Assets
	Schedule 2.1.2:

	 	Contracts relating to Veraz U.S.’s Business
	Schedule 2.1.6:

	 	Permits and Licenses
	Schedule 2.1.10:

	 	VoIP Inventories
	Schedule 6.1:

	 	Business Employees
	Schedule 6.3:

	 	Employee Termination Agreement
	Schedule 7.10:

	 	Assets Not Identified On Time
	Schedule 9:

	 	Pro Forma Balance Sheet of Veraz U.S. as of September 30, 2002

 

 

U.S. Separation And Asset Purchase Agreement

     This U.S. Separation And Asset Purchase Agreement (this “Agreement”) is made and
entered into this 31st day of December, 2002, by and between Veraz Networks International, Inc., a
Delaware corporation (“Veraz U.S.”) and ECI Telecom — NGTS Inc., a Delaware corporation (“NGTS
U.S.”) and an indirect wholly owned subsidiary of ECI Telecom Ltd., an Israeli company (“ECI
Telecom”). NGTS U.S. is sometimes referred to hereinafter as the “Seller” and each of Veraz U.S.
and NGTS U.S. are sometimes referred to hereinafter individually as a “Party” and collectively as
the “Parties.”

WITNESSETH:

     WHEREAS, NGTS U.S. is engaged in the marketing, sale, distribution and service of products and
solutions for gateways for point-to-point, point-to-multipoint and/or switching and non-switching
applications for connecting end-to-end telephony or telephony over packet networks, which gateways
include classification and/or compression of telephony signals, such as voice, modem, fax and/or
other signals, such as video conference, and conversion of the classified and/or compressed signals
into packets in formats suitable for media, such as Ethernet, IP, ATM or MPLS (the “VoIP
Distribution Business”);

     WHEREAS, NGTS U.S. is also engaged in the marketing, sale, distribution and service of ECI
Telecom’s DCME product line (the “DCME Distribution Business” and, together with the VoIP
Distribution Business, the “Businesses”);

     WHEREAS, NGTS U.S. desires to sell certain assets and rights relating to the VoIP Distribution
Business and the DCME Distribution Business to Veraz Networks, Inc. (formerly NexVerse Networks,
Inc.), a Delaware corporation (“Veraz”), pursuant to a Share Exchange Agreement dated as of October
30, 2002 (as amended, the “Share Exchange Agreement”);

     WHEREAS, to effectuate the Share Exchange Agreement, NGTS U.S. desires to separate certain
assets and rights relating to the VoIP Distribution Business and the DCME Distribution Business
from NGTS U.S.’s business as of the Effective Date (the “Separation”) by transferring and conveying
them to Veraz U.S. as set forth in this Agreement and the Exhibits hereto.

     NOW, THEREFORE, in consideration of the covenants, promises and representations set forth
herein, and intending to be legally bound hereby, the Parties agree as follows:

1. Definitions

“Affiliate” means with respect to any Person, any other Person that, directly or indirectly,
through one or more intermediaries, controls, or is controlled by or is under common control with,
such Person. The term “control” means the ownership of more than 50% of the outstanding equity of
a Person or the power to direct the management and policies of a Person.

1

 

“Contracts” means contracts, agreements, notes, indentures, restrictions, commitments, leases,
purchase orders, arrangements, obligations or other contracts, agreements or instruments, whether
written or oral.

“Lien” means all mortgages, liens, pledges, charges, security interests, bank guarantees, third
party rights or other claims or encumbrances of any kind whatsoever.

“Person” means an individual, corporation, partnership, joint venture, trust or unincorporated
organization.

“VoIP” means Voice over Internet Protocol.

2. Sale of the Businesses

2.1 Sale of Assets. Upon the terms and subject to the conditions set forth in this
Agreement, the Seller hereby agrees to contribute, assign, transfer and convey to Veraz U.S. and
Veraz U.S. hereby agrees to acquire and accept from the Seller, all of the Seller’s direct and
indirect right, title and interest in and to all of the assets of the Businesses listed in this
Section 2.1 and the schedules referenced herein (the “Transferred Assets”), the above contribution,
assignment, transfer and conveyance being subject only to those liabilities and obligations of the
Seller expressly set forth in Section 2.2 (the “Assumed Liabilities”). The Transferred Assets
consist of the following assets and properties:

2.1.1 all machinery, equipment, fixtures, furniture, information technology infrastructure and
tangible and intangible assets identified on Schedule 2.1.1 attached hereto or otherwise listed on
the Fixed Assets itemization, dated September 30, 2002 and incorporated by reference in its
entirety herein and all warranty, service or other similar rights related to such assets;

2.1.2 all Contracts identified on Schedule 2.1.2 hereto (the “Assigned Contracts”);

2.1.3 copies of software licensed to the Seller by third parties that, as of the Closing Date, is
installed on any computer system contained in the Transferred Assets,

2.1.4 copies or originals of the business records, books, ledgers, plans, correspondence,
advertising and promotional materials, marketing materials, studies, reports, equipment repair,
maintenance or service records of the Seller, whether written or electronically stored or otherwise
recorded, in each case as used in the Businesses and related to the Transferred Assets for, and
relating directly to, their activities prior to the Closing (the “Materials”);

2.1.5 the Seller’s dealer, distributor, customer, agents and representatives lists, in each case as
used in the Businesses and related to the Transferred Assets for and relating directly to, their
activities prior to the Closing, in each case subject to ECI Telecom’s retained rights to use the
information in such lists for ECI Telecom’s on-going businesses;

2.1.6 the permits, licenses, orders, ratings and approvals of all national, local or foreign
governmental or regulatory authorities or industrial bodies, to the extent the same are

2

 

transferable, all as identified on Schedule 2.1.6 hereto, and copies of any respective third-party
approvals to such transfers to Veraz U.S.;

2.1.7 all rights of the Seller to causes of action, lawsuits, judgments, claims and demands of any
nature which relate to the above-referenced Transferred Assets or constitute counterclaims, rights
of setoff, and affirmative defenses to any claims brought against Veraz U.S. by third parties
relating to such Transferred Assets (except that Seller reserves its rights with respect to
counterclaims, rights of set-off and affirmative defenses to any claims covered by Section 7.7.1(B)
hereof.,

2.1.8 all prepayments made to the Seller for maintenance, warranty service and products to be
performed by or sold by the Seller in connection with the VoIP Distribution Business;

2.1.9 all accounts receivable related to the VoIP Distribution Business; and

2.1.10 all inventories of products related to the VoIP Distribution Business, referenced on
Schedule 2.1.10 hereto.

2.1.11 Notwithstanding anything to the contrary herein, the Transferred Assets shall not include
any assets related to or used in ECI’s DCME product line that is not used for the marketing, sale,
distribution or support of such product line, including, without limitation, all inventory,
manufacturing assets and any assets related to or used in the prepaid calling card business.

2.2 Assumed Liabilities. Upon the terms and subject to the conditions set forth in this
Agreement, Veraz U.S. hereby agrees to assume, pay, perform and discharge the Assumed Liabilities,
and to pay, perform and discharge the Assumed Liabilities as they become due and payable. The
Assumed Liabilities shall consist solely of (i) the obligations and liabilities under the Assigned
Contracts listed in Schedule 2.1.2 attached hereto, but only to the extent such obligations and
liabilities are related to sales that are consummated (i.e., product delivered) on or after the
Effective Date or the grounds for which arose (e.g., services or supplies delivered) on or after
the Effective Date, and (ii) the obligation to assume accrued vacation liabilities up to a maximum
of $100,000 relating to the Business Employees, as defined in Section 6.1, as such vacation
liabilities are detailed on Schedule 2.2.

2.3 Retained Liabilities. All liabilities and obligations of the Seller (including
liabilities and obligations relating to the Businesses) (the “Retained Liabilities”) shall remain
the liabilities and obligations of the Seller and not of Veraz U.S., except for the Assumed
Liabilities.

3. Closing

3.1 Closing Effective Date. The closing of the transactions contemplated hereby (the
“Closing”) shall take place as soon as practicable following the date on which the conditions set
forth in Article 8 hereto shall have been satisfied or waived (the “Closing Date”), at the offices
of Brobeck, Phleger & Harrison LLP, 1633 Broadway, New York, New York, unless another place or time
is mutually agreed upon by the Parties. Upon the Closing, the transactions contemplated by this
Agreement shall become effective as if the Closing had

3

 

occurred on October 1, 2002 (the “Effective Date”), as more fully described in Section 9 below.

3.2 Actions at Closing. At the Closing, the following actions shall occur concurrently:

3.2.1 Transfer of Assets and Liabilities. (A) The Seller shall deliver or cause to be
delivered to Veraz U.S. the following: (a) a bill of sale relating to the Transferred Assets in the
form attached hereto as Exhibit A; (b) a duly signed Assignment and Assumption Agreement in
the form attached hereto as Exhibit B relating to the assignment of any and all Assigned
Contracts and the assumption of the Assumed Liabilities (the “Assignment and Assumption Agreement”)
and any signed consents to the assignments of the other parties to such Contracts and to Permits
that have been obtained; (c) all agreements in the forms attached hereto as Schedule 6.3(a)
executed by the Business Employees, (d) a copy of the resolutions of the board of directors of the
Seller authorizing the transactions contemplated hereby and (e) all other documents and instruments
required hereunder to be delivered by the Seller to Veraz U.S. (B) Veraz U.S. shall deliver or
cause to be delivered to the Seller (a) a duly signed Assignment and Assumption Agreement, (b) a
copy of the resolutions of the board of directors of Veraz U.S. authorizing the transactions
contemplated hereby and (c) all other documents and instruments required hereunder to be delivered
by Veraz U.S. to the Seller.

3.2.2 Issuance of Veraz U.S. Shares. In consideration of the foregoing, Veraz U.S. shall
issue to NGTS U.S. 1000 shares of its common stock, par value $0.01 per share (the “Veraz U.S.
Shares”).

3.2.3 Schedule Update. The Seller shall deliver to Veraz U.S. an addendum to Schedule
2.1.2 identifying any additional Contracts entered into prior to the Closing that, based on the
principles used in preparing Schedule 2.1.2 attached hereto, ought to be assigned to Veraz U.S.
pursuant to this Agreement. Upon Veraz U.S.’s written approval, which shall not be unreasonably
withheld, such addendum shall be deemed part of Schedule 2.1.2., and such Contracts shall be deemed
Assigned Contracts, for all purposes of this Agreement.

4. Representations and Warranties of The Seller

     The Seller hereby represents and warrants to Veraz U.S. that the following representations and
warranties are true and accurate in all respects, as of the date hereof and as of the Closing Date,
and acknowledges that Veraz U.S. is entering into this Agreement in reliance thereon:

4.1 Organization, Qualification and Corporate Power. Seller is a company duly organized
and validly existing under the laws of the State of Delaware. Seller has the corporate power and
authority to own and hold its properties and to carry on its business as now conducted, and to
execute, deliver and perform this Agreement. This Agreement constitutes the valid and legal
binding obligation of Seller, enforceable against it in accordance with its terms.

4.2 Authority; No Violation; Due Execution; Etc. The execution and delivery by Seller of
this Agreement and the agreements attached as exhibits hereto and the performance by Seller of its
obligations hereunder have been duly authorized by all requisite corporate action and will not
conflict with, or result in any violation of, or default under (with due notice or lapse

4

 

of time or both), or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit (any such event, a “Conflict”) under (i) any provision of
applicable law, (ii) any order of any court or other agency of government by which Seller or any of
its properties or assets is or are bound, (iii) the certificate of incorporation or bylaws of
Seller, each as amended, or (iv) any provision of any indenture, mortgage, lease or other agreement
or instrument, permit, concession, franchise or license to which Seller is a party or, to the
knowledge of Seller, by which any of its material properties or assets is or are bound, or result
in the creation or imposition of any Lien upon any assets (tangible or intangible) of Seller, in
each such event which is reasonably likely to prevent, impede, delay, avoid, condition, enjoin,
prohibit or otherwise interfere with, in a material way, the full, valid and complete performance
of Seller’s obligations under this Agreement.

4.3 Consents. No consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or other local or
foreign governmental authority, instrumentality, agency or commission (“Governmental Entity”) or
any third party (so as not to trigger any Conflict) is required by or with respect to Seller in
connection with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby by Seller, except such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings identified on Schedule 3.05 to the Share
Exchange Agreement and those that are not material.

5. Representations and Warranties of Veraz U.S.

     Veraz U.S. hereby represents and warrants to the Seller that the following representations and
warranties are true and accurate in all respects, as of the date hereof and as of the Closing Date,
and acknowledges that the Seller is entering into this Agreement in reliance thereon:

5.1 Organization, Qualification and Corporate Power. Veraz U.S. is duly incorporated and
validly existing under the laws of the State of Delaware. Veraz U.S. has the corporate power and
authority to execute, deliver and perform this Agreement. This Agreement constitutes the valid and
legal binding obligation of Veraz U.S., enforceable against Veraz U.S. in accordance with its
terms.

5.2 Authority; Due Execution; Etc. The execution and delivery by Veraz U.S. of this
Agreement and the agreements attached as exhibits hereto and the performance by Veraz U.S. of its
obligations hereunder have been duly authorized by all requisite corporate action.

5.3 Shares. As of the Closing Date, 1000 Veraz U.S. Shares will be outstanding. All such
Veraz U.S. Shares will be duly authorized, validly issued, fully paid and non-assessable. Such
transfer will not trigger any preemptive or similar rights. As of the Closing Date, there will be
no rights of any Person to acquire any securities of Veraz U.S..

6. Employment Matters

6.1 Employees of Businesses. Subject to the Closing, as soon as practicable, Veraz U.S. or
one of its Affiliates will offer employment to each individual listed on Schedule 6.1 hereto. Each
individual who accepts such offer of employment shall be referred to herein as a

5

 

“Business Employee.” As of the Closing, the employment relationship between NGTS U.S. and each
Business Employee shall cease and each such employee shall become an employee of Veraz U.S. or one
of its Affiliates. NGTS U.S. hereby confirms that, notwithstanding any confidentiality or
non-compete obligations of any Business Employees to NGTS U.S. or any Affiliate of NGTS U.S., the
Business Employees shall be permitted to engage in the Businesses transferred to Veraz U.S., as
mutually contemplated by the Parties prior to the Closing, on behalf of Veraz U.S. and its
Affiliates.

6.2 Business Employee Liability. Any liability with respect to Business Employees the
grounds for which arose during the period prior to the Closing Date shall be NGTS U.S.’s, and any
liability with respect to Business Employees the grounds for which arose any time thereafter shall
be Veraz U.S.’s; provided, however, that vacation liabilities up to a maximum of $100,000 accrued
prior to the Closing Date shall be Veraz U.S.’s.

6.3 Employee Letters. Each Business Employee shall have executed and delivered to NGTS
U.S. a letter substantially in the form of Schedule 6.3 hereto prior to the Closing Date.

6.4 Options. Any vested options to purchase ordinary shares of ECI Telecom held by a
Business Employee on the Closing Date shall continue to be exercisable for as long as the Business
Employee is employed by Veraz U.S. or one of its affiliates and for 30 days thereafter. Any
unvested options to purchase ordinary shares of ECI Telecom held by a Business Employee on the
Closing Date shall be governed by the terms of such options and the option plan under which they
were granted.

7. Additional Matters

7.1 Allocation of Expenses. All expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be borne by the Party incurring such expenses. For the
avoidance of doubt, all fees and expenses of any legal advisors retained by the management of NGTS
U.S. or Veraz U.S. who are not also advisors to ECI Telecom, shall be borne by Veraz U.S.

7.2 Additional Documents and Further Assurances. Each Party, at the reasonable request of
another Party, shall execute and deliver such other instruments and do and perform such other acts
and things as may be necessary for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.

7.3 Non-transferable Assets. Each Party will use commercially reasonable efforts to cause
the assignment of each contract, agreement, license, permit and claim included in the Transferred
Assets or the Assumed Liabilities.

     (a) Specifically, (i) with respect to Assigned Contracts for which the receipt of a
third-party consent to assignment is a condition to the closing of the transactions contemplated by
the Share Exchange Agreement, the Sellers shall use commercially reasonable efforts to obtain all
such third-party consents prior to the Closing and (ii) with respect to any other Assigned
Contracts, the Sellers shall, upon receipt of a written request from Veraz U.S., use commercially
reasonable efforts to obtain all necessary third-party consents prior to the Closing or as soon as
practicable thereafter, provided, however, that, in

6

 

each case, the Seller shall not be required to pay any consideration for any such consents.
Veraz U.S. shall not be liable for any such consideration paid or agreed to be paid by Seller
without the consent of Veraz U.S.

     (b) Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement
shall be construed as an attempt to assign any contract, agreement, license, permit or claim
included in the Transferred Assets and Assumed Liabilities which is non-assignable without the
consent of the other party or parties thereto, unless such consent shall have been given or as to
which all the remedies for the enforcement thereof enjoyed by the transferring Party would, as a
matter of law, pass to Veraz U.S. as an incident of the assignment provided for by this Agreement.
In the event that a third party refuses to consent to an assignment or a novation of such a
non-assignable contract, arrangement, license, permit or claim, or demands any payment or right of
any kind in consideration for granting such consent, then the Seller shall hold the relevant
agreement on behalf of Veraz U.S., and Veraz U.S. shall be entitled to continue the contract,
arrangement, license, permit or claim on behalf of and in the name of the Seller and on Veraz
U.S.’s own account; provided that Veraz U.S. shall indemnify and hold the Seller harmless for its
direct expenses and damages, if any, associated with maintaining and performing any such contract,
arrangement, license, permit or claim during the period following the Effective Date, other than
damages related to the gross negligence or willful misconduct of the Seller, its employees or its
affiliates.

     (c) If and when any such consent shall be obtained or such contract, arrangement, license,
permit or claim shall otherwise become assignable or non-terminable, the Seller will be deemed,
without any further action necessary, to have irrevocably and unconditionally assigned, granted,
transferred, conveyed, and delivered to Veraz U.S. and its successors and assigns, all rights,
title, interests, benefits and privileges under such contract, arrangement, license, permit or
claim, and Veraz U.S. will be deemed to have agreed to assume all liabilities and obligations
arising after the Effective Date thereunder.

7.4 Independent Auditor. For so long as ECI Telecom includes Veraz U.S.’s results of
operations and financial position in ECI Telecom’s financial statements, either by consolidation or
the equity method, Veraz U.S. shall select one of the Big Four accounting firms and shall fully
cooperate to enable them to complete their audits and reviews of Veraz U.S.’s financial statements
in sufficient time to meet ECI Telecom’s timetable for the completion and dissemination of ECI
Telecom’s financial statements.

7.5 Ongoing Information and Cooperation.

     7.5.1 Each Party shall provide, or cause to be provided, to the other Party, in such form as
the requesting Party shall reasonably request, at no charge to the requesting Party, all financial,
tax and other data and information as the requesting Party determines necessary or advisable in
order to prepare its financial statements and reports or filings with any tax authority and any
other governmental authority. The receiving Party shall not use such data or information for
purposes other than those for which such data or information was given and shall use reasonable
efforts to maintain the confidentiality of such data and information, except as may be required by
law. To facilitate the possible exchange of information pursuant to this Agreement after the
Closing Date, each Party agrees to use its reasonable commercial

7

 

efforts to retain all information in their respective possession or control on the Closing
Date for a reasonable period, but not less than 7 years from the Closing Date.

     7.5.2 After the Closing Date, except in the case of a legal or other proceeding, investigation
or inquiry by one Party against another Party, each Party shall use its reasonable commercial
efforts to make available to the other Party, upon written request, the former, current and future
directors, officers, employees and other personnel and agents of such Party as witnesses and any
books, records or other documents within its control or which it otherwise has the ability to make
available (other than information protected from disclosure by applicable privileges), to the
extent that any such person (giving consideration to the business demands of such directors,
officers, employees, other personnel and agents) or books, records or other documents may
reasonably be required in connection with any legal, administrative or other proceeding in which
the requesting Party may from time to time be involved, regardless of whether such legal,
administrative or other proceeding is a matter with respect to which indemnification may be sought
hereunder. The requesting Party shall bear all costs and expenses in connection therewith.

7.6 No Representation or Warranty. Seller does not make any representation as to, warranty
of or covenant with respect to, the value of any asset or thing of value to be transferred to Veraz
U.S.

7.7 Litigation; Indemnification.

     7.7.1 (A) From and after the Closing Date, Veraz U.S. shall manage (and, if applicable, assume
the defense of) any claims or lawsuits relating to (i) the Transferred Assets brought after the
Effective Date, when the grounds for such claims or lawsuits arose after the Effective Date, and
(ii) the Business Employees brought after the Closing Date, when the grounds for such claims or
lawsuits arose after the Closing Date. Veraz U.S. shall indemnify and hold harmless the Seller and
its officers, employees, directors, Affiliates and agents with respect to any and all liabilities,
damages and expenses (including reasonable attorneys’ fees) suffered or incurred in connection with
(i) any Transferred Assets or in connection with any other Assumed Liabilities, when the grounds
therefor arose on or after Effective Date, (ii) the Business Employees, when the grounds therefor
arose after the Closing Date, provided, however, that although Seller shall be responsible to pay
directly to each Business Employee the amounts to which such Business Employee is entitled under
applicable law and under any applicable employment agreement with respect to the period ending on
the Closing Date, the costs of employing (but not any cost of terminating) the Business Employees
during the period commencing on the Effective Date and ending on the Closing Date shall be borne by
Veraz U.S. and reflected in the Closing Date Financial Statements, as defined in Section 9 below
and (iii) any Assumed Liabilities.

     (B) Seller shall manage (and, if applicable, assume the defense of) any claims or lawsuits
relating to (i) the Transferred Assets, when the grounds for such claims or lawsuits arose before
the Effective Date and (ii) the Business Employees, when the grounds for such claims or lawsuits
arose before the Closing Date. The Seller shall indemnify and hold harmless Veraz U.S. and its
officers, employees, directors, Affiliates and agents with respect to any and all liabilities,
damages and expenses (including reasonable attorneys’ fees) suffered

8

 

or incurred in connection with (i) any Transferred Assets or in connection with any other
Assumed Liabilities, when the grounds therefor arose before the Effective Date and (ii) the
Business Employees, when the grounds therefor arose before the Closing Date and (iii) any Retained
Liabilities.

     (C) From and after the Effective Date, each Party seeking indemnification hereunder shall give
the indemnifying Party prompt notice of the commencement of any applicable claim or lawsuit,
provided, however, that any failure to do so shall not limit any of the rights of the indemnities
under this Section 7.7 (except to the extent such failure materially prejudices the defense of such
claim or lawsuit).

     (D) The Parties shall cooperate with each other in connection with such matters pursuant to
Section 7.5.2 hereof. In the event that any claims or lawsuits brought after the Effective Date
relate to the Transferred Assets and also to the assets transferred by ECI Telecom to one or more
other subsidiaries of ECI Telecom (“Sister Newcos”), then ECI Telecom, such Sister Newcos and Veraz
U.S. shall cooperate to allocate responsibility therefor in good faith.

     (E) Except for Veraz and its successors and assigns, no Person who is not a Party (or any
successor thereto or assign thereof) shall be permitted to assert any indemnification claim or
exercise any other remedy under this Agreement unless the applicable Party (or any successor
thereto or assign thereof) shall have consented to the assertion of such indemnification claim or
the exercise of such other remedy.

7.8 Operation in the Ordinary Course of Business. Until Closing, the Seller will operate
the Businesses in the ordinary course of business consistent with past practice, and has not and
will not make any dispositions of assets outside the ordinary course of business consistent with
past practice.

7.9 Future Purchases of Fixed Assets and Inventory. Any fixed assets or raw materials that
have been ordered by NGTS U.S. prior to the Effective Date for use in the VoIP Business but that
have not arrived at the premises of NGTS U.S. prior to the Effective Date shall not be included in
the Transferred Assets. In the event that, at any time and from time to time following the
Closing, Veraz U.S. desires to purchase any such items or items reasonably similar to such items,
it shall offer to purchase such items from NGTS U.S. and, to the extent they are in the possession
of NGTS U.S., NGTS U.S. shall sell them to Veraz U.S. at NGTS U.S.’s cost (including any import
duties and delivery, purchasing and warehousing expenses directly applicable to such items), in the
same manner as such costs were allocated prior to the Effective Date.

7.10 Fixed Assets Not Identified on Time.

     (a) Schedule 7.10 hereto contains a list of fixed, tangible assets related to NGTS U.S. which
belong to the Seller but which were not specifically identified as relating to the Businesses on
the date hereof. In the event that during the period ending on December 31, 2002, Veraz U.S. and
NGTS U.S. mutually identify any of such assets as relating to the Businesses, the parties shall
take all steps reasonably necessary to promptly cause the transfer

9

 

of the relevant asset or assets to Veraz U.S., provided that the aggregate book value of such
assets shall not exceed $50,000.

     (b) If, within one year following the Closing Date, Veraz U.S. determines that there are any
assets owned by the Seller that are reasonably required for operation of the Businesses, which
assets are being used by Seller in the Businesses on the date of execution of this Agreement and,
based on the principles used in preparing this Agreement, should have been included in the
Transferred Assets, but inadvertently have not been transferred to Veraz U.S. pursuant to this
Agreement, then Veraz U.S. may request in writing for the Seller to provide the applicable asset to
Veraz U.S. by way of an assignment of such asset. Upon receipt of such written request, the Seller
hereby agrees to promptly evaluate such request. If such request is valid, the Seller shall
consent to such request, such consent not to be unreasonably withheld, delayed or conditioned, and
use commercially reasonable efforts to obtain all necessary third party consents, if any, and take
all other reasonably necessary actions for such assets to be assigned to Veraz U.S. Within two (2)
days after receipt, the Seller shall provide Veraz U.S. with such third party consents that the
Seller obtains. Immediately upon any assignment of any asset pursuant to this Section 7.10(b),
such asset shall be deemed to be a Transferred Asset for purposes of this Agreement. Until such
assignment, the Parties shall cooperate with respect to such agreements pursuant to the provisions
of Section 7.3 hereof.

7.11 Parent Guaranties.

(a) Veraz hereby irrevocably agrees to unconditionally guaranty all the obligations of Veraz U.S.
under this Agreement.

(b) ECI Telecom hereby irrevocably agrees to unconditionally guaranty all the obligations of NGTS
U.S. under this Agreement.

8. Closing Conditions

     The Closing shall be subject to the simultaneous closing of the transactions contemplated by
the Share Exchange Agreement.

9. Post-Closing Adjustment

9.1 Preparation of Balance Sheets. Attached hereto as Schedule 9 is a pro-forma balance
sheet with respect to the Businesses, as of September 30, 2002 (the “September 30 Veraz U.S.
Balance Sheet”). As soon as practicable, but in any event not later than November 15, 2002, Veraz
U.S., together with its auditors, shall prepare a balance sheet with respect to the Businesses, as
of the Effective Date (the “Effective Date Balance Sheet”), using the same principles and
accounting policies under which the September 30 Veraz U.S. Balance Sheet was prepared.

9.2 Post-Closing Adjustment. (a) During the period between the Effective Date and the
Closing Date, the Businesses shall be operated as between the parties, to the extent reasonably
possible, as if the Separation had been completed.

10

 

     (b) As soon as practicable after Closing, but in any event no later than January 30, 2003,
Veraz U.S., together with its auditors, shall prepare a balance sheet with respect to the
Businesses, as of December 31, 2002 (the “Closing Date Balance Sheet”), using the same principles
and accounting policies under which the September 30 and Effective Date Balance Sheets were
prepared, and related profit and loss and cash flow statements (the “Closing Date Income Statement”
and the “Closing Date Cash Flow Statement”, respectively, and together with the Closing Date
Balance Sheet, the “Closing Date Financial Statements”) for the period between the Effective Date
and December 31, 2002 (the “Interim Period”). The Closing Date Income Statement and Closing Date
Cash Flow Statement shall each be prepared on the basis of income and expenses which would have
been incurred by Veraz U.S. had the Closing occurred on the Effective Date. In preparing the
Closing Date Financial Statements, any inter-company financial transfers from Veraz to Veraz U.S.
during the period between the Closing Date and December 31, 2002 shall be disregarded.

     (c) The Seller shall have a period of 30 days after delivery of the Effective Date Balance
Sheet to present in writing to Veraz U.S. all objections the Seller may have to any of the matters
set forth or reflected therein. Similarly, the Seller shall have a period of 30 days after
delivery of the Closing Date Financial Statements to present in writing to Veraz U.S. all
objections the Seller may have to any of the matters set forth or reflected therein. If no
objections are raised within such 30-day period, the Closing Date Financial Statements shall be
deemed approved by the Seller.

     (d) If on the basis of the Closing Date Cash Flow Statement, the Businesses generated a net
increase in cash and cash equivalents during the Interim Period, NGTS U.S. shall transfer to Veraz
U.S., within three business days of approval of such amount, cash in the amount of the net increase
in cash and cash equivalents generated by Veraz U.S. during the Interim Period. If on the basis of
the Closing Date Cash Flow Statement, the Businesses generated a net decrease in cash and cash
equivalents, Veraz U.S. shall transfer, within three business days of approval of such amount, cash
to NGTS U.S. in the amount of the net decrease in cash and cash equivalents generated by Veraz U.S.
during the Interim Period. The foregoing amounts to be transferred pursuant to this Section 9.2(d)
shall be adjusted by the net amount of cash or cash equivalents actually received or paid by Veraz
U.S. during the period between the Closing Date and December 31, 2002.

9.3 Disputes. The Parties shall seek in good faith to resolve any differences that arise
in connection with the preparation of the Effective Date Balance Sheet or the Closing Date
Financial Statements. Any dispute shall be resolved in accordance with Section 11.5, except that
the arbitrator shall be a certified accountant.

10. Non-Solicitation.

For a period of eighteen (18) months from the Closing Date, (a) Veraz U.S. and its Affiliates shall
not directly solicit any person (other than Business Employees) who is employed by NGTS U.S., ECI
Telecom, any other subsidiary of ECI Telecom (each, a “Sister Newco”) or any Affiliate thereof
until three months have passed since such person has last been employed by such other company and
(b) NGTS U.S. shall not directly solicit, and, until the closing of the separation agreement of any
Sister Newco, shall ensure that any such Sister Newco and

11

 

any Affiliate shall not directly solicit, any person who is employed by Veraz U.S. or an Affiliate
thereof until three months have passed since such person has last been employed by such company.
This prohibition on solicitation does not apply to actions taken by a person (i) as a result of a
general recruitment effort carried out through a public or general solicitation or (ii) as a result
of an employee’s initiative. ECI Telecom hereby undertakes to include in the separation agreement
of each Sister Newco a provision similar to this Section 10 that protects Veraz U.S. If ECI
Telecom fails to do so with respect to a Sister Newco, such failure shall not be deemed a breach of
this Agreement, but Veraz U.S. shall be released of any restriction under this Section 10 with
respect to such Sister Newco.

11. General Provisions

11.1 Counterparts. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement.

11.2 Entire Agreement; Assignment. This Agreement and the Exhibits and Schedules hereto
and the other agreements among the Parties referenced herein (a) constitute the entire agreement
among the Parties with respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, between the Parties with respect to the subject matter
hereof; (b) shall be binding upon successors and assigns of any Party; and (c) shall not be
assigned by either Party without the prior written consent of the other Party, including any
assignment by operation of law pursuant to a merger or sale of such Party; provided, that neither
party shall unreasonably withhold its consent. Notwithstanding anything to the contrary herein,
Veraz U.S. shall have the right to assign or transfer any of the Transferred Assets to any party
after the Closing, provided, however, that, following any such assignment or transfer, the Seller
shall have no further obligations with respect to such Transferred Assets.

11.3 Change of Control Event. This Agreement shall remain in full force and effect and
shall bind the successor of a change of control event, including without limitation, if a Party is
merged, consolidated, or sells all or substantially all of its assets or implements or suffers any
change in management or control.

11.4 Severability. In the event that any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement shall continue in full force and effect and the
application of such provision to other Persons or circumstances shall be interpreted so as
reasonably to effect the intent of the Parties. The Parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision that will achieve,
to the extent possible, the economic, business and other purposes of such void or unenforceable
provision.

11.5 Governing Law, Dispute Resolution. This Agreement shall be governed by and construed
in accordance with the laws of the State of Israel, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof. In the event of any controversy
or claim arising out of or in connection with this Agreement, including without limitation,
disputes among ECI Telecom and Veraz U.S. and any Sister Newco with respect to

12

 

the future allocation of assets or liabilities of ECI Telecom, the first level of escalation shall
be limited to seven business days of discussion between, if ECI Telecom, its Chief Financial
Officer and/or Chief Technology Officer, and if Veraz U.S., its Chief Executive Officer and/or
Chief Financial Officer, and the second and final level of escalation shall be limited to seven
business days of discussion between each of the presidents of ECI Telecom and Veraz. Any such
controversy or claim not so resolved shall be finally settled by arbitration in Israel in
accordance with the Israel Arbitration Law 1968 before a single arbitrator experienced in VOID and
DCME technology, who shall issue his reasoned decision in writing. The arbitrator shall give his
reasoned opinion in writing and his decision shall be binding and conclusive on the parties. In
the event that the Parties do not agree on the identity of the arbitrator within an additional
seven business days, the arbitrator shall be selected by the chairman of the Israeli Society of
Certified Public Accountants. Nothing in this Agreement shall prevent either party form applying
to a court of competent jurisdiction for injunctive or other equitable relief. ECI Telecom hereby
undertakes to include in the separation agreement of each Sister Newco a provision similar to this
Section 11.5 that protects Veraz U.S. If ECI Telecom fails to do so with respect to a Sister
Newco, such failure shall not be deemed a breach of this Agreement, but Veraz U.S. shall be
released from any arbitration requirement or agreement under this Section 11.5 with respect to such
Sister Newco.

11.6 Specific Performance. The Parties 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 an injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in equity.

11.7 No Third Party Beneficiaries. Except as set forth in Sections 7.7 (other than
Business Employees), 10, 11.3 and 11.5, this Agreement is for the sole benefit of the Parties and
their permitted assigns, and nothing herein expressed or implied shall give or be construed to give
to any other Person any legal or equitable rights hereunder.

11.8 Limitation of Liability. EXCEPT AS FORTH IN THE SHARE EXCHANGE AGREEMENT OR ANY
AGREEMENTS ENTERED INTO IN CONNECTION THEREWITH, IN NO EVENT SHALL NGTS U.S., ECI TELECOM, VERAZ
U.S. OR ANY OF THEIR RESPECTIVE AFFILIATES, EMPLOYEES, DIRECTORS, AGENTS OR ADVISORS, BE LIABLE TO
ANY OTHER SUCH PERSON FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR
LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY
WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.

11.9 Amendment. No change or amendment shall be made to this Agreement except by an
instrument in writing signed on behalf of each of the Parties.

13

 

11.10 Termination. This Agreement may be terminated upon termination of the Share Exchange
Agreement as provided therein. In the event of termination pursuant to this Section 10.10, no
Party shall have any liability of any kind to another Party as a result of such termination.

11.11 Interpretation. The headings contained in this Agreement or in any Exhibit or
Schedule hereto are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement or such Exhibit or Schedule. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit
or Schedule to, this Agreement unless otherwise indicated.

11.12 Notices. All notices and other communications hereunder will be in writing and shall
be served by personal delivery or by registered mail or by fax to the address (and for the
attention of the relevant party) set out below. Any such notice shall be deemed to have been
received: if delivered personally, at the time of delivery; in the case of registered mail, three
days from the date of posting; and if faxed, at the time of cleared transmission notice, if sent on
a business day. The addresses and fax numbers for the purposes of this clause are:

     If to Veraz U.S.:

Veraz Networks International, Inc.

c/o Veraz Networks, Inc.

926 Rock Avenue

San Jose, CA 95131

Fax: 408-750-9409

Attn: Chief Executive Officer

     If to NGTS U.S.:

ECI Telecom — NGTS Inc.

c/o ECI Telecom Ltd.

30 Hasivim Street

Petach Tikva 49133

Israel

Fax: 972-3-926-6070

Attn: General Counsel

or such other address or fax number as may be notified in writing from time to time by the relevant
party to the other party.

[SIGNATURES APPEAR ON NEXT PAGE]

14

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be signed by their duly
authorized respective officers and representatives, all as of the date first written above.

ECI TELECOM — NGTS INC.

	 	 	 	 	 
	By: 
	 	/s/ Illegible	 	 
	 

	 	 	 	 
	 

	 	Name:

Title:	 	 

VERAZ NETWORKS INTERNATIONAL, INC.

	 	 	 	 	 
	By: 
	 	/s/ Martin Ossad	 	 
	 

	 	 	 	 
	 

	 	Name: Martin Ossad

Title: Vice President	 	 

With respect to Section 7.11(a):

VERAZ NETWORKS, INC.

	 	 	 	 	 
	By:

	 	/s/ Amit Chawla	 	 
	 

	 	 	 	 
	 

	 	Name: Amit Chawla

Title: CEO	 	 

With respect to Section 7.11(b):

ECI TELECOM LTD.

	 	 	 	 	 
	By:

	 	/s/ Giora Bitan
	 	 
	 

	 	 	 	 
	 

	 	Name: Giora Bitan

Title: Executive VP and CFO	 	 

[Signature page to U.S. Separation and Asset Purchase Agreement]

 

 

Schedule 2.1.1

Veraz U.S. Business Assets

Schedule 2.1.2

Contracts Relating To Veraz U.S. Business

Schedule 2.1.6

Permits and Licenses

Schedule 2.1.10

VoIP Inventories

Schedule 6.1

Business Employees

Schedule 6.3

Employee Termination Agreement

Schedule 7.10

Assets Not Identified On Time

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}]]